Part 5 (2/2)

The first iPod came out in stores on October 23, 2001. Over at Texas Instruments headquarters, in Dallas, intrigued engineers immediately brought one back to the lab and took it apart. They were impressed with the PortalPlayer chips-two processors. While TI made similar internal products, Apple had found a smaller, cheaper company to do the same work. The TI engineers liked the integration between iTunes and iPod. They felt it was far superior to what Sony Corp. had done with its clunky Music Clip, the poorly reviewed player that had emerged from the SDMI meetings, and corresponding software a couple of years earlier. And they liked innovations like its scroll wheel and lack of an onoff switch. But Randy Cole, manager of TI's digital audio research and development, was impressed for an even simpler reason. ”It just looked processors. While TI made similar internal products, Apple had found a smaller, cheaper company to do the same work. The TI engineers liked the integration between iTunes and iPod. They felt it was far superior to what Sony Corp. had done with its clunky Music Clip, the poorly reviewed player that had emerged from the SDMI meetings, and corresponding software a couple of years earlier. And they liked innovations like its scroll wheel and lack of an onoff switch. But Randy Cole, manager of TI's digital audio research and development, was impressed for an even simpler reason. ”It just looked cool cool,”* he says. he says.

All Apple needed after that was music-legal music-to play on it. music-to play on it.

PAUL V VIDICH AND Kevin Gage, new-media vice presidents at Warner Music, survived their false-hijacking episode in Brandon, Manitoba. Less than three months later, in January 2002, they faced a scarier ordeal. They had traveled from New York to Cupertino for an appointment at 1 Infinite Loop. They walked into the huge, fanlike gla.s.s structure that was the first building at Apple Computer's headquarters, pa.s.sing underneath the iconic rainbow-colored logo. They met Steve Jobs and a few other Apple executives in a boardroom. Gage started his PowerPoint presentation. Jobs rocked back and forth in his chair, obviously agitated, trying despite himself to be patient. Four slides into Gage's presentation, Jobs interrupted. ”You guys are all nuts,” he said. Kevin Gage, new-media vice presidents at Warner Music, survived their false-hijacking episode in Brandon, Manitoba. Less than three months later, in January 2002, they faced a scarier ordeal. They had traveled from New York to Cupertino for an appointment at 1 Infinite Loop. They walked into the huge, fanlike gla.s.s structure that was the first building at Apple Computer's headquarters, pa.s.sing underneath the iconic rainbow-colored logo. They met Steve Jobs and a few other Apple executives in a boardroom. Gage started his PowerPoint presentation. Jobs rocked back and forth in his chair, obviously agitated, trying despite himself to be patient. Four slides into Gage's presentation, Jobs interrupted. ”You guys are all nuts,” he said.

There were a half dozen executives in the room, including AOL's Rad.u.c.h.el and Apple's Higa. Most were in coats and ties. Jobs, true to his image, wore a black turtleneck, jeans, and sneakers. The room went silent. Jobs turned to Vidich, who had spoken with him by phone from New York and was the senior Warner Music executive in the room. ”It was almost as if for the first time he was given an audience with a music executive,” Vidich says. ”And he vented. He vented at the music industry and the ways in which it didn't get it.” The major labels, Jobs told Gage and Vidich bluntly, were trying to suck out all the money from digital music for themselves. His His customers- customers-Apple's customers-deserved better. They needed an easy-to-use online music store. His tirade lasted several minutes. ”It was kind of awkward,” says Gage, who tried to disappear into the blinds behind him. customers-deserved better. They needed an easy-to-use online music store. His tirade lasted several minutes. ”It was kind of awkward,” says Gage, who tried to disappear into the blinds behind him.

Finally, Jobs finished skewering Vidich. ”Steve,” came the response from Warner Music's top technology executive, ”that's why we're here. We need some help.”

