Could Apple Be The Next Sony?

by James R. Stoup Aug 22, 2005

I have an interesting question to pose to you, who do you think Apple most wants to be like, Microsoft or Sony? Now, they are well on their way with OS X86 towards the MS goal, but what about Sony? Is Apple really gunning for their market as well? Here are two interesting bits of trivia for you, this year 5% of Apple’s profits came from the ITMS and all of the major music production houses want to increase song prices. Incidentally, you might have also heard about how various music labels have been complaining about Apple’s unfair (to them) DRM policy. Make no mistake, they don’t give a damn about what DRM scheme is used, they don’t care about how easy it is to listen to your music and they don’t care about what is best for the customer. What they do care about is making money and it will be easier to dictate terms (which is what they are use to) to multiple vendors than be locked into one system from one company (which they don’t like at all). I mean, please, how many of us really think we would be paying .99¢ a song if the major label’s had their way? No, we would be paying $5 a song for the latest hits and .99¢ a song for the best of Yanni.

But I digress.

Back onto the topic which is Sony. Let’s get back to the two points I mentioned earlier, Apple is making more and more money from music sales and Sony (in addition to the rest of the labels) is becoming more of a problem by demanding more money. What if one day Apple decided to go after the artist themselves. In other words what if Apple decided to call Josh Groban or Green Day or any of the others and said “hey, you dump EMI or Universal or Sony and come work with us.” Apple gives the artist a larger percentage of their earnings and they in turn never have to deal with the label’s whining about increasing prices. The artists win because they get to keep more of their money and Apple wins because they can sell more iPods and more songs off of the ITMS. In fact, the only ones who really takes it in the shorts are the recording studios.

Before you scoff too hard at that idea let me remind you of the two main jobs of a music label, which is providing a recording studio and providing a distribution channel. Now, they have other functions but as far as an artist is concerned getting recording time and then getting face time are the most important. The artist needs a place in which to record and mix their music and then, once the CDs are ready to go they need someone to promote them and get them out to the average consumers. Now, at one point artists desperately needed labels if they ever wanted to have a chance in the business. The equipment needed to record and produce music was too expensive. Likewise, even if they made the album themselves they still had no way of advertising or distributing their new music. So really they were at the music industry’s mercy.

But look at how things have changed in the last few years. The equipment to record songs has reduced in price considerably but the software has been a problem until GarageBand. Now, GarageBand isn’t by far a professional application but it is a start in the right direction. So the recording aspect has become much easier for the average artist to gain access to. Why then, haven’t more artists left the major labels? Well, because of the second aspect I mentioned, distribution.

Until recently it looked like things were never going to change, and then Apple introduced the ITMS. And suddenly Apple had a way to advertise songs and sell songs in the same package. Thus conceivably the largest obstacle preventing artists jumping ship is now gone. So this brings me back to my original question of what if Apple became a distributor of music (maybe movies one day?) and thus became more like Sony. If you look at just the iPod/iTunes side of Apple’s business, they already look like Sony. They both produce and sell entertainment media. So, is it possible for Apple to try and take it to the next level? Or would they just use this as a threat to keep the labels in line? What do you think?


  • I have thought about this as well. The main problem I see is that Apple could only get a handful of artists at first and as soon as they started the Record Studios would pull any and all music from the iTMS. That would mean a much smaller selection of music and over time it would probably go under. Apple needs volume and lots of it to make money on the music store. It’s a shame. I bet there are a lot of artists that would rather deal with Apple than the labels. And then there’s that whole Beatle’s issue. Would they have a more legitimate lawsuit if Apple were to get into actual production of music?

    Gabe H had this to say on Aug 22, 2005 Posts: 40
  • I do think that Apple would have some very major “frank discussions” with the labels if they ever decided to try something like this. And organising a mass move of artists, to provide an instant sizabel catalogue, would be a logistical nightmare. Perhaps their best bet would be to start with small new bands, probably via a holding front label.

    Apple Music Inc. would def. be a problem. Their current lawsuit is based on Apple Comp.‘s past promise not to go into the music industry.

    Dan Ebeck had this to say on Aug 22, 2005 Posts: 23
  • There’s more to the recording business than just the recording studio.

