The collaboration of the band U2 and Apple was something very special – also regarding the payment of the artists.
What did the band want? U2 was one of the most sought-after bands in the world at the time of the iPod. A reach that Apple wanted to secure for their then-new product. Until the iPod, the band had never given their songs for an advertisement.
Accordingly, it should also be quite expensive for Apple. The artists demanded Apple shares from CEO Steve Jobs as payment for the major campaign surrounding the launch of the iPod. But the CEO refused their request and did not give them a single share.
Moreover: He also did not pay them for the license to use their song in the advertisement and not for their performance with the iPod. U2 initially worked completely for free for Steve Jobs, but the artists did not do it for nothing.
A case study for business administration lessons
How were they then paid? Jobs wanted the reach of U2, U2 wanted shares from Jobs, but in the end, a completely different deal was made. Instead of simply paying the band, the CEO tied the artists even more closely to himself.
He designed a U2 special edition for the new iPod, which featured special colors, laser-engraved signatures on the back, and exclusive videos from U2. A must-have for every fan and the ultimate deal for Jobs.
He offered them a revenue share on their special edition. An offer they later accepted and earned a lot of money with it.
The deal also included the very first digital box set, The Complete U2, which was exclusively available through iTunes and generated additional revenue for the band.
Did Apple not have to pay anything at all? Yes, even besides the revenue share for U2, the deal was not free for Apple. The advertising campaign for the iPod cost the company 20 million US dollars in 2004, which would correspond to about 31 million Euros today when adjusted for inflation. (Source: mbaknol.com)
The band benefited greatly from the extensive campaign, after all, their song was played repeatedly and their special edition was heavily advertised. In the end, the band may have earned even more than they would have received at that time with the Apple shares, even if they are of course worth much today.
Steve Jobs made a good deal for Apple here. He wanted the reach of the prominent band and in the end, only had to pay what the band’s fans were willing to spend. Another example of a lucrative business model can be found here: 1 billion dollars has Star Citizen now earned, but instead of a release there are now two unfinished games
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