Morris was so smitten with Jobs that he called Jimmy Iovine, the fast-talking and brash chief of Interscope-Geffen-A&M. Iovine and Morris were best friends who had spoken every day for the past thirty years. “When I met Steve, I thought he was our savior, so I immediately brought Jimmy in to get his impression,” Morris recalled.
Jobs could be extraordinarily charming when he wanted to be, and he turned it on when Iovine flew out to Cupertino for a demo. “See how simple it is?” he asked Iovine. “Your tech folks are never going to do this. There’s no one at the music companies who can make it simple enough.”
Iovine called Morris right away. “This guy is unique!” he said. “You’re right. He’s got a turnkey solution.” They complained about how they had spent two years working with Sony, and it hadn’t gone
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anywhere. “Sony’s never going to figure things out,” he told Morris. They agreed to quit dealing with Sony and join with Apple instead. “How Sony missed this is completely mind-boggling to me, a historic fuckup,”
Iovine said. “Steve would fire people if the divisions didn’t work together, but Sony’s divisions were at war with one another.”
Indeed Sony provided a clear counterexample to Apple. It had a consumer electronics division that made sleek products and a music division with beloved artists (including Bob Dylan). But because each division tried to protect its own interests, the company as a whole never got its act together to produce an end-to-end service.
Andy Lack, the new head of Sony music, had the unenviable task of negotiating with Jobs about whether Sony would sell its music in the iTunes Store. The irrepressible and savvy Lack had just come from a distinguished career in television journalism—a producer at CBS News and president of NBC—and he knew how to size people up and keep his sense of humor. He realized that, for Sony, selling its songs in the iTunes Store was both insane and necessary—
which seemed to be the case with a lot of decisions in the music business. Apple would make out like a bandit, not just from its cut on song sales, but from driving the sale of iPods. Lack believed that since the music companies would be responsible for the success of the iPod, they should get a royalty from each device sold.
Jobs would agree with Lack in many of their conversations and claim that he wanted to be a true partner with the music companies. “Steve, you’ve got me if you just give me something for every sale of your device,” Lack told him in his booming voice. “It’s a beautiful device. But our music is helping to sell it.
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That’s what true partnership means to me.”
“I’m with you,” Jobs replied on more than one occasion. But then he would go to Doug Morris and Roger Ames to lament, in a conspiratorial fashion, that Lack just didn’t get it, that he was clueless about the music business, that he wasn’t as smart as Morris and Ames. “In classic Steve fashion, he would agree to something, but it would never happen,” said Lack. “He would set you up and then pull it off the table. He’s pathological, which can be useful in negotiations. And he’s a genius.”
Lack knew that he could not win his case unless he got support from others in the industry. But Jobs used flattery and the lure of Apple’s marketing clout to keep the other record labels in line. “If the industry had stood together, we could have gotten a license fee, giving us the dual revenue stream we desperately needed,” Lack said. “We were the ones making the iPod sell, so it would have been equitable.” That, of course, was one of the beauties of Jobs’s end-to-end strategy: Sales of songs on iTunes would drive iPod sales, which would drive Macintosh sales. What made it all the more infuriating to Lack was that Sony could have done the same, but it never could get its hardware and software and content divisions to row in unison.
Jobs tried hard to seduce Lack. During one visit to New York, he invited Lack to his penthouse at the Four Seasons hotel. Jobs had already ordered a breakfast spread—oatmeal and berries for them both—and was
“beyond solicitous,” Lack recalled. “But Jack Welch taught me not to fall in love. Morris and Ames could be seduced. They would say, ‘You don’t get it, you’re supposed to fall in love,’ and they did. So I ended up isolated in the industry.”
Even after Sony agreed to sell its music in the iTunes Store, the relationship remained contentious.
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Each new round of renewals or changes would bring a showdown. “With Andy, it was mostly about his big ego,” Jobs claimed. “He never really understood the music business, and he could never really deliver. I thought he was sometimes a dick.” When I told him what Jobs said, Lack responded, “I fought for Sony and the music industry, so I can see why he thought I was a dick.”
Corralling the record labels to go along with the iTunes plan was not enough, however. Many of their artists had carve-outs in their contracts that allowed them personally to control the digital distribution of their music or prevent their songs from being unbundled from their albums and sold singly. So Jobs set about cajoling various top musicians, which he found fun but also a lot harder than he expected.
Before the launch of iTunes, Jobs met with almost two dozen major artists, including Bono, Mick Jagger, and Sheryl Crow. “He would call me at home, relentless, at ten at night, to say he still needed to get to Led Zeppelin or Madonna,” Ames recalled. “He was determined, and nobody else could have convinced some of these artists.”