    Record companies have a whole promotional infrastructure in place—deals with concert venues, record store promotion, radio station relationships (which sometimes involves illegal payola, but that’s a whole other conversation) and marketing on many different levels… that’s really what a record contract brings you. The studio work is the easy part.

    Apple would need to become a whole different business to handle artists properly. And yes, Apple Records would definitely scream bloody murder about trademark infringement and they would be right.  Heck, they’re right even about iTunes for the most part, which is why we’ll probably never know what it took to settle the new case.  Apple would have to buy out Apple Records lock, stock and barrel to make that kind of move.

    If that happened, you could count on the other labels withdrawing their catalogs from iTMS since iTMS wouldn’t just be a distribution outlet like Tower Records, but also a direct competitor for their artists.

    While Apple has a huge stack of chips at the table, that would be like going all-in on a pair of 9’s… You might win, but you could be just as likely be out of the game.

    vb_baysider had this to say on Aug 22, 2005 Posts: 243
  • Why not to consider than they will simply split beetween two companies (in a near future of 2 years ?) :

    1) A new “Itunes Inc” as a “music and video provider” using iTunes as a crossplatform distribution chanel (PC, windows, phones running iTunes and ITMS server)

    2) Apple as a software (OS X) and hardware provider (including iPod, Mac and future multimedia products).

    It may also simplify this recurring problem about the “Apple” brand.

    Tibere had this to say on Aug 22, 2005 Posts: 1
  • The first step to this was splitting the iPod in to a separate division. I can easily see the “iTunes Music Company” a wholly owned subsiduary of Apple Comp. that produces iPods.

    Dan Ebeck had this to say on Aug 22, 2005 Posts: 23
  • I agree that Apple may soon become more involved in working directly with artists, but your theory is flawed because it’s based on misinformation. Artists do not sign with major labels for a recording studio or for distribution. Perhaps back in the 50s, but those two things are moot today.

    First, the label has nothing to do with the studio. Yeah, some labels have, or have had, their own in-house studios, but this is pretty rare today. Recording studios are a dime a dozen. If the label does anything of this sort, it’s hooking up an artist with a producer. The producer is more likely to pick a studio, unless the artist is well-established and fairly knowledgeable.

    Second, yes, artists can get distribution from a label, but that’s not the reason they sign. They sign because they need money to get off the ground. They sign for the advance (and that’s usually what kills them, too). They also sign with a major for connections. Major labels (and good indies) know how to get songs to the right people. That’s different from distribution.

    “...even if they made the album themselves they still had no way of advertising or distributing their new music.”

    Absolutely not true. Hasn’t been true for decades. Anybody can distribute a record nowadays. It’s not hard. Selling it is hard. It takes money - which is what the labels have. Again, it comes back to the advance.


    “...the software has been a problem until GarageBand…”

    That’s a wildly uninformed statement that bears no relation to reality. GarageBand is just Logic stripped down with a simpler GUI. ProTools, Nuendo, Logic, Deck all operate in a similar manner, and have for some time. Yeah, they’re more complicated, but that’s what’s required to make a professional recording. GarageBand has no relevance here.

    This will probably sound smug, but I think it should be said: you’re writing about something here you don’t really understand. I think you should do a little more research before you construct a whole article based on misunderstandings.

    Billy K had this to say on Aug 22, 2005 Posts: 10
  • Agreed, and hardly smug I don’t think.  Many folks are under the impression that the major record labels actually have something to do with “recording”, I’d guess just about everybody that ISN’T involved in the music industry in some capacity.

    To further back up this arguement, take this simple hypothetical example:

    “Joe” and his band record a demo at home with GarageBand, it sounds so darn good it can pass as a professionally recorded piece of music so their next obvious step is to release it.  Currently they have very little out-of-pocket expense, only their time and whatever the cost of the Mac they used to record it, their gear, etc.  Now comes the hard part, getting noticed.  Where I want to believe that eventually everyone will have equal oppotunity to put their music out and get heard, even the vastness of the internet just doesn’t cut it currently.  The major labels have deep pockets to bombard potential listeners with advertising far beyond what Joe and his band can ever achieve and they simply go unheard.  Hopefully they’ll tour like crazy (again on their own dime) and gain exposure over time but meanwhile the music industry is still in complete control of the market, no matter what company we’re talking about.

