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Steve Jobs wasn’t just a technological innovator – he created a role for himself and his business in the music industry that hadn’t existed before. In these conversations and written remembrances from key executives in the music business — some of whom dealt with him personally, some of whom didn’t — a picture emerges of how he created that role and what he did with it. Before he stepped in, the music business’ transition from physical to digital was filled with false starts and self-interest. Jobs didn’t just act as the catalyst for organizing that transition — he did so on terms that were favorable to his company. Here Edgar Bronfman Jr., Martin Bandier, Paul Vidich and Al Smith share their memories of Jobs. As Smith says, “He forced the industry to follow. He ended the bullshit.”
Edgar Bronfman Jr. (Warner Music Group chairman), in a statement to Billboard:
“The history of the music industry is inevitably also the story of the development of technology. From the player piano to the vinyl disc, from reel-to-reel tape to the cassette, from the CD to the digital download, these formats and devices changed not only the way music was consumed, but the very way artists created it.
“Thanks to his incomparable brilliance, Steve produced perhaps the greatest marriage of music and technology in over a century: the birth of the iPod and the launching of iTunes. Following numerous failed online music startups and massive digital piracy that risked destroying our industry, Steve at last gave the music industry a viable commercial solution for the Internet age.
“ITunes today sells more music to consumers than any other retailer in the world, and its growth throughout the world continues unabated. And since discriminating fans can pick and choose exactly what they want to buy, artists and their labels are more conscious than they’ve ever been of making sure that every song on a new album is as good as can be.
“Steve and I certainly disagreed about some issues, as business partners sometimes do, but I respected him not only for his astounding genius but for what set him apart from so many other technological innovators: his deep love of music. I believe much of his amazing success is attributable to just that — his ability to envision devices and the listening experience from the perspective of a passionate music fan.
“He is irreplaceable.”
Paul Vidich (former executive VP at Warner Music Group, the first label to sign on with Apple and iTunes; currently a consultant)
How did Warner’s collaboration with Apple come about?
“[Ten years ago], the industry was under a lot of pressure because of piracy and the lawsuits against file sharers to come up with a commercial digital play. The Time Warner Merger with AOL in January 2001 was supposed to help us get music online, but it didn’t work out. There didn’t seem to be any good ideas on how to get digital going.
“In April of 2002, I got a call from Barry Schuler [then president of AOL’s Interactive Services Group], who said Steve Jobs was on the phone with him. The iPod was out then, but was not successful. But Steve understood the vast opportunity Napster would provide for Apple. He wanted to do something in music but had nobody to talk to.
“So I flew out with a few other Warner people and met with some of his people. He came late to the meeting and sat in a chair closest to the door. As we explained what we were doing and planning for digital, I watched him in his chair — he rocked back and forth and was obviously frustrated.
“‘I don’t want to talk about what you guys are doing,’ he said. ‘You guys have always had your heads up your expletive-deleted.’ He went on like that, I let him insult us and I said, ‘Steve, that is what we are here for — to hear your thoughts. [Then-Warner Chairman/CEO] Roger Ames will come out the next time and together we will jointly come up with an offering and if it works for us, we will introduce you to the other majors.’
“We spent six months shaping the music rights, the consumer experience, the rights management — which became FairPlay — the number of copies allowed, how you copy it off the disk, and we also gave them feedback on iTunes. When we had our deal done, we introduced them to the other majors.
“We did our deal, closed it in October 2002, they then pitched it to each of the other, who signed on and they launched it on April 28, 2003. Within a month they sold a million downloads, which startled everybody.
“‘You are the technology company and we are the content business,’ [was the arrangement]. ‘You have to create the technology experience, when attached to the right content it will create the compelling experience for the consumer.’
“I came up with 99 cents per track download. He liked it; a lot of others didn’t like it. But at that time, there was nothing going on except free downloads.
“We needed something compelling that the consumer would embrace: Jobs and Apple using our content, creating a compelling new format and permanently altering the relationship between fans and music. He did it at a moment in time when there was a lot of chaos in the market.
“Had he not been successful, I don’t think the music industry would today be getting 45% of its revenue through downloads. It would be much more fractured and suffering from significantly greater piracy. If you look back over the last 10 years, there have only been two digital successes: Pandora and iTunes, and nothing else has risen to that level.”
Is there a downside to what Jobs and Apple brought to the table for the music industry?
“The downside we didn’t achieve interoperability. I have always believed that the best outcome for the industry would have been an interoperable standard, where you can buy anywhere and for any device and unfortunately, initially that wasn’t the case. It got there with MP3, but that is an unsecure format. But initially it was in Steve Jobs’ interest to create FairPlay because it creates a ringed fence around the Apple offering.”
Can you remember any personal moments with him?
“About a year after we launched, Time Warner had a senior management meeting in Boca Raton, Florida and he was the keynote speaker. About an hour before he went onstage, Steve asked to see me. So I went and talked with him for about 45 minutes. I found him to be a very shy person at one level and yet a very deep person and unusually soulful person to be in a position of power. It was just the two of us talking about life. It was a very interesting talk and not one I’d had with a CEO before. We didn’t share music tastes but he came across as a music fan.”
Do you see anybody on the horizon who could replace Steve Jobs as an executive who has framed and will frame the industry’s future?
“I am not sure if anybody can replace him. But he was not a music visionary, really — he was a technology visionary. Apple is in a unique space and I don’t think anyone is replacing Apple — I don’t see much out there that is particularly compelling and innovative. What I do see is music rights and industry legacy issues that continue to hamper innovation in the space.”
Al Smith (former executive VP for Sony Music Entertainment, currently a consultant)
What did Jobs mean to the music industry?
