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« What is Twitter? Do you have an answer? | Main | Michael Laskow of Taxi: Marketing + Entrepreneurial Skills = Music Business Success »
Thursday
Nov112010

The Day Steve Jobs Dissed Me In A Keynote

In May 2003, Apple invited me to their headquarters to discuss getting CD Baby’s catalog into the iTunes Music Store.

iTunes had just launched two weeks before, with only some music from the major labels. Many of us in the music biz were not sure this idea was going to work. Especially those who had seen companies like eMusic do this exact same model for years without big success.

I flew to Cupertino thinking I’d be meeting with one of their marketing or tech people. When I arrived, I found out that about a hundred people from small record labels and distributors had also been invited.

We all went into a little presentation room, not knowing what to expect.

Then out comes Steve Jobs. Whoa! Wow.

He was in full persuasive presentation mode. Trying to convince all of us to give Apple our entire catalog of music. Talking about iTunes success so far, and all the reasons we should work with them.

He really made a point of saying, “We want the iTunes Music Store to have every piece of music ever recorded. Even if it’s discontinued or not selling much, we want it all.”

This was huge to me, because until 2003, independent musicians were always denied access to the big outlets. For Apple to sell all music, not just artists who had signed their rights away to a corporation, this was amazing!

Then they showed the Apple software we’d all have to use to send them each album. It required us to put the audio CD into a Mac CD-Rom drive, type in all of the album info, song titles and bio, then click [encode] for it to rip, and [upload] when done.

I raised my hand and asked if it was required that we use their software. They said yes.

I asked again, saying we had over 100,000 albums, already ripped as lossless WAV files, with all of the info carefully entered by the artist themselves, ready to send to their servers with their exact specifications. They said sorry - you need to use this software - there is no other way.

Ugh. That means we have to pull each one of those CDs off of the shelf again, stick it in a Mac, then cut-and-paste every song title into that Mac software. But so be it. If that’s what Apple needs, OK.

They said they’d be ready for us to start uploading in the next couple weeks.

I flew home that night, posted my meeting notes on my website, emailed all of my clients to announce the news, and went to sleep.

When I woke, I had furious emails and voicemails from my contact at Apple.

“What the hell are you doing? That meeting was confidential! Take those notes off your site immediately! Our legal department is furious!”

There was no mention of confidentiality at the meeting and no agreement to sign. But I removed my notes from my site immediately, to be nice. (You can see still a copy someone posted here.)

All was well, or so I thought.

Apple emailed us the iTunes Music Store contract. We immediately signed it and returned it the same day.

I started building the system to deliver everyone’s music to iTunes.

I decided we’d have to charge $40 for this service, to cover our bandwidth and payroll costs of pulling each CD out of the warehouse, entering all the info, digitizing, uploading, and putting it back in the warehouse.

5000 musicians signed up in advance, each paying $40. That $200,000 helped pay for the extra equipment and people needed to make this happen.

Within two weeks, we got contacted by Rhapsody, Yahoo Music, Napster, eMusic, and more - each saying they wanted our entire catalog.

Yes! Awesome!

Maybe you can’t appreciate this now, but the summer of 2003 was the biggest turning point that independent music has ever had. Until that point, almost no big business would sell independent music. (That’s why I had to start CD Baby, because nobody would sell my music.)

By iTunes saying they wanted everything, then their competitors needing to keep up, we were in! Since the summer of 2003, every musician everywhere can sell all their music in almost every outlet online. Do you realize how amazing that is?

But there was one problem.

iTunes wasn’t getting back to us.

Yahoo, Rhapsody, Napster and the rest were all up and running. But iTunes wasn’t returning our signed contract.

Was it because I posted my meeting notes?

Had I pissed-off Steve Jobs?

Nobody at Apple would say anything. It had been months.

My musicians were getting impatient and angry.

I gave optimistic apologies, but I was starting to get worried, too.

Then in October, Steve Jobs did a special worldwide simulcast keynote speech about iTunes.

People had been criticizing iTunes for having less music than the competition. They had 300,000 songs while Rhapsody and Napster had over 2 million songs. (Over 500,000 of those were from CD Baby.)

Four minutes in, he said something that made my pounding heart sink to my burning stomach:

“This number could have easily been much higher, if we wanted to let in every song. But we realize record companies do a great service. They edit! Did you know that if you and I record a song, for $40 we can pay a few of the services to get it on their site, through some intermediaries? We can be on Rhapsody and all these other guys for $40? Well we don’t want to let that stuff on our site! So we’ve had to edit it. And these are 400,000 quality songs.”

(Watch the video, here.)

Whoa! Wow. Steve Jobs just dissed me hard!

I’m the only one charging $40. That was me he’s referring to.

