Did Steve Job's Hurt or Help the Music Industry?

His good looks, charismatic personality, and success at Apple made him a multi-millionaire and a cultural legend before the age of 30.  Steve Jobs was a smart business man but some will argue that he had a big part in the economic fall of the record industry and the devaluation of music. 

Job's developed the first legal viable peer to peer music site that was user friendly and worked well with other devices.  Flexing his proven technology and wonderful charm, Job's was able to convince record labels to let his web site become the main distributor for music in the world.  During this rough economical time consumers were buying discounted music albums at Wal-Mart or Best Buy (Big box retailers) and downloading free music torrent files from the web in order to satisfy their music cravings.  At this point in time record labels were profusely hemorrhaging from their pockets, they needed a quick fix solution to get consumers to stop downloading free music.

I always say it's all about timing because Apple could not have come at a better time.  Record companies were now ready to take the leap into the digital age in order to stop the bleeding.  The answer was a fully integrated music software that allowed consumers to instantly buy and download music from the web at any time of the day.  Record labels bought the idea thinking this was the solution to their problems and got in bed with apple.

A fixed price of .99 cents per song was agreed by all parties in order to incentivize the consumer to move away from retailers and buy on iTunes.  The record industry has always been a volume business, the philosophy is sell as much as you can as fast as you can before the trends and fad's change.  .99 cents made sense to the record labels because once they hooked in the consumer they could eventually move to variable pricing.  Job's agreed to this price even though he knew .99 cents would not create much revenue in mechanical royalties.  In the music industry this deal was perceived as an abundant deal for the record labels and not so much for Apple Inc. but Steve Job's had something else in mind.

Today we now know who got the raw end of the deal and who really benefited from this collaboration.  Once the .99 cent song came out consumers were addicted and two things happened, the sale of single songs returned and consumers were now used to paying less for music.  Both were a problem for the record labels because consumers were only spending .99 cents for singles and no longer buying full albums on iTunes.  The single sales model was now beginning to show it's ugly face again.  Industry changing companies like Pandora began to show up streaming "free" music to our consumers. Remember the idea of eventually increasing prices on iTunes?  Well, this was no longer a good idea.

Clueless to the popularity of free streaming music record labels still increased a single song to $1.29 on iTunes.  This did not turn out to be profitable because most consumers began to migrate over to these free sites that provided on-line streaming music.

So how did Steve Job's benefit from this?
Well it's obvious he did not benefit from posing as a music distributor selling music to consumers on iTunes. Job's became successful from music consumers buying his hardware and software in order to listen to the music record companies were selling on his online store.  Job's was not in the music business he was in
the computer/technology business. 

What would you rather sell a .99 cents song or a $200.00 plus iPod, iPad, iPhone which requires apps and other add on's that create more and more revenue. 

Today record companies are beginning to see more revenue from on-line distribution due to the rise of other competing companies like Amazon.