I’m sure that Apple (AAPL) will indeed sell the Fab Four’s music via its digital music store one day. But it’s not happening at Apple’s keynote presentation tomorrow.

The Beatles estate, Electronic Arts (ERTS) and Viacom’s (VIA) MTV will be releasing a new version of “Rock Band” that features the band’s songs tomorrow. And on the same day, EMI Music Group will release all of the band’s music on remastered compact discs.

But that’s it, a source familiar with the band’s plans tells me. For now.

UPDATE: Want an on the record source? The Financial Times obliges with a follow-up:

“Conversations between Apple and EMI are ongoing and we look forward to the day when we can make the music available digitally. But it’s not tomorrow,” Ernesto Schmitt, EMI’s global catalog  president, told the FT’s Andrew Edgecliffe-Johnson.

Beatles-to-iTunes is a story that never goes away. And some day, it will turn out to be true–there’s no good reason for it not to happen. But predictions that it will happen Wednesday have been tied to wafer-thin logic.

Two years ago, the Web was convinced an announcement was in the offing because of the wording of an Apple keynote invitation. This year, even sober-minded publications are noting the timing of Apple’s keynote event and the Rock Band and CD launches, concluding that an iTunes launch makes sense too.

But I’d argue that it makes less sense: If you’re trying to convince people to spend $16.99 for a remastered copy of the White Album or as much as $250 to play along with the band’s ghostly avatars, why offer a competing product from Apple at the same time?

Nor do I see Steve Jobs expressing much interest in coordinating his marketing announcements with the likes of Viacom.

Anyway, if you really want to get the Beatles on the Web, you don’t have to wait for Apple–a quick Google search will do. Or you can head to Google’s (GOOG) YouTube, which is flooded with great clips like this:

[CORRECTION: My assertion about NPD's unit sales data below is incorrect: The tracking service counts 12 digital download singles as the equivalent of one CD. That makes Apple's share of the market that much more impressive, since singles make up the majority of iTunes sales.]

Ready to toss dirt on the old, unloved CD? You’re going to have to wait a while. Compact discs are increasingly hard to find (at least in physical stores), but someone out there keeps buying them: The ancient format still makes up the majority of music sales in the U.S.

Here are the data for the first half of the year, via the NPD Group consumer-tracking outfit: CDs made up 65 percent of the music market, while paid digital downloads accounted for 35 percent. The digital share has increased from 20 percent two years ago, and Apple’s iTunes (AAPL) alone makes up 25 percent of overall sales*, so you’re going to hear lots of proclamations about Steve Jobs’s ascent to the to top of the music industry.

But hold off on that, just a bit. Because those numbers are skewed even more in favor of the CD than they appear at first glance: They’re measuring unit sales, not dollars. And given that the majority of digital sales are in the single format (i.e., a dollar or so a pop), that means CDs (at $10 or so a pop) still account for the vast majority of music revenue.

Which is why the industry is still tied to CDs, even though no one you know buys them anymore. And it explains why the industry is working on two separate digital formats (dubbed “Cocktail” when sold by Apple, and CMX when sold by anyone else) designed to induce buyers to pay for CD-like bundles.

It won’t work. At best, they’ll convince some digital album buyers to upgrade, but the music business is once again a singles business, and it’s going to remain that way. But you can’t blame the industry for trying.

By the way, there are decent odds you’ll hear about Cocktail at Apple’s September event, which Digital Daily’s John Paczkowski says is scheduled for Sept. 9. Mark your calendar.

*If you’re keeping track: Wal-Mart (WMT) and Target (TGT) trail Apple in the overall market. And iTunes still dominates the digital download market with a 69 percent share, while Amazon (AMZN) is a distant second with eight percent.

Operating income could be a problem, though: Factoring out foreign exchange swings and a one-time charge, Amazon delivered pro forma operating income of $240 million, and Wall Street was looking for something like $260 million.

As Henry Blodget points out, Amazon’s North America media sales (books, CDs, DVDs, etc.) have flat-lined in the last year. This is what that looks like in graph form (click to enlarge):

Now listening to the stultifying earnings call, which does not feature Jeff Bezos. Assuming there’ll be questions about the Zappos deal; I also assume that Amazon (AMZN) won’t have much to say about it beyond the announcement it put out yesterday. But I’ll add in any highlights below.