Shit. OK. That’s that. Steve changed his mind. No independents on iTunes. You heard the man.

I hated the position this put me in.

Ever since I started my company in 1998, I had been offering an excellent service. I could make promises and keep them, because I was in full control.

Now, for the first time, I had made a promise for something that was out of my control.

So it was time to do the right thing, no matter how much it hurt.

I decided to refund everybody’s $40, with my deepest apologies. With 5000 musicians signed up, that meant I was refunding $200,000.

Since we couldn’t promise anything, I couldn’t charge money in good conscience.

  • I removed all mention of iTunes from my site.
  • I removed the $40 cost to make it free.
  • I changed the language to say we can’t promise anything.
  • I emailed everyone to let them know what had happened.

I decided to make it a free service from that point on.

The next day, we got our signed contract back from Apple, along with upload instructions.

Unbelievable.

We asked, “Why now?”, but got no answer.

Whatever. Fucking Apple.

We started encoding and uploading immediately.

I quietly added iTunes back to the list of companies on our site.

But I never again promised a customer that I could do something beyond my full control.

Reader Comments (11)

Great story. Especially in the seemingly Apple-centric music industry.

November 12 | Unregistered CommenterBrian John Mitchell

Wow that's a heck of an object lesson!

Thanks so much for posting this; as I start off a couple of ventures, that's an amazing lesson to have burned into my memory.

November 12 | Unregistered CommenterJeff Namnum

Fuck, I'm raging in my chair right now. God how I hate Apples attitude towards EVERYONE, be it customers or clients. Fucking shitty design-philosophy behind the products and now this shitty treatment of partners!

November 12 | Unregistered CommenterWarwolt

First of all, I don't like Apple and I don't like the enterprise's politics and I have big respect for CD-Baby and it's work in the independent music business.
BUT this article must be a joke!
If all the stuff written here was true, the author is one of the most naive entrepreneurs I ever faced.
What is the real intention of this article?
To play one's heart strings? Buhuuu, they didn't say a word about "confidential meeting", come on, get serious! Not if you collaborate with APPLE! There is everything, everyday and everywhere called confidential. And of course you don't post "the news" before there is no contract signed.
And what is this "I gave the money back to my artists"-stuff? Collecting 200.000 $ without having a contract signed? Please, these are basics. Having about 500.000 tracks you need to let the artists pay for the i-tunes service? I'd like to know why you were the only enterprise passing the costs directly to your customers?
Please don't blame Apple for this situation and don't say "I'll never promise something without having control": You didn't wait untill the contract was signed, so you operated in a vacuum. And Apple didn't have the control too, just you.
Well I don't like the taste of this article.
If you had written kind of a tutorial like "do's and don's in musicbusiness" I would say thank you too! But creating an atmosphere of "evil Steve Jobs made me learn my lessons" is absolutely lame.
Sorry for these harsh words, but lets stay fair!

November 12 | Unregistered CommenterMarc

I think Marc raises some great points and I actually remember the debacle that was CD Baby's iTunes venture. To be fair to Derek he did the right thing promptly by paying the money back (with interest I hope) and changed CD Baby's policy and sign up for iTunes. Of course, iTunes were very snobbish to indies until Impala, AIM and other independent bodies took them to task over it. CDBaby may have foolishly caused the problem with indies by charging for people to get onto iTunes and in that respect I think Apple were RIGHT to diss them so publicly. There were others who were not charging to get onto iTunes at that time. All CD Baby should have done was to ask its members to do the conversion themselves.

November 12 | Unregistered CommenterKehinde

@ Marc
Apple in 2003 I think is Apple still on the verge of failure. iTunes had just opened & only worked for Mac (so at that time probably 7% of the computing market). Getting your catalog on iTunes seemed to me at the time about as valuable as getting involved with Burnlounge & Weedshare (both of those failed with Burnlounge actually being declared a pyramid scheme & shut down by the feds, yet every couple of years I see the same business model come out as the next big thing), so I can totally see why it wouldn't seem like waiting for contracts is a necessary thing when it means significantly slowing down the progress of business. I don't think it's an "evil Jobs taught me a lesson about doing business" as much as "evil Jobs taught me a lesson about doing business with evil Jobs." I don't know.
I have a contract from years ago with Cartoon Network (as tons of people do) that is signed & they theoretically owe me $10,000, but told me I could try to sue them for the money if I thought I could beat Ted Turner's lawyers. Did it teach me about doing business? No. Did it teach me about doing business with CN? Yes.

