Steve Jobs still drives a hard bargain
On Christmas Eve, at the height of a holiday season that Steve Jobs claimed was the first in a decade he got to spend with his family, Apple's (AAPL) ailing CEO was on the phone screaming at the chairman of Sony Music (SNE).
That's the picture Tim Arango paints in Monday's New York Times in an article that describes the "tense and antagonistic" relations behind the seemingly harmonious music pricing agreement unveiled at Macworld less than two weeks later.
On Jan. 6, Apple announced that the major record labels had agreed to drop their demands for copy protection in return for the right to charge more than 99 cents for new and popular songs on Apple's iTunes store.
But according to Arango, the negotiations were anything but cordial.
"Disagreements over the timing of the changes … resulted in a particularly tense conversation on Christmas Eve between Steven P. Jobs, the chairman and chief executive of Apple, and Rolf Schmidt-Holtz, the chairman of Sony Music. …
"According to a person briefed on the telephone call, Mr. Schmidt-Holtz and Mr. Jobs had a heated exchange by phone on Christmas Eve. Eventually, Sony gave in and agreed to a longer waiting period …
"A spokesman for Apple declined to comment, as did a representative for Sony Music. But chatter about Mr. Jobs’s combative tone on the call ricocheted around the music industry, and it was regarded as another display of his tough bargaining tactics, made possible by Apple’s position as the dominant seller of music …
'I think Steve has been smart, and he knows he has the upper hand,' said Dave Goldberg, the former general manager of Yahoo Music." (link)
Although Jobs has since taken a leave of absence to deal with medical problems, the music industry does not expect Apple's bargaining manners to become any more pleasant.
"The entire Apple staff," writes Arango, "including Eddie Cue, the vice president in charge of iTunes who handles the relationships with the record labels, do their best to follow Mr. Jobs’s style in their own negotiating." (link)
See also:
When are Music Execs going to get it? This is better than the countless Napster remakes like Limewire that abuse copy right. Apple is their best friend but I'm not going to itunes for music if they won't let me use the music in more than one place. I think artists are starting to make some of the money up on concerts, cant see anyone for less than half a hunde these days. Nice job Steve – hope you get better.
Can Apple use this muscle on book publishers? I am a bookseller and am disgusted by the inherent inefficiencies of book publishing. Without going into detail, books are old industry dating back to its inception with the printing press. It is high time we take the ideals of the Enlightenment and apply them to the Google Era. If Apple can effectively leverage its its mass appeal (divisive marketing) with its mass adoption (ipods, iPhones, Macs) it could unseat the Kindle in one single firmware update to the devices and iTunes. In much the same way as it sells audiobooks through its partnership with Audible.com; Steve could coerce the archaic book publishers to digitally distribute their content.NY Times bestsellers, $9.99 ALWAYS! Textbooks specially formatted for the iPhone and Macs. Apple has a unique opportunity to disrupt how we as consumers, consume our most valued content: books. On a grander, more noble level, Apple can make reading sexy and information more ubiquitous. Our educational institutions will have to adopt iTunes in their syllabi and curricula planning. Reading Malcolm Gladwell's Outliers will happen in tandem with listening to the latest Kanye West track (there are parallels). As a Mac faithful, I am devoted from release to release. I am convinced Apple has a plan for civilization as a while far more insidious than Google's "make all information accessible" mantra. I am hoping they're hoping to culture as a whole just as Google has. It started with music, now is the its time to exact the demise of the written book.
"copyright protection"???
Shouldn't that be "copy protection"? Copy protection has long been the contention; copyright was never in question.
ex ped. Of course! (sound of hand smacking head) Thanks. Fixed.
Two other more important points to note in that article:
1. Apple offered the deal a year ago. Implication: Apple patiently waited out the labels betting that Amazon would not make a dent..
2. The key for Apple was getting the same pricing deal for iPhone cellular purchases.
Implication: Apple's focus is using whatever they have to build up iPhone and its mobile services.
Geez, if Steve were nice and would allow the Sony exec to make that decision, Apple & iTunes may well become another Sony (Yikes!).
Thank you Steve for your persistence.
Yeah, that sounds like SJ and a lot of other people throughout history with uncompromising vision and success. Genius or talent is usually wrapped in passion and it's probably quintessential to what's made Apple what it is.
He's able to keep backing it up with the goods, even if it costs a lot of gossip. I find it hard to imagine him not returning to apple now that he has the bankroll and the all-star, hand picked team to make almost anything he wants, exactly how he wants it. I'd have a hard time walking away from that, if I was him.
and what’s wrong with hard bargaining if you have something that’s a fruit of your risk and hard labor, that somebody else wants???
That’s what intellectual property rights are all about.
What has not been discussed is what Apple gain by delaying the start of variable pricing a few months.
I wonder if Steve Jobs believes that the music industry are wrong about the value of variable pricing and wants to gather before and after data – with DRM-free music – to show the record companies that single-pricing simplicity enables casual purchases.