x Abu Dhabi, UAESunday 21 January 2018

The iTunes music store dramatically changed the way recordings are sold

It may appear as the poor relation in the rich Apple family, but iTunes drastically reshaped the music business and transformed the fortunes of the corporation. Saul Austerlitz contemplates the music store¿s complex legacy ahead of its 10th birthday this year

The Amoeba Music store in Los Angeles, a haven for music lovers who prefer vinyl records and CDs over digital downloads. The privately owned California stores were created in response to corporate chain stores. Nick Ut / AP Photo
The Amoeba Music store in Los Angeles, a haven for music lovers who prefer vinyl records and CDs over digital downloads. The privately owned California stores were created in response to corporate chain stores. Nick Ut / AP Photo

Perhaps it speaks most effectively to the titanic impact of Steve Jobs that a product of his design that upended an entire industry, was responsible for billions of dollars of commerce, and changed the way listeners consume music, received a scant 15 pages of coverage in Walter Isaacson's best-selling 600-page biography of the late Apple chief executive.

When compared to the Mac, iPod, iPhone and iPad, the iTunes Music Store seems relatively insignificant and yet, with its 10th birthday imminent, along with its recent arrival in the United Arab Emirates, now might be the time to assess its complicated legacy, one which has enriched us at the same time as it has eroded some of popular music's place in the cultural landscape.

 

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The iTunes Music Store is a relative weakling in the Apple armamentarium, yet it played no insignificant role in drastically revising the business of selling musical recordings.

In 1999, when the music industry was still a multi-billion dollar endeavour, and the internet was poised to recalibrate the way music fans accessed their favourite songs and albums, there were three ways to purchase music.

The first was to plunk down a small bundle of cash for a CD at the local branch of your friendly record store chain. The second was through industry-designed portals such as Sony and Universal's Pressplay, and EMI, Warner, and BMG's MusicNet, which charged a monthly subscription fee to download a limited selection of tracks. The music industry being the far-sighted, open-hearted beacon of generosity that it is, a number of punitive restrictions were placed on the digital access: tracks could only be downloaded to a limited number of computers to cut down on piracy, and if subscribers chose not to renew their subscriptions, all their downloads would evaporate into the digital ether.

The other was a little something called Napster.

Started by a 19-year-old computer programmer named Shawn Fanning, along with his uncle John and fellow tech wunderkind Sean Parker, Napster was a peer-to-peer sharing service that allowed users to download the contents of other users' music collections.

It was not just that Napster was free (albeit illegal), and Pressplay and MusicNet were expensive; it was also that Napster was painless, and the industry portals were poorly designed and treated legal music downloaders like perpetual recidivists in the hands of a particularly draconian probation officer.

Unsurprisingly to everyone, except perhaps the executives then in charge of the music industry, Napster was an immediate sensation, and Pressplay and MusicNet were duds. Napster had almost 20 million users by the summer of 2000.

The music industry mobilised their legions of lawyers to shut down Napster, which, handily, was run exactly how you would expect a tech startup begun by a teenager to be run. Fanning would have been well-advised to avoid sending emails acknowledging that Napster was in the business of illegal music downloading, but record labels would have been wise as well to realise that Napster filled an enormous appetite that the industry, as it was currently structured, could not, and would not, sate.

Napster was eventually crushed by the Recording Industry Association of America, and other, less attractive replacements such as BearShare and Gnutella stood in its stead.

By then, of course, it was too late. The bottom had fallen out of the music industry now that fans realised the world's best and most comprehensive record stores were online. That they were also free was only the icing on the cake.

Then came Steve Jobs. "You guys are all nuts," he told a roomful of Warner Music executives who had come to Apple's headquarters in Silicon Valley.

"The major labels," Steve Knopper has Jobs say in his book Appetite for Self-Destruction, "were trying to suck out all the money from digital music for themselves." Rigidly attempting to control the flow of music, they were unable to envision the new uses to which MP3 technology would be put.

Sony, for example, ideally positioned to dominate the next wave of portable music players after having created the Walkman and the Discman, was fatally slow in developing the new MP3 technology. Sony was both an electronics company and a major record label, and the once-vaunted hardware wing of the corporation was haunted by fears that developing a portable MP3 player would cannibalise profits from their musical imprints. The same concern in reverse would keep them from developing a functional alternative to iTunes.