Perhaps the oddest meeting was when Dr. Dre came to visit Jobs at Apple headquarters. Jobs loved the Beatles and Dylan, but he admitted that the appeal of rap eluded him. Now Jobs needed Eminem and other rappers to agree to be sold in the iTunes Store, so he huddled with Dr. Dre, who was Eminem’s mentor.
After Jobs showed him the seamless way the iTunes Store would work with the iPod, Dr. Dre proclaimed,
“Man, somebody finally got it right.”
On the other end of the musical taste spectrum was the trumpeter Wynton Marsalis. He was on a West Coast fund-raising tour for Jazz at Lincoln Center and was meeting with Jobs’s wife, Laurene. Jobs insisted
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that he come over to the house in Palo Alto, and he proceeded to show off iTunes. “What do you want to search for?” he asked Marsalis. Beethoven, the trumpeter replied. “Watch what it can do!” Jobs kept insisting when Marsalis’s attention would wander. “See how the interface works.” Marsalis later recalled, “I don’t care much about computers, and kept telling him so, but he goes on for two hours. He was a man possessed.
After a while, I started looking at him and not the computer, because I was so fascinated with his passion.”
Jobs unveiled the iTunes Store on April 28, 2003, at San Francisco’s Moscone Center. With hair now closely cropped and receding, and a studied unshaven look, Jobs paced the stage and described how Napster
“demonstrated that the Internet was made for music delivery.” Its offspring, such as Kazaa, he said, offered songs for free. How do you compete with that? To answer that question, he began by describing the downsides of using these free services. The downloads were unreliable and the quality was often bad. “A lot of these songs are encoded by seven-year-olds, and they don’t do a great job.” In addition, there were no previews or album art. Then he added, “Worst of all it’s stealing. It’s best not to mess with karma.”
Why had these piracy sites proliferated, then?
Because, Jobs said, there was no alternative. The subscription services, such as Pressplay and MusicNet,
“treat you like a criminal,” he said, showing a slide of an inmate in striped prison garb. Then a slide of Bob Dylan came on the screen. “People want to own the music they love.”
After a lot of negotiating with the record companies, he said, “they were willing to do something with us to change the world.” The iTunes Store would start with 200,000 tracks, and it would grow each day.
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By using the store, he said, you can own your songs, burn them on CDs, be assured of the download quality, get a preview of a song before you download it, and use it with your iMovies and iDVDs to “make the soundtrack of your life.” The price? Just 99 cents, he said, less than a third of what a Starbucks latte cost.
Why was it worth it? Because to get the right song from Kazaa took about fifteen minutes, rather than a minute.
By spending an hour of your time to save about four dollars, he calculated, “you’re working for under the minimum wage!” And one more thing . . . “With iTunes, it’s not stealing anymore. It’s good karma.”
Clapping the loudest for that line were the heads of the record labels in the front row, including Doug Morris sitting next to Jimmy Iovine, in his usual baseball cap, and the whole crowd from Warner Music. Eddy Cue, who was in charge of the store, predicted that Apple would sell a million songs in six months. Instead the iTunes Store sold a million songs in six days. “This will go down in history as a turning point for the music industry,” Jobs declared.
Microsoft
“We were smoked.”
That was the blunt email sent to four colleagues by Jim Allchin, the Microsoft executive in charge of Windows development, at 5 p.m. the day he saw the iTunes Store. It had only one other line: “How did they get the music companies to go along?”
Later that evening a reply came from David Cole, who was running Microsoft’s online business group.
“When Apple brings this to Windows (I assume they won’t make the mistake of not bringing it to Windows), we will really be smoked.” He said that the Windows team needed “to bring this kind of solution to market,”
adding, “That will require focus and goal alignment around an end-to-end service which delivers direct user
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value, something we don’t have today.” Even though Microsoft had its own Internet service (MSN), it was not used to providing end-to-end service the way Apple was.
Bill Gates himself weighed in at 10:46 that night.
His subject line, “Apple’s Jobs again,” indicated his frustration. “Steve Jobs’s ability to focus in on a few things that count, get people who get user interface right, and market things as revolutionary are amazing things,” he said. He too expressed surprise that Jobs had been able to convince the music companies to go along with his store. “This is very strange to me. The music companies’ own operations offer a service that is truly unfriendly to the user. Somehow they decide to give Apple the ability to do something pretty good.”
Gates also found it strange that no one else had created a service that allowed people to buy songs rather than subscribe on a monthly basis. “I am not saying this strangeness means we messed up—at least if we did, so did Real and Pressplay and MusicNet and basically everyone else,” he wrote. “Now that Jobs has done it we need to move fast to get something where the user interface and Rights are as good. . . . I think we need some plan to prove that, even though Jobs has us a bit flat footed again, we can move quick and both match and do stuff better.” It was an astonishing private admission: Microsoft had again been caught flat-footed, and it would again try to catch up by copying Apple. But like Sony, Microsoft could never make it happen, even after Jobs showed the way.