Q. Mary Meeker wants to know if Amazon is seeing a slowdown in media sales due to the transition to digital. She’s also interested in the possibility that mobile could be a big deal.

A. Media is slow, but it doesn’t seem to be related to digital. Still very early, and Amazon is seeing good unit growth there (Kindle, MP3 store, movie service). Not much to say about mobile.

Q. Any plans to take Kindle overseas?

A. Nonanswer.

Amazon has explained why it has been deleting some novels from its customers’ Kindles: It shouldn’t have been selling them in the first place.

Amazon (AMZN) says the copies of George Orwell’s “Animal Farm” and “1984″ it removed without warning from some Kindles this week are “illegal” because the publisher didn’t have the rights to sell them.

Won’t happen again, the e-commerce giant says. Sort of:

These books were added to our catalog using our self-service platform by a third-party who did not have the rights to the books. When we were notified of this by the rights holder, we removed the illegal copies from our systems and from customers’ devices, and refunded customers. We are changing our systems so that in the future we will not remove books from customers’ devices in these circumstances.

Here’s the thing: I refrained from making any Orwell references when I wrote about this earlier today. But doesn’t this statement have a hint of Newspeak to it?

If Amazon wanted to reassure customers worried that digital media they buy from the company might disappear, unannounced, it could do so very easily. It could just say: “We won’t be taking away stuff we sell you ever again. You buy it, you own it. Doesn’t matter if it’s a book, a CD, or a collection of bytes.”

Because, as I noted before, that’s basically what the Kindle license already says: Amazon says it “grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content.” The company doesn’t seem to add any caveats that I can see.

I’m hoping Amazon’s language here is just an awkward bit of PRspeak, and not a lawyerly way of reserving the right to pull stuff off Kindles sometime down the road. But I’ve asked, and will let you know if I hear back.

What happened? The details are fuzzy, but apparently, a publisher that supplied Amazon (AMZN) with two George Orwell titles has decided that it doesn’t want to sell them via Amazon anymore. So away they went.

Readers described their experiences at this Amazon forum, and one of them included this note she said she received from Amazon customer service explaining what happened:

The Kindle edition books Animal Farm by George Orwell. Published by MobileReference (mobi) & Nineteen Eighty-Four (1984) by George Orwell. Published by MobileReference (mobi) were removed from the Kindle store and are no longer available for purchase. When this occured, your purchases were automatically refunded. You can still locate the books in the Kindle store, but each has a status of not yet available. Although a rarity, publishers can decide to pull their content from the Kindle store.

Normally, I’m pretty cavalier about the complaints that people make about the evils of digital rights management–the locks and restrictions distributors often attach to digital media like music, movies and books–but this is the sort of incident that gives those gripes some gravitas. If you’re buying bits, you ought to own those bits, just as you would when you plunk down dollars for a CD, a book or any other physical item.

Doubly confusing: As far as I can tell, Amazon’s license terms don’t have any loophole that allows for this. The section on “digital content” explains that I don’t have the right to “sell, rent, lease, distribute,” etc., the stuff I buy from Amazon. But it sure looks like stuff I buy, I keep:

Upon your payment of the applicable fees set by Amazon, Amazon grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content and to view, use, and display such Digital Content an unlimited number of times, solely on the Device or as authorized by Amazon as part of the Service and solely for your personal, non-commercial use. Digital Content will be deemed licensed to you by Amazon under this Agreement unless otherwise expressly provided by Amazon.

So, what am I missing here? I’ve asked Amazon for comment, but if anyone has any bright ideas, sound off in comments below.

UPDATE: Amazon says the copies it sold were “illegal”, because the publisher never had the rights to them. But it says that going forward, it won’t be removing books from customer’s Kindles “in these circumstances”.

Why so reserved? Maybe it’s because Sony (SNE) is struggling through yet  another restructuring, so a big party would seem inappropriate. Maybe because Sony views the Walkman’s birthday as a lot of middle-aged people view their birthdays: Markers of bygone eras and missed opportunities. Or else it’s just Apple’s (AAPL) fault. Associated Press:

The manufacturer, which also makes Vaio personal computers and Cyber-shot cameras, hasn’t had a decisive hit like the Walkman for years, and has taken a battering in the portable music player market to Apple Inc.’s iPod.