At the time, the iPod was for sale at Apple Stores around the country. Jeff Robbin's iTunes software was available for use on Mac computers. Both were popular, but neither was a smash hit. Consumers were put off by the iPod's initial $399 price-to the extent that critics had given it a new acronym, ”Idiots Price Our Devices.” An improved version had landed in stores in March 2002, but the market was still limited, as both iTunes and the iPod were still incompatible with Windows-based computers. At the boardroom meeting, there wasn't much to say after Jobs's rant. (Notably, he did not show off the iPod or iTunes to the Warner group at this point.) Neither Jobs nor the Warner people discussed specifics. But it became clear to Vidich that he would have to enlist more powerful officials at their companies to make progress on an Apple deal involving digital music.

Vidich returned to Warner Music's offices in New York. He knew just the executive to contact-Roger Ames, a longtime British record man who'd recently become chairman and chief executive officer. Ames agreed to meet Jobs in Cupertino to move the Apple-Warner digital music talks forward. Vidich and Gage went along, and the technology experts briefed Ames on the plane. So far, the Apple people hadn't mentioned any specifics, so the Warner execs came up with their own agenda. They decided to push the ”second session” CDs-the super-secure discs with extra layers of music that had been discussed during the failed DMX sessions.

When they arrived, the Apple CEO turned on the very specific kind of charm he uses to persuade important fellow executives. ”Sort of a mogul-to-mogul thing,” is how Jonathan Rubinstein describes it. ”He never reacted to Roger the same way he reacted to Paul [Vidich] and myself. Put it that way,” Gage says. ”He ranted on Paul, that first meeting, about the a-holes of the music industry. I got ranted on when I was pus.h.i.+ng for digital rights management. But when Roger came into the room, you didn't see any of that. You saw Steve at his brightest and sharpest.” Jobs listened patiently to Ames's pitch about super-secure CDs. Then he casually turned around a computer screen to show the Warner executives a new piece of software Apple engineers had been working on for the last few months. It was the iTunes Music Store.

Ames's eyes widened as Jobs demonstrated how the store would work. Like every other digital music fan on the planet, he had been frustrated with half-hearted record industry equivalents like Pressplay and MusicNet. ”That's a great piece of software,” he told Jobs, sincerely. ”It does everything I need-it organizes my music, works very efficiently, it has an efficient mechanism around a credit card. This is exactly what we need.” He may as well have simply said, ”Sold!”

Vidich and his staff worked out a Warner content-licensing deal with Jobs. The 99-cents-per-song concept came from Warner, Vidich recalls; Jobs had been thinking along similar lines and quickly agreed. ”We were looking at a hook, something consumers were going to be interested in,” Vidich says. Ames went back to New York and became a sort of unofficial Apple salesman. Not everyone was as sold on Apple as he was. At the time, Jim Caparro headed Warner's powerful distribution company, WEA, and told Ames point-blank that he objected to the pricing structure. Apple would take a 22-cent retailer's cut out of every 99-cent song, leaving just 67 cents for the labels to divide up among artists, publishers, and themselves. Caparro was not naive about technology: He saw that digital was the future and would quit the major labels entirely within a few years. But he felt Apple was giving the labels a terrible deal, just as MTV had done in scoring videos for free more than twenty years earlier. Within Warner, he suggested a temporary licensing deal, but was overruled. ”Ultimately, we could have constructed a far different deal than sixty-seven cents,” says Caparro, who today runs the Entertainment Distribution Company, whose biggest client is Universal Music. ”Look what happened as a result: The value of Apple has skyrocketed. Roger felt the proposal by Apple was a good one. Steve Jobs was his Jedi.”

Undeterred by Caparro's opposition, Ames met with an acquaintance in the record industry, Doug Morris of Universal Music. Morris, one of the most outspoken major label opponents of Napster, was skeptical at first but surprisingly receptive overall. ”I don't think we're going to make a lot of money, but [Jobs] is going to sell a lot of iPods,” he told Ames. ”Doug, I agree, but I don't think we have much choice,” Ames responded. ”We have to put a legal service in the market. None of us have come up with anything.” It took a short time, but Morris was sold, too. He in turn met with one of his top technology vice presidents, Albhy Galuten. ”Of course, we have to rely on Steve Jobs to do this-we don't have anybody at Universal who knows anything about technology,” Morris told Galuten. The remark stung Galuten. ”In my group [at Universal], there was a guy with a Caltech PhD, a guy with a master's in computer science at MIT, and a guy who architected the DirecTV satellite systems,” he says today. we have to rely on Steve Jobs to do this-we don't have anybody at Universal who knows anything about technology,” Morris told Galuten. The remark stung Galuten. ”In my group [at Universal], there was a guy with a Caltech PhD, a guy with a master's in computer science at MIT, and a guy who architected the DirecTV satellite systems,” he says today.

