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Steve Jobs A Music Visionary?

Steve Jobs is a Bob Dylan fan because the folk singer is, in the words of Apple's CEO, a "clear thinker."

Jobs' own lucid and careful contemplation of the music industry is apparent in a 2003 interview he gave to Rolling Stone magazine's Jeff Goodell. My colleague Tom Krazit pointed me to the story after stumbling on to it recently. We were bowled over by the preciseness of Jobs' assessment of what the future held for digital rights management, music subscription services, the four largest recording companies, and Apple. The interview in retrospect is a fascinating read.

Jobs correctly predicted that attempts by the major labels to find a technological solution to piracy would fail. When it came to subscription music services, he said the public would reject them. He foresaw a day when iTunes would sell 1 billion tracks a year--a bold statement, considering that at the time, iTunes had only sold 20 million songs.

One can sense from Jobs' comments that he was ready to pounce on a music sector that five years ago possessed precious little tech savvy. He described leaders at the top labels as technologically innocent.

Also by 2003, Jobs had concluded that Apple was ready to move beyond computers. He suggested that his company's talent at melding innovative hardware and software designs could help it build winning consumer products.

Jobs warned that competitors would find it difficult to duplicate the success of Apple's iTunes music service, then just 8 months old. Yeah, that's another thing that's striking about the interview. In every word, there's a fierce confidence.

At one point, Goodell asks Jobs if he wrung his hands over the decision to bring iTunes to Windows. The tech legend responded, "I don't know what hand-wringing is."

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One has to remember that the music industry was vastly different in 2003. Most of the public had never heard of a download and overwhelmingly preferred CDs. Piracy was rampant, and no legal digital-music service had caught on with consumers. The major recording companies were betting big on subscription services and copy protection software. Nobody knew for certain if a digital-music store would work. Wal-Mart Stores was the largest music retailer offline, and dominated in music sales online.

Here are some highlights from the interview:

  • Jobs on whether the iPod could become more important to Apple than the Mac.: Apple has a core set of talents, and those talents are: we do, I think, very good hardware design; we do very good industrial design; and we write very good system and application software. And we're really good at packaging that all together into a product.

    We're the only people left in the computer industry (who) do that. And we're really the only people in the consumer electronics industry (who) go deep in software in consumer products. So those talents can be used to make personal computers, and they can also be used to make things like iPods.

  • On major music labels: 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.
  • On iTunes: We've created this music store, which I think is nontrivial to copy. I mean, to say that Microsoft can just decide to copy it, and copy it in six months--that's a big statement. It may not be so easy.
  • A defense of copyright: 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.

    You know how it turned out. Apple's iTunes surpassed Wal-Mart to become the largest music retailer in the land. Jobs proved prophetic about the difficulty in competing with iTunes. Apple's music service trounced those of Sony, Microsoft, and every other competing site. Amazon's digital music store has yet to show it can dent iTunes' 75 percent market share

    Most of the top subscription services are either shuttered, have changed their business models, or hover near irrelevance.

    As for Jobs' predictions on iTunes' song sales, it took the service three years to sell 1 billion songs. Last June, Apple topped the 5 billion mark and earlier this month announced that it had reached 6 billion.

    Is Apple selling a billion songs every six months?

    The major labels have given up on DRM but not as fast as Jobs may have thought. The music industry is moving away from suing individuals for copyright violations and has enlisted the help of Internet Service Providers to help thwart illegal file sharing. The music industry is focused more now on competing with piracy in the marketplace. Rio Caraeff, Universal Music Group's digital chief, told me recently that his label's approach now is to try to win over file sharers by providing easy and inexpensive ways to acquire music.

    And Jobs' assessment that Apple had the kind of talent to produce consumer devices that could replace the Mac as the company's most important product...well, let's talk iPhone. In an October story, CNET News' Krazit wrote that an internal assessment at Apple--using supplemental metrics--determined that the iPhone represents 39 percent of company revenue, while the Mac accounts for 30 percent.

    Jobs' foresight likely has a lot to do with why Doug Morris, chairman and CEO of top label Universal Music Group, called him the smartest man in music.
    By Greg Sandoval

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