As I write this, I am aware that I will undoubtedly take a lot of criticism from fellow music industry professionals. But it’s important to tell the truth — looking at the facts dispassionately and making a logical case based on the realities of history is the only way to move forward.
The truth is that Steve Jobs saved the music industry. In the late-90’s, computer and internet technology had reached a point that made the transfer of reasonably sized, high quality MP3 files extremely easy and inexpensive for millions of people. Once that point was reached, the music industry was set on an inevitable collision course with modern technology. The stasis of the (relatively young) modern music industry was shaken; nothing would ever be the same again.
In 1999, on the heels of the initial success of peer-to-peer file sharing sites like Napster, lawsuits were filed, but lawsuits would not solve the overwhelming issue: music had become broadly available online, and access was easy… not to mention free. Sure, it was technically illegal, but the new technology was breaking unprecedented legal ground, and a population that was largely uneducated on intellectual property law ultimately took advantage of this access. You could say that the downloaders were ignorant opportunists.
The legal fights would multiply– record labels, publishers, the RIAA– it seemed like everyone reacted and got in on the fight— suing the file-sharing services, and suing the college kids in dorm rooms who were utilizing them, suing ISPs… At various points, injunctions were granted, settlements were offered and accepted, but the sharing continued… the stealing of music was rampant and seemingly unstoppable.
As technological advances continued, the innovations that made this “sharing” possible grew in sophistication as well. The genie would not go back into the bottle. The lawsuits were costly and cumbersome, and they weren’t solving the problem. The music industry wasn’t coming up with a viable solution either. It shouldn’t be surprising — after all, the music industry was not equipped — or even conscious — of the idea of selling directly to the public. The industry was built on the model of creators under contract to labels who push distribution to retailers who ultimately sold product to consumers. The downloading was bypassing the retailers (and in some cases the labels) and going straight into the hands of the consumers, cutting out the traditional distribution chain that existed with physical product like CDs and cassettes.
The problem was clear, but a solution would require a major paradigm shift. It would require changes in licensing from the major labels, technological implementation, a strong marketing plan, and perhaps most importantly, an appealing value that would entice illegal downloaders to pay for music that was already free for the taking.
Steve Jobs quietly presented the answer. Steve Jobs and Apple introduced the iPod and iTunes software in 2001 and it was marginally successful, but the real shift wouldn’t come until 2003 with the launch of the iTunes Store. Steve Jobs not only had a vision, he had a plan — a plan that the music industry was initially reluctant to take part in. Jobs was intent on a singles-based sales structure with optional pricing for full albums. He determined that 99 cents per single song would be the standard price point — a suggestion that rankled many industry traditionalists. Nonetheless, Jobs eventually negotiated licensing agreements with all of the major labels. Of course in hindsight we see that there were few other options, but to his credit Steve Jobs could already see what was ahead…
In a 2003 interview Jobs spoke openly about the major labels and said, “When the Internet came along, and Napster came along, they didn’t know what to make of it. A lot of these folks didn’t use computers–weren’t on e-mail; didn’t really know what Napster was for a few years. They were pretty doggone slow to react. Matter of fact, they still haven’t really reacted, in many ways.” Jobs recognized the path that technology was taking, and the effect it would continue to have on the music industry, and more importantly, music itself.
He also understood intellectual property, and this may be the most important piece of the strategy that saved the music industry. Jobs stated, “If copyright dies, if patents die, if the protection of intellectual property is eroded, then people will stop investing. That hurts everyone. People need to have the incentive that if they invest and succeed, they can make a fair profit. Otherwise, they’ll stop investing. But on another level entirely, it’s just wrong to steal. Or, let’s put it another way: it is corrosive to one’s character to steal. We want to provide a legal alternative.” With iTunes, Jobs not only provided a legal alternative, but a more convenient alternative. He understood that people would pay 99 cents a song if it were easier than stealing, and of equal importance he understood that the vehicle — the iTunes application itself — would need to be free. iTunes didn’t just carry Jobs’ vision to fulfillment — it built a commercial superhighway and saved the music business.
These days it is hard to imagine a world without the iPod. But I encourage you to try to imagine a world in which a viable, marketable entity such as iTunes never existed. Before the iTunes store illegal downloading was on the rise, and there were no viable legal alternatives that provided the variety and consumer-demanded selections of the bygone mega-record stores. Would the industry have even more aggressively sued its customers? Would it have collapsed completely? Perhaps each major label would have eventually opened their own online music marketplace, but with what arcane limitations? Was it even possible that the major labels could reach enough of a consensus to integrate their technologies? Or would we need a separate Sony Walkpod for one genre while U2 fans would be relegated to the Island/DefJamPlayer? Thankfully, we will never know.
I strongly believe that Steve Jobs did the impossible – he created a platform that would ultimately sway the public through its ease, affordable price-point, and vast selection. He brought together an industry that was disintegrating — fragmented and scrambling in every direction but the right one. Steve Jobs brought this industry together on a level playing field and confidently showed them the new rules of the game. He pointed towards the existing revenue potential — not the revenues of the past, full of packaging deductions and other physical goods profit points. Jobs pointed us towards revenues that existed in a brand new landscape. He knew that the music-oriented public was already far more sophisticated than the labels, and he knew what they would want, because as a music fan himself, he knew what he wanted.
A true innovator gives the market what it wants before the market knows what it wants. Steve Jobs was a true innovator. The music industry is still refining their models for business – and is taking a hell of a long time to let the old models go. But music is being consumed more than ever – songs are delivered faster, and there is more variety at our fingertips than ever before in the entire history of music. It is a special time — uncertain, exciting, scary, and quite exhilarating in its potential.
The music business will survive and will once again thrive – this time with majors and independents sharing nearly equal footing. Things don’t look the same as they did 15 years ago, and I guarantee that they will not look the same 5 years from now, but music is here to stay and as long as intellectual property is protected, it will always be a valuable commodity. To think we can completely control it is foolish — this is art in its commercial form — but it is art nonetheless: creative, unpredictable, and attractive when excellent.
I am so thankful that Steve Jobs was a music fan, because he believed that its value was intrinsic when delivered effectively. He showed the music industry how to capture the value that was quickly being eroded by old-world ideals. He developed technology, and then built the marketplace that would allow music-creators to communicate value and reap the benefit of their work. It’s not the world I imagined when I first entered this business; it’s more challenging, but in many ways it’s better. Thank you, Mr. Jobs, for saving the music industry. We owe you one.***