Nonetheless, Galuten went to Cupertino. Although Jobs had told Gage and Vidich he vehemently opposed digital rights management-which prevents users from making unlimited copies of the music files they download from the internet-he conceded the point. Jobs could see that Sony Music, owned by Sony Corp., was not about to budge on this. Sony had been instrumental in creating the CD and had invented the popular Walkman ca.s.sette player in the 1980s. Its executives were not thrilled about ceding their content to a different computer-and-electronics company. So in an effort to make Sony and the other major labels happy, Apple's engineers came up with FairPlay. This encryption prevented users from playing their protected AAC music files, cousins of the MP3, on more than three different computers. The idea was to stop college students from sharing their files all over the dorm rooms by making sure they still had to buy CDs from an old-fas.h.i.+oned record store once in a while.

Otherwise, to Galuten's surprise, the concessions came mostly from Universal. As the biggest major record label by far, whatever Universal did would ultimately dictate terms for its compet.i.tors, especially smaller ones like EMI and BMG. Jobs could not launch the iTunes Music Store without U2, Eminem, and Motown songs from the world's largest label. ”We had all the leverage in the world,” Galuten says. ”I don't know why Doug didn't exercise it.” Galuten wanted to fight for a number of points. For example, Jobs insisted that a user must be able to transfer music to an unlimited number of iPods. Galuten saw immediately this would allow people to get as much free music as they wanted. But Morris instructed Galuten to give up this point, as well as several others.* ”Doug called and said, 'Just close,'” Galuten recalls. ”Doug was not interested in technical details.” At Universal, though, Jobs sold his idea to others besides just Doug Morris. He also contacted Jimmy Iovine, head of the company's Interscope Records, which at the time had Dr. Dre, No Doubt, U2, and Eminem and was on the cusp of breaking 50 Cent and Gwen Stefani. Iovine had been worrying about his industry's future for some time but hadn't been impressed with high-tech companies' proposed solutions. Also, he liked Jobs. ”We just hit it off, what can I say?” he told ”Doug called and said, 'Just close,'” Galuten recalls. ”Doug was not interested in technical details.” At Universal, though, Jobs sold his idea to others besides just Doug Morris. He also contacted Jimmy Iovine, head of the company's Interscope Records, which at the time had Dr. Dre, No Doubt, U2, and Eminem and was on the cusp of breaking 50 Cent and Gwen Stefani. Iovine had been worrying about his industry's future for some time but hadn't been impressed with high-tech companies' proposed solutions. Also, he liked Jobs. ”We just hit it off, what can I say?” he told The Perfect Thing The Perfect Thing author Steven Levy. ”Every other company was telling us, 'Give us your licenses and we'll build you a system.' He had a complete thought.” Iovine also acknowledged that the persistent rumors at the time of a Universal-Apple merger may have swayed top execs. author Steven Levy. ”Every other company was telling us, 'Give us your licenses and we'll build you a system.' He had a complete thought.” Iovine also acknowledged that the persistent rumors at the time of a Universal-Apple merger may have swayed top execs.

For Sony Music executives, price remained a sticking point. Jobs insisted on 99 cents per song. Some at the record labels, such as Warner's Vidich and Sony's Phil Wiser, who had replaced Al Smith as chief technology officer, agreed with the Apple chief. They'd tried $3.99 singles in other formats and customers didn't have any interest whatsoever. Wiser spent a lot of time as a go-between, persuading Sony executives and haggling on the phone with Eddy Cue, Apple's director of iTunes. Finally, Jobs cut through the bureaucracy and called Andrew Lack, then chief executive officer of Sony Music. The other four labels are in, Jobs told Lack, and the iTunes Music Store launches in two months-with or without Sony. Lack took Wiser and Sony Music's US chief, Sir Howard Stringer, with him on a company jet to Cupertino in order to view the iTunes Store with Jobs. After that, Sony was in. Later, Lack would declare, ”I don't think it was more than a fifteen-second decision in my mind [to license music to Apple] once Steve started talking.”

