“Music is in our DNA” is a phrase we’ve often heard from Apple people like Tim Cook. How far are they willing to take that belief? Above Avalon takes a look at the idea of Apple’s possible plan to own the entire music industry.
Apple’s ambition in music continues to be misunderstood. Most of the focus remains on the battle between Apple Music and Spotify for paid music streaming subscribers. However, the much more interesting development relates to Apple’s desire to grab music mind share. Apple is aiming to leverage its strong balance sheet to control the music narrative, and in the process, remove all of the oxygen from the music streaming industry.
Music Is in Apple’s DNA
Music not only served as inspiration for the iPod, but also justified Apple’s first major foray beyond hardware and software. Apple got into the messy business of distributing and selling digital music because it believed hardware and software expertise gave the company advantages that other companies lacked. Apple saw the increasing amount of chaos in the music industry as an opportunity to package and sell a superior customer experience. The one thing that Apple was missing: access to songs.
To make the case that Apple should have access to music catalogs, Steve Jobs explained to the big five record labels, BMG, EMI, Sony, Universal, and Warner, how Apple would control the entire music experience. Everything from running the store that would sell the songs all the way to selling the device used to listen to those songs would go through Apple. The goal was to impress the labels and have them see how no one was better positioned than Apple to offer a superior customer experience. Since the iTunes store was initially sold as being available only on a Mac, if things turned out negatively for the labels, the Mac’s low market share meant the mistake would be contained.
The sales pitch worked, and the world quickly embraced Apple’s model of buying single songs for $0.99. A million tracks were downloaded in the first six days. Over the next few years, the iTunes store became the go-to place to buy music, and more importantly, it grabbed a significant amount of music mindshare. Eventually, the first thing that came to mind when talking about music was either iTunes or iPod. Apple had captured the music industry.