Regardless of your personal feelings about Apple (or Steve himself), one can’t deny they’ve developed products that are easy to use and look amazing, revolutionizing the way consumers use technology with the ipod, iphone, and the itunes store. But Steve Jobs, the music Industry visionary? Five years ago in an interview with Rolling Stone, Jobs it turns out accurately predicted the outcomes of some of music’s and the Industry’s vexing problems like Digital Rights Management (DRM), the business strategies of the four major labels, and even Apple itself. From the article…
We said: These [music subscription] services that are out there now are going to fail. Music Net’s gonna fail, Press Play’s gonna fail. Here’s why: People don’t want to buy their music as a subscription. They bought 45’s; then they bought LP’s; then they bought cassettes; then they bought 8-tracks; then they bought CD’s. 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, you know, at 10 bucks a month, that’s $120 a year. That’s $1,200 a decade. That’s a lot of money for me to listen to the songs I love. It’s cheaper to buy, and that’s what they’re gonna want to do.
Here’s Jobs talking about the future of the itunes store. Keep in mind, last year, they sold six billion songs…
Well, we don’t even have to go that far. There are approximately 800 million CD’s sold in the U.S. a year, I believe. That’s about 10 billion tracks, right? About 10 billion tracks in the U.S. — sold legally. Our next milestones are to get up to 100 million tracks a year, then a quarter a billion, and then half a billion, and then a billion. And that’s gonna take a little bit of time. But we can see a path that people will buy a billion tracks a year online. From us and others. And that’ll be 10% of the music that’s sold today in the country, and then it will keep going from there. And, someday, maybe all of the music will be delivered online — ’cause the Internet was built to deliver music. I mean, if nothing else, Napster proved that.
And finally (if Jobs’s predictions are true), a solution for the record Industry to be successful in the future.
…But then, again, the music companies aren’t making a lot of money right now … so where’s the money going? Is it inefficiency? Is somebody going to Argentina with suitcases full of hundred-dollar bills? What’s going on?
And it turns out, after talking to a lot of people, this is my conclusion. A young artist gets signed, and they get a big advance — a million dollars, or more. And the theory is that the record company will earn back that advance as the artist is successful.
Except that even though they’re really good at picking, still, only one or two out of the ten that they pick is successful. And so, for most of the artists, they never earn back that advance — so they’re out that money. Well, who pays for the ones that are the losers?…The winners pay. The winners are paying for the losers, and the winners are not seeing rewards commensurate with their success. And so they get upset. So what’s the remedy? The remedy is to stop paying advances. The remedy is to go to a gross-revenues deal and to tell an artist: We’ll give you 20 cents on every dollar we get … but we’re not gonna give you an advance.
The accounting will be simple: We’re gonna pay you not on profits — we’re gonna pay you off revenues. It’s very simple: The more successful you are, the more you’ll earn. But if you’re not successful, you will not earn a dime. We’ll go ahead and risk some marketing money on you, and we’ll be out. But if you’re not successful, you’ll make no money — but if you are, you’ll make a lot more. That’s the way out. That’s the way the rest of the world works.
The full article is here and is a great read.