In reality, the decision most likely took more than fifteen seconds. Since the Napster debacle, Sony Corp., more than any other company, had been wracked with conflict over the new file-sharing technologies. The company that had been the first to profit off the transistor radio in the 1950s and had invented the Walkman in the 1970s was an active member of the Napster-supporting Consumer Electronics a.s.sociation. But its record label, Sony Music, was simultaneously a member of the RIAA, which, obviously, opposed file sharing. This was a contradiction, as millions of music fans were filling their iPods and other digital music players with songs they'd downloaded illegally. Sony, which sold 19 million Walkmans in fiscal year 2002, wanted to profit from these customers and compete against the iPod. But the company's record label, Sony Music, accounted for 30 percent of the electronics giant's revenues and most of its profits. Wired Wired magazine termed this internal conflict ”The Civil War Inside Sony.” Because of it, the company, which had been so instrumental in developing the CD, merely watched as Apple took over the markets for both digital music players and online songs. Keiji Kimura, a Sony senior vice president in charge of portable products, told magazine termed this internal conflict ”The Civil War Inside Sony.” Because of it, the company, which had been so instrumental in developing the CD, merely watched as Apple took over the markets for both digital music players and online songs. Keiji Kimura, a Sony senior vice president in charge of portable products, told Wired Wired he admired Apple's device but Sony would not try to compete with it. ”We do not have any plans for such a product,” Kimura said. ”But we are studying it.” Sony Corp. reps would not comment on these issues. he admired Apple's device but Sony would not try to compete with it. ”We do not have any plans for such a product,” Kimura said. ”But we are studying it.” Sony Corp. reps would not comment on these issues.

With all this static in the background, it was easy for unenc.u.mbered Apple to seize the digital music market. Eventually, with the other major labels plunging into iTunes, Sony had no choice. The company gritted its teeth and signed on. ”Now Sony Music was going and empowering Steve Jobs and his iPod to take over that business,” Wiser says. ”It was very controversial and a very difficult move-but it was the right move. No one else in the market was doing anything in digital music at that time.”

Why did record executives, who'd stonewalled Rob Glaser's MusicNet and the SDMI process, whoosh into deals with Apple? There are several reasons.* One was Jobs's confidence and charm. At NeXT and Pixar, he'd dealt with Hollywood executives all the time, so he didn't find powerful record people like Roger Ames and Doug Morris particularly intimidating. Another was Apple's tiny market share at the time-just 4 percent or 5 percent of computer users owned Macintoshes, and the iPodiTunes system was initially incompatible with Windows. ”Our smaller market share turned out to be an a.s.set!” Jobs said in One was Jobs's confidence and charm. At NeXT and Pixar, he'd dealt with Hollywood executives all the time, so he didn't find powerful record people like Roger Ames and Doug Morris particularly intimidating. Another was Apple's tiny market share at the time-just 4 percent or 5 percent of computer users owned Macintoshes, and the iPodiTunes system was initially incompatible with Windows. ”Our smaller market share turned out to be an a.s.set!” Jobs said in The Perfect Thing The Perfect Thing. ”We only convinced them to let us do it on the Mac at first. We said, 'Well, if, you know, the virus gets out, it's only going to pollute five percent of the garden here.' And that's probably what, in the end, enabled us to get them to come along with us. Doug Morris, who runs Universal, said, when he was arguing with his own team, 'Look, how-I don't understand how Apple could ruin the record business in one year on Mac. Why shouldn't we try this?'” A third reason was that Jobs told Universal's Galuten that Apple's marketing budget was $15 million to $30 million every quarter. every quarter. This was a free artist-publicity machine on par with MTV. Finally, many executives at record labels believed Microsoft was on the brink of releasing a digital music service that would compete fiercely with iTunes. Surely labels could play the two services off each other. But Microsoft stayed out-until November 14, 2006, when it released the Zune digital music player. Why the long wait? ”A lot of people at Microsoft did react quickly, but it took roughly a year to convince the full management chain to act on the knowledge of what was going on with Apple,” says Hadi Partovi, who in the early 2000s was general manager of MSN's music and entertainment division, and later cofounded the popular iLike music service on Facebook. ”Record labels repeatedly asked us what we were going to do to combat Steve Jobs's marketing budget. Our budget was in the This was a free artist-publicity machine on par with MTV. Finally, many executives at record labels believed Microsoft was on the brink of releasing a digital music service that would compete fiercely with iTunes. Surely labels could play the two services off each other. But Microsoft stayed out-until November 14, 2006, when it released the Zune digital music player. Why the long wait? ”A lot of people at Microsoft did react quickly, but it took roughly a year to convince the full management chain to act on the knowledge of what was going on with Apple,” says Hadi Partovi, who in the early 2000s was general manager of MSN's music and entertainment division, and later cofounded the popular iLike music service on Facebook. ”Record labels repeatedly asked us what we were going to do to combat Steve Jobs's marketing budget. Our budget was in the ones ones of millions.” of millions.”