Sony has sold 385 million Walkman machines worldwide in 30 years as it evolved from playing cassettes to compact disks then minidisks — a smaller version of the CD — and finally digital files. Apple has sold more than 210 million iPod machines worldwide in eight years….

The archival exhibit shows other Sony products that have been discontinued or lost out to competition over the years — the Betamax video cassette recorder, the Trinitron TV, the Aibo dog-shaped robotic pet.

I do remember hearing some Sony folks mutter hopeful words about a new line of Walkmans that came preloaded with music from Sony artists like Beyoncé and were supposedly flying off the shelves at Wal-Mart (WMT). But that was a while ago, come to think of it, and I haven’t heard about it since.

In any case, just because Sony’s being bashful about the Walkman’s history doesn’t make it less interesting. You can learn more about it at Sony’s online archive, which is compelling despite the fact that it’s a stilted corporate hagiography. Start reading at Chapter 17, part 2: “Listening to Stereophonic Sound While Walking.”

While Squires solves that riddle, he’ll leave his day job as head of the “news business unit” (Time, Fortune, Money, etc.). In his place will be… Moore, who is already running the company’s style group.

I chatted briefly via email with Squires, who is good-natured about the assignment. But I have to take issue with him (and everyone else who uses this example) re iTunes. Apple (AAPL) didn’t prove that people are willing to pay for content online–we’d already seen that (at The Wall Street Journal, among other examples). Apple proved that people are willing to pay for portions–that would be songs–of products that were previously only sold in bundles–that would be CDs.

You can debate whether this was terrible for the music industry or simply the least-bad option. But I don’t think it makes sense to compare the experience of the music industry with news and other Web content that people aren’t used to paying for in any form.

Here’s my Q&A with Squires:

MediaMemo: I’m struck by Ann’s “genie” reference–are we meant to take that in a tongue-in-cheek way, or do you folks really think you can put the free-content genie back in the bottle? Or am I misinterpreting that?

John Squires: We’re not unrealistic about the challenge, but iTunes showed people will pay for something attractively packaged and fairly priced that they once got for free….We also wanted to get your attention. So I guess we’re genies.

MM: Do you imagine that Time Inc. will be taking content that’s currently available for free online and putting it behind a pay wall? Or are you more focused on creating new products you can charge for?

JS: This is part of what we’ll be testing. Certainly some online content will remain free because we’re eager to keep our large online audiences (over 26 million Nielsen uniques) and successful advertising model. Some other online content may be subscription-based. And the content we create for mobile readers will be a completely new experience, with different design and functions that we think consumers will want to pay for.

MM: Haven’t heard Time Inc.’s voice in the “Google isn’t playing fair” chorus. How much, if any, energy are you spending on getting the search engine to help you/take less from you, etc.?

JS: We’re not part of that chorus at the moment.

MM: Is this a permanent assignment or will you go back to News at some point?

JS: We’ll see what comes out of this assignment.

And here’s the companywide memo from Moore:

To:       Time Inc. Employees

From:   Ann Moore

Re: How to Put the Genie Back Into the Bottle; Special Assignment for John Squires

It won’t be a revelation to any of you that the publishing business is changing rapidly. While print magazines are not going away, and while we have built vibrant websites with over 26 million unique visitors and 750 million pages views each month, it’s increasingly clear that finding the right digital business model is crucial for the future of our business. We need to develop a strategy for the portable digital world and to refine our views on paid content.

Given the magnitude of the opportunity, I have asked John Squires to take on a new role and devote his full time efforts this summer to developing the best business plan for the future. John’s qualifications for this assignment are ideal. He has a strong background in consumer marketing and digital content and has stature in the publishing industry, as well as with digital software and hardware companies. It is likely we will be seeking partners and allies in our quest to ‘put the genie back into the bottle’.

As many of you know, we are currently pursuing four related initiatives:

1.    Evolving our current website businesses by identifying and developing consumer revenue streams.

2.    Accelerating the creation of applications for smartphone platforms.

3.    Developing new products and business models for portable digital readers.

4.    Exploring partnerships with other publishers to develop the optimal retail store for our digital products.

John will need the support of many, including Consumer Marketing, Legal, Strategy and Business Development, and the Time Inc. titles. Please pitch in with all your resources available when he calls.