A Warner Music executive admitted defeat, pleading with Jobs to intervene and save the music business: "We don't know what to do. You need to help us figure it out." Apple offered an alternative, with Napster's elegance and ease of function joined to the legality of the industry-approved stores.

Jobs overcame the inherent scepticism of many successful musicians and executives with the effortlessness and comprehensiveness of iTunes.

"See how simple it is?" Jobs asked Interscope's Jimmy Iovine, as Isaacson recounts in Steve Jobs. "Your tech folks are never going to do this. There's no one at the music companies who can make it simple enough."

Iovine was convinced, calling it "a turnkey solution" to the industry's ills. Jobs showed Dr Dre how the iPod integrated with the iTunes Store, and the legendary hip-hop star was convinced: "Man, somebody finally got it right." Music from all five major labels would be available, and individual songs could be purchased, in the US, for 99 cents each.

 

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On April 28, 2003, Jobs introduced iTunes, detailing the limitations of Napster and its successors, and of the industry sites, before demonstrating Apple's latest product. There would be 200,000 songs immediately available, and the guarantee of dependability. The iTunes Store would not be shuttered by a judge, nor would it whisk away all of your music after a payment failed to go through.

Jobs was offering on the musical front roughly the same promise as President George W Bush was offering Americans on the economic front: an "ownership society".

Bush guaranteed Americans their own homes, no matter their financial condition; Jobs intended to deliver their music. "People want to own the music they love," he told the audience of journalists, clicking on a slide of his own musical hero, Bob Dylan.

Apple's Eddy Cue was designated by Jobs to manage the iTunes Store, and he predicted that they would sell one million songs in the first six months of operation. He was wildly mistaken. Apple sold one million songs in the first six days. Jobs understood that truly loving music required owning it, not merely renting it.

"We said these services that are out there now are going to fail," Jobs told Dylan Jones for his book iPod, Therefore I Am. "MusicNet's gonna fail, Pressplay's gonna fail. Here's why: people don't want to buy their music as a subscription. They bought 45s, then they bought LPs, then they bought cassettes, then they bought eight-tracks, then they bought CDs. They're going to want to buy downloads. People want to own their music. You don't want to rent your music and then, one day, if you stop paying, all your music goes away." And fans agreed; iTunes reached 10 billion downloads in 2010.

Jobs had sold the iTunes Store to the labels by demonstrating the built-in escape hatch: all they were committing to, he reminded them, was to sell music to Mac users, who made up only five per cent of computer owners. If the business model was calamitous, it could always be sealed off before contaminating the far larger Windows market: "If the store turned out to be destructive," Jobs told Isaacson, "it wouldn't destroy the entire universe."

However, six months later, already cornered, the labels agreed to expand iTunes for Windows as well.

Eventually, Apple allowed for tiered pricing of singles, granting labels the option of charging $1.29 for hit songs. In exchange, Apple removed the copy protection facility that had hobbled iTunes downloads, which had driven some savvier buyers to alternatives such as the Amazon MP3 store, which offered copy protection-free downloads.

 

 

 

 

 

It wasn't a particularly great business model for Apple, either, taken on its own terms. Selling singles at 99 cents apiece, with 70 of those cents destined to return to the labels, does not a multi-billion-dollar corporation make. But those cheap songs were intended to lure consumers into Apple's store in order to get them to purchase the profit-making machines.

Software was now in the service of hardware, and Apple would gladly make the latest number one single available to you for practically nothing if it also meant that you would purchase an expensive iPod from them as well.

Sony Music head Andy Lack's request for a tiny cut of iPod sales was rejected by Jobs, but Lack ultimately proved prescient that music sales would now primarily drive the sales of Apple's ever-expanding line of portable music devices. Music became the killer app that drove Apple from computer-industry has-been to the largest corporation in the world.

"I don't think we're going to make a lot of money," said Doug Morris of Universal Music, "but [Jobs] is going to sell a lot of iPods." He was undoubtedly correct about the latter. Apple sold 376,000 iPods in the US in its first year and, after introducing the iTunes Store (and making Windows-compliant iPods), sold 6.5 million by the end of 2004.

The downloading culture - legal and otherwise - had a perverse impact on music. Easy access to recorded music made for a concomitant downgrading of its importance in the business of music. Artists still recorded albums, and many of them still conceived of their assemblages of new songs as coherent entities, to be consumed as a unified whole. But listeners bought individual tracks from iTunes, or shuffled them on their iPods, scrambling the album as a concept. Moreover, the new business model enriched Apple at the expense of not only the labels, but the artists themselves.