After signing up the major labels, Jobs broadened his support in the record industry. He called Irving Azoff, powerful manager of the Eagles, the aging country-rock superstars who had blocked the use of their music in all other digital music services, and begged. ”I've said 'no' to all of them,” Azoff told the Wall Street Journal. Wall Street Journal. ”But I don't like their services, and I liked [Apple's] product.” Azoff said yes. In much the same way Sony's CD marketers earned support from big-name artists in the early 1980s, Jobs contacted U2's Bono, the Rolling Stones' Mick Jagger, and Sheryl Crow, among others. ”The black iPod is something I coveted-this is a beautiful object,” Bono said at an October 2004 press conference, announcing a special-edition iPod that contained U2's entire catalog. (Bono added, ”People want to sleep with it.”) Jobs invited Dr. Dre, multiplatinum gangsta rapper and masterful Interscope talent scout, who had been a fierce Napster enemy and vowed never to release his music to a digital service, to his office in Cupertino. They tinkered with iTunes for hours. ”Man,” Dre said afterward, ”somebody finally got it right.” He gave up the rights. ”But I don't like their services, and I liked [Apple's] product.” Azoff said yes. In much the same way Sony's CD marketers earned support from big-name artists in the early 1980s, Jobs contacted U2's Bono, the Rolling Stones' Mick Jagger, and Sheryl Crow, among others. ”The black iPod is something I coveted-this is a beautiful object,” Bono said at an October 2004 press conference, announcing a special-edition iPod that contained U2's entire catalog. (Bono added, ”People want to sleep with it.”) Jobs invited Dr. Dre, multiplatinum gangsta rapper and masterful Interscope talent scout, who had been a fierce Napster enemy and vowed never to release his music to a digital service, to his office in Cupertino. They tinkered with iTunes for hours. ”Man,” Dre said afterward, ”somebody finally got it right.” He gave up the rights.

Not every label executive was thrilled about the sudden rush of Apple excitement. Ted Cohen, who had begun his career as a Bay Area concert promoter and had climbed up the label ladder to be EMI's top new-media executive, was not easily swayed by charisma. He loved Apple products-in a fall 2007 phone interview from his home in Los Angeles, he was in viewing distance of eighteen iPods, five Macintosh computers, and two iPhones. But this was the music executive who'd had the guts to travel with the s.e.x Pistols during their first and last American voyage, through Texas, in 1977. When Sid Vicious swung his ba.s.s at a rabble-rousing Texan from the stage of a club, he missed and bashed Cohen in the face instead. Although Warner's Roger Ames had called one of EMI's top executives, David Munns, to sell him on the iTunes Store, Munns did not go personally to Cupertino. He sent Cohen, who showed up with other label reps. He was unimpressed.

