A common narrative about the music business is that Apple single-handled disrupted it. It was Apple, and in particular Steve Jobs, that used iTunes to “break the back … of music majors” (see JLG’s Monday Note). My problem? It isn’t actually true, at least not in the form the myth has taken. It’s close, but it isn’t the whole picture.
How The Story Goes
The story starts with services like Napster, which offered a way for people to share MP3’s. And lots did. Enough that it got the attention of the music business. This wasn’t people swapping dubbed cassettes, something the labels already hated. Being able to share a song or album with essentially an unlimited number of people was a real problem. It scaled in ways that bootleg tapes could never hope to achieve. This model could hurt the music industry, if not kill it off in the form known at the time.
Along comes iTunes, where you can now buy individual songs for $0.99, or entire albums for less than the price of the CD. No need to buy the disc and rip it. No need to go to Napster and find the one download that was done at a decent sample rate. A few clicks, a pause to download, and you have music to put on your iPod. With iTunes, Steve Jobs was able to bring the music industry to heel, forcing their hand, and disrupting the business as a result. The picture is of a bunch of hapless music executives looking on, bewildered at what just happened, while Apple shows the way. Steve even took it further, eventually convincing the labels to remove the DRM they initially insisted on. It was “Apple vs. The Music Industry”, and Apple won.
The story is the archetype for Silicon Valley disruption. It is often referenced when discussing other attempts to disrupt some industry. Some might talk about Uber or airBnB or Netflix, but not typically. When people talk about disruption, they usually talk about iTunes, Apple and the music business.
The problem, though, is that this narrative isn’t complete, and it’s not entirely true. It gets some of the core elements right, but overlooks some key pieces.
In order for iTunes to work, Steve had convince the major labels to agree to an interesting and somewhat unusual licence. Elements of what Steve did wasn’t entirely unprecedented. But it was a different core model than the music labels were accustomed to, and I fully expect they pushed back hard before they relented.
Without the active and willing participation of the major music labels, iTunes would not have been possible. Only having music from minor and independent labels wasn’t going to work. It wasn’t going to attract enough attention to bring the big boys around, or allow iTunes to survive without them. Without Sony, Warner, Universal, EMI (and others), and their massive current and back catalogs of popular music, iTunes was dead in the water. Apple simply didn’t have enough influence at the time to pull it off without them.
I expect it was a very, very tough set of conversations, but eventually the major music labels relented. They volunteered to participate in the iTunes experiment, licencing their music so that it could be sold one song at a time, not just by the album. They also had to buy into the “$0.99 per song” model, rather than some kind of tiered system that would likely have seen higher prices for newer or more popular songs.
It bears repeating: the music business volunteered to be disrupted by Apple. They were active and (somewhat) willing participants in changing the way people bought and listened to music. Steve didn’t force it on them. They chose this path, likely because they simply could not see any other viable way.
One-At-A-Time Sort-of New
The “one at a time” thing wasn’t entirely new. It’s how music labels typically licenced music for radio airplay and for “musak” in elevators, restaurants and other public settings. It was also the model that K-Tel used for their various music collections. So the concept certainly wasn’t completely new.
But the difference here was that, in the past, the labels choose which individual songs could be played, and when entire albums had to be used instead. Most DJ’s weren’t allowed to spin just any song off an album. Typically, they used the singles that the labels provided, rather than the album version. K-Tel and other 3rd-party producers of “greatest hits” collections had to specify which songs they could use, and not every song was necessarily available to them.
The model that iTunes was going to use was different: every song had to be made available for individual purchase. Now, that wasn’t always the case. From time-to-time, you would see songs that were “album only”, meaning you had to buy the whole album to get the song. I suspect part of that was due to other contractual obligations on the part of the label, and as such, they represented the exception rather than the rule. But for almost all of the music on iTunes, you could buy the one song you wanted, and ignore the rest of the album.
Had They Said “No”…
Prior to iTunes, some or all of the music labels could have said “no”. They didn’t have to agree to work with Apple. The labels could have tried whatever schemes they had come up with (and would probably have been disrupted externally without their active assent). The result would have dramatically changed Apple, though. Prior to iTunes, and in particular the Windows version of iTunes and the iPod, the iPod was an expensive niche MP3 player for Macintosh users. It was in a market populated with cheaper and more feature-rich alternatives. Apple’s bread-and-butter was the Macintosh, not the iPod. The impact of iPod, though, is a conversation for another day.
The point here is to reinforce that Apple and Steve Jobs didn’t disrupt the music business by themselves. Apple was of critical importance. Clearly Steve was able to craft a story that the music labels were willing to buy into. The music business was facing a crisis, and I’m certain that others had approached them with other ways to try to salvage the label’s future. But Steve already had some credibility with his time at Pixar, and his relationship with Disney. Pixar transformed animated motion pictures, and that likely gave Steve a leg up on anyone else in the business.
But without the active participation of the major labels, iTunes (had it even been released) would have been an interesting science experiment and little else. Apple was instrumental in disrupting music, but it required the music business to play along. The music labels were as much a part of disrupting the music business as Apple was.