During this assignment, similar to the role I’m playing at the Style and Entertainment Group, I will assume responsibility for the News Business Unit.

A.M.

But that was when people still bought CDs. Now everyone from Britney Spears down to the smallest indie band routinely streams music for free, before the disc–or iTunes download–goes on sale, in order to whet appetites–or at least promote concert tours. No big deal.

But I still like the way that Wilco, the best band of all time in the whole wide world (disclosure: I am a big Wilco fan) handles this: Rather than linking up its free stream in a promotional tie-up, the band waits for the album to leak onto the Web, then streams it on their own site. And they ask fans who have helped themselves to an illegal download to donate to charity.

Slight bummer for Warner Music Group (WMG), which would like to sell as many discs as possible, but good vibes for everyone else. And, in truth, a nice promotion for the band as it heads out on tour this summer.

Here’s how the band describes it, via an email sent out last night:

Well, we made it nearly a month with copies of Wilco (the album) floating around out there before it leaked. Pretty impressive restraint in this day and age. But the inevitable happened last night. Since we know you’re curious and probably have better things to do than scour the internet for a download (though we do understand the attraction of the illicit), we’ve posted a stream of the full album at http://wilcoworld.net/records/thealbum/. Feel free to refer to it as “wilco (the stream)” if you must.

We also have our usual guilt abatement plan for downloaders. If you have downloaded the record, we suggest you make a donation to one of the band’s favorite charities, the Inspiration Corporation–an organization we’ve supported in the past & who are doing great work in the city of Chicago. Information and donation button here: http://inspirationcorp.org/.

If you don’t want to click through, here’s a version of the album’s first song, recorded last fall. Not as good as the album cut, in my humble opinion.

Less boast-worthy: Warner has written off almost all its investments in lala and imeem, two digital music start-ups it once thought would help save it from the slump in CDs.

In 2008, Warner invested $20 million in lala.com and $15 million in imeem.com. Now the label is taking a $33 million charge on the two start-ups.

The company’s 10-Q, filed this morning, spells it out: It wrote off $16 million in imeem–its entire investment–and half of its investment in lala. It also threw away $4 million via a “receivable write-off” related to imeem–that is, the start-up owes Warner money the label doesn’t expect to see again.

This appears to explain why Warner wasn’t bothering to renegotiate its streaming rights deal with imeem earlier this year even though it owned an equity stake in the company: It looks like the label had already concluded the company wasn’t worth saving. UPDATE: A person familiar with the situation says Warner may yet hammer out a new agreement with imeem.

Asset write-downs–acknowledgements that the stuff you bought back in the boom is worth a lot less now–have been par for the course for big media companies following last fall’s crash. If anything, Warner is a little late to the game here–many of its peers took their lumps last quarter.

But it is unfortunate for imeem, which has just raised an emergency funding round–something in the single-digit millions, I’m told–and is still out trying to land more cash.

For the record, Warner said music sales were down 17.6 percent in the last quarter and that the company lost 45 cents a share on revenue of  $668 million. Analysts had been looking for revenue of $730 million. Warner attributed a loss of 22 cents a share to the write-downs.

And as far as Warner’s digital revenue goes, that six percent increase is worrisome since it shows continued deceleration: A year ago, digital revenue had increased 48 percent over the previous year. And Warner’s digital total was up just one percent over the previous quarter.

And then these two sentences: “Discussions regarding the digital distribution of the catalogue will continue. There is no further information available at this time.”

So, to sum up: The Beatles are still not available on Apple’s iTunes (AAPL) or any other legal online venue.

If you want to read about the CDs, which will be released in September and will feature “new packaging,” go right ahead. But if you’re pressed for time, here’s what said packaging will look like. Start saving now:

But just in case you weren’t convinced, here’s some new data from NPD Group:

• CD sales dropped by 19 percent last year.
• The number of U.S. CD buyers  dropped by 17 million last year.
• The number of music buyers dropped by 13 million last year.

Only the last number is noteworthy. Because while NPD says that digital music downloads increased by 29 percent in the last year–good for Apple (APPL)–the research firm also notes that many Americans have simply stopped paying for recorded music, period.