At one point, Cohen remembers John Rose, then an EMI vice president, writing demographic sales statistics on a thirty-foot-long whiteboard in an Apple conference room. Afterward, Jobs stood up, walked to the whiteboard, which was entirely empty save for the one square foot where Rose had scribbled, and erased it completely. Rose was undeterred by this blatant power maneuver. ”John, G.o.d bless him, erased what Steve Jobs wrote and wrote something else over that,” Cohen recalls. ”They were erasing each other's words for about ten minutes. It was funny to watch, but it was very telling-Steve wants to do it his way and that's it.” Cohen saw the whiteboard power struggle as a sign of future battles between Jobs and record executives. Shortly after Apple signed up all five of the major record labels-including EMI-Cohen recalls the computer company subtly wriggling out of certain agreements. For example, Cohen says, Coldplay's 2002 smash A Rush of Blood to the Head A Rush of Blood to the Head was supposed to sell for $13 on iTunes, but an EMI distribution executive alerted Cohen one day that it was going for $11.88. The distribution rep called Apple. ”OK,” the Apple contact responded, ”you want us to take it down?” The distribution rep was stunned. ”Welcome to the world of Apple,” Cohen told him. ”If you don't like it, they'll stop selling your music.” Apple refused to make its executives, including Jobs, available for interviews for this book. was supposed to sell for $13 on iTunes, but an EMI distribution executive alerted Cohen one day that it was going for $11.88. The distribution rep called Apple. ”OK,” the Apple contact responded, ”you want us to take it down?” The distribution rep was stunned. ”Welcome to the world of Apple,” Cohen told him. ”If you don't like it, they'll stop selling your music.” Apple refused to make its executives, including Jobs, available for interviews for this book.*

THE ITUNES M MUSIC Store opened on April 28, 2003, with a catalog of 200,000 songs available for 99 cents apiece. And those were Store opened on April 28, 2003, with a catalog of 200,000 songs available for 99 cents apiece. And those were good good songs, from all five of the major record labels, not the local-band dross digital music fans used to find on websites like MP3.com. There were some major holdouts-the Beatles, Led Zeppelin, Radiohead-but top artists mostly supported the iTunes Store. Bob Dylan, U2, and Eminem provided exclusive tracks. ”This industry has been in such a funk,” Sheryl Crow declared, endorsing Apple's system on behalf of rock stars. ”It really needs something like this to get it going again.” songs, from all five of the major record labels, not the local-band dross digital music fans used to find on websites like MP3.com. There were some major holdouts-the Beatles, Led Zeppelin, Radiohead-but top artists mostly supported the iTunes Store. Bob Dylan, U2, and Eminem provided exclusive tracks. ”This industry has been in such a funk,” Sheryl Crow declared, endorsing Apple's system on behalf of rock stars. ”It really needs something like this to get it going again.”

Crow's vision came true-for Apple. Surprising its record label partners, the iTunes Store crossed over to Windows-based computers in October 2003 and became a ma.s.s phenomenon, selling 25 million 99-cent songs. It was a huge success-again, for Apple. In 2003, total iTunes sales were the equivalent of one small blockbuster in the record industry. (By contrast, the hundredth alb.u.m on the RIAA's Top 100 list of best-selling alb.u.ms, Green Day's American Idiot American Idiot, had sold 5 million CDs at the time of this writing.) That's a lot, but hardly enough to excite big-spending label executives about a new business model.* Plus, labels made just 67 cents on every 99-cent song, a decent percentage, but far, far inferior to taking roughly $10 to $12 on every $18 CD. (Remember, the labels had to share some of the revenue with artists and songwriters.) For Apple, though, the iTunes Store was absolutely brilliant, because it pushed music fans to buy more and more iPods, for $300 to $500 apiece. In the fourth quarter of 2003, iPods generated about 7 percent of Apple's $1.7 billion in revenue-$121 million overall. Plus, labels made just 67 cents on every 99-cent song, a decent percentage, but far, far inferior to taking roughly $10 to $12 on every $18 CD. (Remember, the labels had to share some of the revenue with artists and songwriters.) For Apple, though, the iTunes Store was absolutely brilliant, because it pushed music fans to buy more and more iPods, for $300 to $500 apiece. In the fourth quarter of 2003, iPods generated about 7 percent of Apple's $1.7 billion in revenue-$121 million overall.