“The record industry was having a hard time moving the ball forward, given the difficulties with trying to work together to develop a new channel without violating the anti-trust regulation. Also before Jobs, we couldn’t agree on anything. Even the record companies and the publishers couldn’t agree. It all came back to [the fact that] we couldn’t talk to each other. Individually, none of the companies could really put together enough content to give a complete offering to the consumer. We couldn’t build it within. It took someone like Jobs, as an outsider, to deal with everybody.
“At the time, Jobs wasn’t the only one we were talking to. We also went to Microsoft, but they had their difficulties. They were developers of an operating system and had all these hardware companies with different interests they were serving. Jobs had the unique ability to develop hardware without needing third [parties].
“Jobs had the vision to see the value of what music distribution could be. Bill Gates didn’t quite feel the same way. He was more into games and didn’t think the same way about music. But of course he got upset when Jobs succeeded, but he had the chance too and didn’t get it done. Gates and [Sony’s Nobuyuki] Idei had a meeting that got no place.
“There were a lot of efforts to start digital. There was the Madison Project with IBM and Microsoft, and at the end of the day, we couldn’t get it done. Besides, whatever positions the individual [major] companies were working toward, we could only deliver what we had control over. We couldn’t deliver 80% of the music.”
What were the side agendas?
“AOL wanted to control distribution, Sony wanted to get Kodak as the standard [memory format for devices]. There was one venture, after Madison and SDMI [Secure Music Digital Initiative], which included Apple and other technology companies and because Sony and Philips had their own interests, Jobs saw this and stepped away. He saw they all had their own agendas, so it created a path for Jobs and he was a smart man and took it.”
I’ve heard that Jobs didn’t care too much about copyrights in the beginning…
“Well, he was open to allowing users to make as many copies as they wanted but in the end there had to be a compromise, so he took a step back and there was an allowable number of copies and devices. Remember, he was looking to sell devices and didn’t worry too much about revenue from music. Look what that did for him! The idea that he controlled the closed system and used music to create interest in his product was brilliant. He was the only one who could see that.
“While the industry was doing maybe thousands of things to get digital off the ground, the press was hammering the majors as being in the buggy-whip industry.
“It was an interesting time for those of us sitting in the middle trying to figure out digital. The door was open to the digital world, but after the CD now the consumer can share it. The industry can sue as many people as they want, but the individual companies are still trying to figure out how to build a digital business model.
“From the industry, Jimmy Iovine had a lot to do with making it happen. Early on, before Apple turned it around, I can remember being in Redmond [Washington] with Jimmy at a meeting with Microsoft to give them the opportunity to work with Pressplay, and their reaction left Jimmy with the reaction that it was not going to work there. So Jimmy said, ‘Let’s go to Apple.’
“It was a weird time and Jobs saved the day, although I don’t know if he saved the day for the music industry.”
What did Jobs mean to the music business?
“He was the first one to take a digital business model and connect the dots to the public. Everyone else was trying something — you had Roxio and Real and companies like that. Larry Miller was at Bell Labs and they put a system up internally where the people in the music companies had music on their computers. Everyone was trying to figure out the business. But Jobs did it. It was Jobs who said to the labels, ‘This is what I am going to do. Come along. Take it or leave it.’ He was a smart man. He put out a product [iPod], the consumer bought it, and he had a place where you can download music from [iTunes] and it was associated with revenue.”
What specifics aspects of the business did he influence?
“The majors were all looking at how to do digital distribution — there was no standard in place in how to deal with it. And the industry was trying to achieve inter-operability. He was able to bring about — in a non-traditional way — [the process] to get digital music versus the traditional MP3. He stepped past everything going on and put together a way to deliver music without worrying about compatibility problems. He forced the industry to follow. He ended the bullsh–.”
Martin Bandier (former CEO of EMI Music Publishing, currently Chairman/CEO of Sony/ATV Music Publishing)
What did Jobs mean to the music industry?
“He converted illegal into legal and enhanced the value of his shareholders’ equity and was very hands-on in how he developed the iPhone and music applications — and certainly had a meaningful impact on the music business.”
What specific aspects did he influence?
“He influenced the business model and made it a more singles-driven business than it had been in the recent past. When I started, [the music business] was singles-driven and it converted to albums. His business model was good for the sale of his iPod — it was very much geared to the buying of singles, and that had a major impact on the business.”
What was the upside of Jobs’ role as an executive for the music business?
“The biggest upside was that he made a new generation realize that they had to pay for music — and that is a tough battle when you are competing against free.”
Was there a downside?
“The pricing never rose about 99 cents and that made it very difficult to survive and prosper. And also the single-driven aspect of the business.”
Did you have any dealings with Jobs personally?
“No I didn’t, primarily because the music publishers gave away their right to license their material for digital to the record companies. It was part of a compromise — there was a quid pro quo, and never until this day, with the advent of cloud services, did we start dealing with Apple.
“He didn’t precipitate the exclusion of publishers initially. It was a negotiated deal between the record companies and music publishers. The logic behind it was that the publishers never had direct contact with Tower Records or Trans World, and this was the new retail and everyone bought into that view. At the end of the day, it was not a great thing for publishers, although it might have helped move the deal along.
“I once had an indirect dealing with him. When the Beatles decided to go with Apple on an exclusive basis, to release their music digitally, they thought they had the right to advertise using Beatles songs for free. I think they learned it was not for free.Ultimately we came to terms for Apple that were also very favorable to us.”
Who could replace Jobs as the industry’s leading digital CEO?
“I don’t know. The guy was so innovative and so hands-on that I don’t really see anyone that can compare to him. Not only was he involved in the business aspect, but he was involved in the design, the presentation and the marketing. I don’t see anyone that can fulfill that role.”
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