Up until last fall, music optimists would argue that this was OK, because people were more engaged with music than ever. Semi-true cliche: The music labels are in trouble. The music business is doing just fine.

And indeed, NPD throws out a series of stats which show that more people are listening to free music provided by the likes of Pandora, iMeem and News Corp.’s (NWS) MySpace Music. But all of the sites that are providing free music are having a very hard time figuring out how to make a business out of it. It’s quite likely that we’ll see some of them fold or sell out in the next few months. Stay tuned.

Note: News Corp. owns Dow Jones, which owns this site.

The six-unit Virgin Megastore chain will close two more stores, the Union Square location in New York City at the end of May and the Market St. store in San Francisco at the end of April, sources say….

In August 2007, the Virgin Entertainment Group North America was acquired by two real estate companies–the Related Cos. and Vornado. Since then, the chain has been reduced from 11 units–with the industry awaiting word of the fate of the three remaining stores in Denver, Los Angeles, and Orlando, Fla.”

At this point the real news should be when people buy music at brick-and-mortar outlets at all. They still do: CD sales continue account for the majority of big music’s revenues.

But as the handful of remaining music stores vanishes, and the big boxes like Wal-Mart (WMT) and Best Buy (BBY) keep cutting back the space they allot to discs, that won’t remain true for long.

Increases in digitally downloaded albums and songs were not enough to offset a nearly 20% plunge in CD sales in the U.S., according to year-end figures published Wednesday by the Nielsen Co.’s SoundScan service… U.S. album sales including digital downloads fell 14% for the year, while factoring in individual song downloads, sales were off 8.5%.”

This is either the seventh or eighth year in the last decade where you could have run a similar paragraph, depending on who’s counting. The big picture is that the industry peaked in 2000, when online file-sharing/stealing/swapping/whatever-you-want-to-call-it became mainstream. It has yet to recover.

That recovery is still a long way off. Despite years of talk, the industry is still yoked to the inexorably declining CD business, which makes up the overwhelming majority of its sales and profits. So it’s going to keep declining for quite a while before it bottoms out.

The good news: If you’re only interested in listening to good music, and don’t care about the industry behind it, you have more options than anyone has ever had in the history of man. Enjoy yourself, and have a very merry new year. See you in 2009.

[Image Credit: Backstreet Boys concert photo, which has nothing to do with the clip above, via Anirudh Koul]

Latest example: Borders Group (BGP), the struggling book chain, has cut its music inventory by 30 percent in the last year, the company said. Music now occupies about seven percent of its floorspace, and the space it used to take up has been given over to higher-margin products like children’s books.

Borders makes up a relatively small portion of U.S. music sales, but most big retailers have been doing the same thing for more than a year. If you don’t believe me, try to find the CD section next time you visit a Target (TGT) or Best Buy (BBY) this month.

The big stores will embrace individual albums–if they have an exclusive, like Best Buy’s deal with Guns N’ Roses, or Wal-Mart’s (WMT) recent AC/DC promotion. (That’s Best Buy’s GNR promotion, pictured above. Lonely, isn’t it?) But beyond that, they are basically telling music shoppers, who bought some $7 billion worth of discs last year, to take their business elsewhere.

[Image Credit: Idolator]

The first four weeks of Q4 2008 have seen CD sales fall about 23% in total (down 26% excluding last week’s AC/DC exclusive that did not benefit the major record labels, nor retailers beyond Wal Mart), compared to the 16%-18% declines experienced during the first three quarters of 2008 and last year’s full-year decline of 19%.”

The accelerating rate of decline for CDs combined with the slowing growth of digital unit sales has resulted in Q4 total unit sales declining 11.6% compared to the 5%-7% declines experienced in Q1-Q3 2008 and is similar to the 11.3% decline experienced in Q4 2007.”

Those are the kinds of stats that make it easy for even the most slothful armchair analysts to declare the CD dead. And they’ll be right–one day.

Even after CD sales shrink by double-digits again this year, it’s going to remain a big business. Last year the music labels shipped some $7.4 billion worth of discs in the U.S. alone. Question. Who is buying these things?

[Image Credit: Neil Rickards]