To be sure, there were exceptions, but album sales have sagged drastically over the last decade. The third-best-selling album of 2003 in the US, the year of iTunes' debut, was Linkin Park's Meteora, which sold 3.47 million copies. In 2012, the No 3 album on the year-end sales chart, One Direction's Up All Night, sold 1.62 million copies - less than half its predecessor.

Even critically lauded acts such as indie-rock band Grizzly Bear manage to headline New York's Radio City Music Hall while not all being able to afford health insurance, perhaps in part due to iTunes' measly 17 per cent royalty rate - the same they had received for CD sales, which had built-in manufacturing and distribution costs that digital downloads do not. Grizzly Bear's lead singer lives in a 450-square-foot apartment. When any of us thanks Apple for revolutionising music, it might be worth remembering that they're at least partially responsible for that, too.

 

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Through countless magazine and newspaper stories, posthumous encomiums, and Isaacson's book, Jobs' story has become an immediately recognisable one: smarter, wilier little guy takes down calcified titans.

The wave of Jobsmania has only just begun, of course, with Isaacson's best-selling Steve Jobs giving way to two feature film biopics: jOBS, starring Ashton Kutcher and an Aaron Sorkin-penned film, yet to be cast. Jobs perfectly fits the current cinematic fascination with deeply flawed, but wildly talented antiheroes, joining the likes of Johnny Cash, Ray Charles and Mark Zuckerberg as the subject of his own film.

Jobs may not be the guy you would invite over for dinner - based on Isaacson's book, he would likely have critiqued your overly generous use of balsamic vinegar on the salad and the tacky tablecloth you paid way too much for - but he was the American icon of an era now already slipping out of a nation's grasp. Jobs promised a life of frictionless affluence, of the world at our fingertips, of technology easing our path through life. Americans would own their music just like they owned our houses.

President Bush's ownership society came to a crashing halt in 2008. An era of easy money vanished, and a trail of bad mortgages sputtered and fizzed, the fuse to a bundle of dynamite that blew up the American economy, and then the global one. Indeed, post-crash, many Americans could no longer afford to own much of anything, let alone the overpriced homes they had convinced themselves were their heart's desire.

Jobs had once astutely realised that subscription services such as those the music industry had cooked up were doomed to fail because people wanted to own what they loved. But now the bloom had come off the rose of ownership, and at least some music fans - particularly the young ones aware that the promise of the white picket fence had evaporated - were ready to lease.

The ownership society was now eclipsed by a new world that still sought instantaneous access without requiring permanence. We no longer demanded to own our favourite music because, perhaps now, we understood that we no longer truly owned much of anything.

Where Pressplay and MusicNow littered the side of the road, trampled into the dust by the ease and excellence of iTunes, streaming-music companies such as Spotify have now undone some of Jobs' prognosticating prowess. iTunes had played the leading role in assuring that more than half of record labels' revenues stemmed from digital music sales, reaching $5.2 billion globally in 2011.

But as Apple was expanding into the UAE, Saudi Arabia, India, Kazakhstan, Papua New Guinea, and more than 50 other countries in 2012, streaming-music services like Spotify were exploding in popularity. By last summer, Spotify had more than 15 million users worldwide, along with four million paying subscribers, and had expanded to Germany, Australia and New Zealand.

Jobs' insistence that streaming music could never work had been true for the time of iTunes' introduction, but Pressplay and MusicNow's fleeter, hipper successors were leeching business from Apple. Downloading culture had evolved into streaming culture. Instead of carrying around our music collections in our pockets, we were now told that we would access them from the cloud. iTunes has conquered the world just in time for it to be supplanted.

Once we listened to music by dropping a needle onto a slab of heavy black vinyl. Then we purchased tiny lasers that would read the grooves in a miniature plastic Frisbee. Then we were given a little box the size of a pack of cigarettes, and told that it would store all of our music. Now our music was everywhere and nowhere all at once.

We were granted ever-more access to our music while being pushed farther and farther from actually possessing any of it, in anything resembling what we had once known. The ownership society is no longer, and the iTunes Music Store is the harbinger of a bittersweet time when we have everything and possess nothing.

 

Saul Austerlitz is a regular contributor to The Review.