”People think we knew the iPod was just going to be a success,” Tony Fadell recalls. ”That was the farthest thing from the truth.” To his surprise, the iPod changed everything-music, fas.h.i.+on, electronics, computers, the internet. Fans of the Beatles' cla.s.sic Sgt. Pepper's Lonely Hearts Club Band Sgt. Pepper's Lonely Hearts Club Band lamented that the iPod, with its irresistible song-shuffling function, would eliminate the alb.u.m as an art form. The TBWAChiatDay ”Silhouettes” ads made it cool to wander college campuses, board buses and trains, jog, and mow lawns while gently swaying to music coming through white earbuds. Vince Carter, superstar dunker for the Toronto Raptors, criticized the National Basketball a.s.sociation's decision to disallow players from practicing with their iPods. Celebrities from actor Bruce Willis to CNN anchor Aaron Brown to President Bush and Vice President Cheney owned up to making playlists for their iPods. (Bush likes the Knack's ”My Sharona”; Cheney prefers the Carpenters.) Thanks to the iPod, music was as exciting and culturally important as ever. That didn't necessarily mean the sound was an improvement. Over the years, as compressed iTunes files joined MP3s as the standard for online music, and fans started to listen to music on iPods and tinny computer speakers, producers started to compensate in their studios. By 2006, Bob Dylan was complaining to lamented that the iPod, with its irresistible song-shuffling function, would eliminate the alb.u.m as an art form. The TBWAChiatDay ”Silhouettes” ads made it cool to wander college campuses, board buses and trains, jog, and mow lawns while gently swaying to music coming through white earbuds. Vince Carter, superstar dunker for the Toronto Raptors, criticized the National Basketball a.s.sociation's decision to disallow players from practicing with their iPods. Celebrities from actor Bruce Willis to CNN anchor Aaron Brown to President Bush and Vice President Cheney owned up to making playlists for their iPods. (Bush likes the Knack's ”My Sharona”; Cheney prefers the Carpenters.) Thanks to the iPod, music was as exciting and culturally important as ever. That didn't necessarily mean the sound was an improvement. Over the years, as compressed iTunes files joined MP3s as the standard for online music, and fans started to listen to music on iPods and tinny computer speakers, producers started to compensate in their studios. By 2006, Bob Dylan was complaining to Rolling Stone Rolling Stone that modern alb.u.ms ”have sound all over them. There's no definition of nothing, no vocal, no nothing, just like-static.” In late 2007, prominent rock producer David Bendeth added: ”They make it loud to get [listeners'] attention. I think most everything is mastered a little too loud. The industry decided that it's a volume contest.” that modern alb.u.ms ”have sound all over them. There's no definition of nothing, no vocal, no nothing, just like-static.” In late 2007, prominent rock producer David Bendeth added: ”They make it loud to get [listeners'] attention. I think most everything is mastered a little too loud. The industry decided that it's a volume contest.”

The majority of fans, however, didn't care about sound quality. Almost immediately, iTunes emerged as the biggest online retailer, taking more than 70 percent of the market and dwarfing later compet.i.tors like Napster (whose a.s.sets had been purchased by another company, Roxio, and turned into a legal service) and stores from Microsoft, MTV, Sony Corp., and Wal-Mart. By April 2008, the iTunes Music Store had sold more than 4 billion songs around the world. It ranked No. 1, above Best Buy and Wal-Mart, as the top overall music retailer in the United States, according to a survey-research firm called the NPD Group.

Record executives privately started likening Apple to MTV-major labels agreed to give videos to the channel in the early 1980s, when it seemed like a tiny promotional device, and regretted losing all that video revenue when MTV blew up. But this was even worse. Apple had basically taken over the entire music business. Steve Jobs's agenda was not to make money off 99-cent digital songs, although they were a nice additional source of revenue. He used the songs to profit from expensive iPods. Labels made exactly zero dollars for every iPod sale. Not only that, record execs noted ruefully, there was no chance no chance music fans were filling their 80-gigabyte iPods with 20,000 songs they'd bought for 99 cents apiece or ripped from their CD collections. Surely pirated music had something to do with the booming iPod sales as well. music fans were filling their 80-gigabyte iPods with 20,000 songs they'd bought for 99 cents apiece or ripped from their CD colle

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