Silicon Insider: Steve Jobs, Music Mogul
May 1, 2003 -- Two cheers for Steve Jobs.
With Apple Computer's announcement this week of iTunes Music Store, its online library of downloadable songs, we may finally see the reassertion of reason on the music industry.
There is no little irony to the fact that the music industry, which has made billions celebrating the outlaw life, based in a town founded on movies idolizing Prohibition-era gangsters, is now in the business of suing millions of children for bootlegging.
You don't have to be a marketing genius to realize that: 1) It won't work; 2) The music business is alienating its own customer base, and 3) It will drive the development of new technologies that will eventually kill the record industry.
Enter Steve Jobs, a rock star in his own world, who understands these three points better than anybody. I am no fan of Jobs the human being, but I respect him mightily as a high-tech leader. Jobs may be the greatest innovator (not inventor, though he is often mistakenly credited with that, too) in tech history — that is, no one has ever equaled his skill at matching new technology to sophisticated design to market desire.
Jobs is also a killer. The Apple II, after all, wiped out both the minicomputer and computer terminal industries. And the Macintosh, once it was armed with desktop publishing software, gutted the printing profession.
Old Industry Gets a New Model
If ever there was an industry ripe for plucking it is the music industry. It is the Ottoman Empire of American business. It used to be hungry and shady, but produced a quality product. But now it has grown rich, fat and decadent — and the product is shoddy. It's 1962 all over again, the radio filled with over-engineered pablum performed by TV and movie stars pretending to be musicians. Only this time one senses that there is no British Invasion waiting in the wings to restore rock to its roots.
Kids sense this malaise, even if they don't know its historic antecedents. They know they are getting ripped off by $16 CDs that contain one good song. That's why the occasional real band with real talent, like White Stripes or Linkin Park, rockets up the charts. That's why bands with arcane, but at least sincere, music such as Cold Play and Radiohead are unlikely success stories. Kids know that they live in a rotten time for music.They know why, too. And that's why tens of millions of them gleefully jumped aboard Napster, and even the egregious Kazaa, to illegally download free tunes.
How has the music industry responded to this threat, now estimated at 10 percent of its revenues? Like all dying industries: with more of the same, plus armies of lawyers.
In doing so, it is making the same fatal mistake as other industry dinosaurs of the recent past: it believes that it owns its market space. The fat cats who run the industry are still convinced that their product is so desirable that consumers will accept any level of abuse to get it — and that their sole task is to defend the status quo.
Steve Jobs knows better. He knows that an industry can be centuries old, with a long and complex history, filled with giant corporations, with a sophisticated marketing apparatus, and a well-worn pricing model, and all of it can die in an instant from a new technology ICBM coming in unnoticed from over the horizon.
Not Perfect, But a Start
That's what Jobs is doing right now. And bless him for it. The five major music labels that have signed onto iTunes Music Store with their 200,000 tracks have just saved their lives and sealed their fates. The music industry will never be the same again. It has now become what it was destined to be: software, with all the different demands that industry places on pricing, licensing and quality. And we consumers will be better for it.
Having said all that, I'm not convinced that Jobs has found the perfect solution. He rarely does: just look at the history of memory storage on Apple and Next computers. In particular, his plan to sell downloads at 99 cents per track, is flawed. The price is right; 99 cents does seem to about what most people believe is fair for a song. And for impulse-buying young people the notion of one-off purchases is probably more attractive than the subscription formats of competitors like Rhapsody and Pressplay.
But consumers also want to hear the song they are going to buy, several times, before they make a purchase. Jobs' solution, offering free 30 second previews, won't cut it. If he is really going to revitalize popular music he needs to create an outlet for unknown new bands, fresh from the garage and full of new ideas.
Charging for everything will only reinforce the status quo, which is the mess we're in now. Instead, Jobs should offer lower-quality, full-length downloads of the same songs — grainy AM to iTunes' high-grade FM. Then he can kill the cheesy world of music radio as well. I, for one, can't think of a better two-fer.
Still, the Apple iTunes Music Store is a good start. Combine it with the new iPod (especially when it is Windows compatible ) and Jobs can finally abandon that 3 percent-market-share-in-a-moribund-industry world of Apple Computer and become what he was always suited to be: a classic megalomaniacal music mogul.
Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. His work as the nation’s first daily high-tech reporter at the San Jose Mercury-News sparked the writing of his critically acclaimed The Big Score: The Billion Dollar Story of Silicon Valley, which went on to become a public TV series. He has written several other highly praised business books and a novel about Silicon Valley, where he was raised. For more, go to Forbes.com.