“Put your full damned catalogues on-line already.”
In not quite those words, Apple CEO Steve Jobs pressed the music industry to fully monetize their intellectual property. In a conference call today on the one year anniversary of Apple’s popular iTunes Music Store, Jobs was was far subtler and more diplomatic than my own take on it. He correctly noted that most of the music industry’s IP lay fallow.
If only the industry would digitize the 2/3rds of their catalogue currently out of print, the big labels might find a potentially high margin revenue source.
Steve noted why most of the large music labels have only one third or less of their music catalogues available for purchase: It is simply not cost effective to physically press, distribute, warehouse and inventory the vast majority of the labels’ intellectual property. This makes a good deal of sense, especially for specialty and niche genres which may have small but dedicated fans.
However, those prohibitive costs do not apply to digitized music.
As the chief of both Apple and Pixar, Steve Jobs is a man who knows his technology, as well as his digital content. If the music industry is smart — and there is little to suggest that they are — they will sit up and pay attention to what he is suggesting.
If Jobs manages to convince the major studios to release their back catalogues to Apple initially, and ideally to Apple exclusively, then they become the defacto standard for “Digital Music Distribution.”
Perhaps Apple could even become to music what the the Library of Congress is to the printed book.
UPDATE: April 29, 2004, 3:18pm
Here’s the excerpt from the conference call:
Steve Jobs: Oh, there’s, you know, there’s a lot of challenges that we all face together. Let me give you one that’s really exciting to us, which is that if you look at a typical music company, less than a third of their music that they have in their vault is actually available for sale. And the reason for that is, is because with traditional CD distribution channels where you have to make a physical object, somebody has to carry the inventory, somebody has to make, you know, rent space to put it on a shelf, they can’t get distribution for a lot of their catalogues that’s sitting on their vault because it wouldn’t sell enough to justify, you know, the record company…the record stores carrying it. And it’s getting even worse with the demise of the small individual record store and the tendency of, you know, of Wal-Mart and Best Buy, et cetera, the selection is even narrowing further.
And one of the most exciting things for us is to get the rest of that catalogue, which has not been purchasable, in some cases, for decades, digitally encoded and online on the iTunes Music Store where there is no inventory, where there are no returns, where there is no rent for the shelf space, and make that music available to everybody.
Transcript courtesy of MacObserver
Delivered April 26, 1994 to the MIT Department of Economics World Economy
Laboratory Conference Washington, D.C.
When Rudi Dornbusch invited me to speak at this conference, he gave me
a totally free hand in deciding what I wanted to talk about. Well, I
want to discuss a subject which fascinates me but doesn’t seem to
interest others very much. That is my theory of reflexivity which has
guided me both in making money and in giving money away, but has
received very little serious consideration from anybody else. It is
really a very curious situation. I am taken very seriously; indeed, a
bit too seriously. But the theory that I take seriously and, in fact,
rely on in my decision-making process is pretty completely ignored. I
have written a book about it which was first published in 1987 under
the title The Alchemy of Finance; but it received practically no
critical examination. It has been out of print for the last several
years but demand has been building up as a result of my increased
visibility, not to say notoriety, and now the book is being re issued.
I think this is a good time to get the theory seriously considered.
I was invited to testify before Congress last week and this is how I
started my testimony. I quote: “I must state at the outset that I am in
fundamental disagreement with the prevailing wisdom. The generally
accepted theory is that financial markets tend towards equilibrium, and
on the whole, discount the future correctly. I operate using a
different theory, according to which financial markets cannot possibly
discount the future correctly because they do not merely discount the
future; they help to shape it. In certain circumstances, financial
markets can affect the so called fundamentals which they are supposed
to reflect. When that happens, markets enter into a state of dynamic
disequilibrium and behave quite differently from what would be
considered normal by the theory of efficient markets. Such boom/bust
sequences do not arise very often, but when they do, they can be very
disruptive, exactly because they affect the fundamentals of the
economy.” I did not have time to expound my theory before Congress, so
I am taking advantage of my captive audience to do so now. My apologies
for inflicting a very theoretical discussion on you.