November 12 | Registered CommenterBrian John Mitchell

@Brian John Mitchel
Hi Brian, I agree with you concerning the point of jumping on the right business train. And of course it was right, to collaborate with i-tunes also with the other stores, like the author wrote "Within two weeks, we got contacted by Rhapsody, Yahoo Music, Napster, eMusic, and more - each saying they wanted our entire catalog". But you can't offer a service without having a contract that confirms the ability of the service to perform. Sorry, it's like building cars without having a company delivering the essential parts.
But in Germany we say "if you dance with the devil, you might burn your ass" and I think it was obvious, that Apple, won't change it's attitude of staying autonomous. They always had their closed OS-system, they always averted other non-apple-software and so on. Everybody knew this and it worked out. If it hadn't worked out, CD-Baby had not jumped right into Apples offer! Some like it, some hate it, but the author can't complain in the end, when he wants to participate knowing exactly how Apple runs its business.
And I agree with you totally that contracts are not the guarantee for not getting fooled, but they show the customers that you don't do business in "expecting that it all will work somehow".
As I wrote before, my two points are:
1. Don't run a business, without some kind of security like a contract
2. I don't like Apple, but in this case they were not the bad guys and Steve Jobs mentioned rightly that CD-Baby was the only enterprise passing the costs right to the customers. Is that "dissing" someone or is that a justifiable statement? Well I think it is the last thing.
Best Marc

November 13 | Unregistered CommenterMarc

This is pure speculation, but the only reason I can think of why Jobs would even bother to diss CD Baby during the preso is because CD Baby had the audacity to partner with iTunes competitors (eMusic, Rhapsody, etc.) prior to signing the deal. Maybe Apple was counting on some exclusivity -- or maybe Jobs was ticked that iTunes was going to end up as Just Another Store in CD Baby's one-size-fits-all DD offering.

I don't think it had anything to do with the $40 pricing and I don't think Jobs cared much about indie music one way or the other (he wants to sell iPods; selling the music is a sideshow). I think Jobs used the situation as an opportunity to trash the competition: "did you know that Rhapsody will accept any schmo's album? Not us!" Maybe he DID hold back the CD Baby contract just long enough so he could correctly say that all music in the iTunes store had been vetted for "quality."

Like I said, pure speculation. Jobs is one fascinating dude...

November 13 | Unregistered Commenterscottandrew

Hi all !

My name is Michael Yaffe of Sunkrest (Overseas) Ltd. I am based in Manchester,England----home on Saturday 13th, to the WBA fight between world champion David Haye and Audley Harrison.

I found your website by chance. What I have read makes me think that however popular its products, Apple seems to upset various industry players. My understanding is that Apple is damn good at marketing products that are not necessarily revolutionary and that is to their credit. On the other hand there are many people who don't like Apple's "strongarm tactics" and this seems to be evidenced in the articles I have read on this site.

As much as we live in a "download" era for music, there are still millions of people worldwide, who buy CD and DVD products. Our research shows that these people still love to "buy" "own" "collect" "use". In addition there is a demand, via the associated gift market, to "give" and "receive"------you decide which is the more emotional and desirable gift: a CD\DVD with all it's packaging and sleeve notes, or a souless download voucher?

So much of downloaded content--legal or illegal--is destined for personal media players. Go down any busy street, or on public transport and one loses count of the number of people with stereo earpieces jammed into their ears! For physical content lovers and other user demographics, there has not been a product that would directly bridge their culture to portable Mp3\ Mp4 players. Not everyone wants to be bothered with a computer to download or to "rip" content from a CD or DVD. There is no "instant gratification" for a traveller at a bus station or airport, when buying a CD or DVD---it cannot be plugged into a portable device. Artists complain about the "cherry picking" of tracks off an album---witness the legal battle between PInk Floyd and EMI, this year. The download market is not all things to all men (or women !)

My company has developed a patent protected, physical product, with a unique selling point, which delivers preloaded content, be it music, video, photographs, or any mix of these to a mobile phone. Many consumers use mobile phones for entertainment as well as communication. The process is automatic and without any advanced user technique. Our unique selling point is that the content is permanently filed under "artists" "videos" "photographs" and so on, exactly as if a computer had been used. Once filed, our product is removed and retained. Our product could be supplied through existing channels that supply CD's and DVD's and packaged to sit in the same retail footprints. This could help reverse the decline in the physical sales figures of traditional music and video retailers and bolster the associated gift markets.

We are looking to speak with content providers.
Why not get in touch with me at: myaffe@sunkrestoverseasltd.com
We have a presentation and plenty to discuss with you!

Regards,

November 16 | Unregistered CommenterMichael Yaffe

Gosh. That sounds like hair-raising stuff Derek. Definitely a growth experience.

What a great man, he was and will always be!! Rest in peace Steve Jobs!!

Laise

October 15 | Unregistered Commentermon 1er single

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