    It’s a great fantasy, that anyone can level the playing field now, but it’s still a long way from reality.  Apple has provided a lot of great tools for artists and potentially a great deal of options on the distribution front (something that can’t be said for Sony in my opinion), but it’s going to take another revolution in the music business to really bring it all together. 

    I see the genesis of a “new, improved!” music industry as this so far:

    1. Napster making the world aware that any music can be obtained anytime for little or no money (with varying degrees of effort) via a PC.  The original Napster put the music/PC idea on the map. Period.

    2. Apple refining both the Napster business model so as to make things profitable for both artists and the businessmen and investors behind them (i.e. record labels), as well as significantly furthering the idea of a personal computer as a professional recording device (and for what it’s worth, I believe we’re just a short time away from hearing the first major music release composed and recorded entirely on GarageBand, it’ll happen - it’s just a matter of time - and suddenly Apple will push that many more units).

    3.  The future, where someone (Apple possibly, but unlikely) comes up with a clever way of granting worldwide exposure to INTERESTED music listeners.  Every artist out there, big or small, has a website - but no one is necessarily visiting.  Right here is where the next revolution will take place.  No one knows the answer to this one, if they did we’d already have it in front of us.

    dickrichards2000 had this to say on Aug 22, 2005 Posts: 112
  • Another value the record labels add (in concert with the radio industry, payola and all) is filtering music. A&R is a big part of the record industry, and, having worked at Rykodisc for a period time I got to meet and work with many of them. They often have an incredible knowledge of music, and the best ones help the artist shape their album.

    Yes, the majors do have A&R machines that crank out crap. But, for better or worse, most of our favorite musicians came through this system.

    What we need is a Google/Digg/Yahoo for music. Something that provides a technological solution. However, we will still need people. Who knows, maybe in the future bloggers will be the A&R and radio program managers of the future.

    Hadley Stern had this to say on Aug 22, 2005 Posts: 114
  • “(and for what it’s worth, I believe we’re just a short time away from hearing the first major music release composed and recorded entirely on GarageBand, it’ll happen - it’s just a matter of time - and suddenly Apple will push that many more units)”

    According to Guitar World, former Korn guitarist Brian Welch is currently recording an album solely with Garageband…“to show kids that you don’t need million dollar studios to be creative”.

    Also, about point 3 in dickrichards2000’s comment, I already use the iTMS and it’s new releases rss feed to browse for music I haven’t heard about.  Thanks to the 30 second preview on the store, I find it really efficient to hear a bunch of bands.  Anytime you like a band you can look at what other people buy from other bands and there are also the lists of recommendations put together by others.  I find it gives you more freedom than just waiting for advertising from the typical sources.  So far the iTMS is a convenient place to not only buy music, but find it as well.

    alexpasch had this to say on Aug 23, 2005 Posts: 16
  • How about this? The Beatle’s Apple wanted to be a powerful indie meant to keep new groups out of the hands of music sharks.
    - Instead of arguing, and spending money over the name Apple, they may find common ground. Beatles Šbecomes a virtual label helping young artists and Jobs à distributes them on iTMs.
    No one in the industry can seriously criticise the Beatles, Å does want it always wanted to achieve fulfilling their legacy.
    - After a period of time the groups can sign up with a major if they want, possibly keeping Å as their legal guidance and publisher.

    WAWA had this to say on Aug 23, 2005 Posts: 89
  • Good points, DR2000 and Hadley (esp. the “value” of A&R guys).

    I think we’re seeing the beginnings of this “next revolution” in MP3 blogging. That’s where I get 99% of my new music information now. Add in RSS capabilities, and it may be the bginnings of a new music discovery/distribution system.

    Also, I recall reading about the “first CD ever recorded in GarageBand’ like a year ago. Couldn’t tell you the name - some unknown.

    P.S. Was that an obtuse “Joe’s Garage” reference, DR2000?

    Billy K had this to say on Aug 23, 2005 Posts: 10
  • Hadley is right on with the Google of music searching…am still looking forward to see what Google does with that once they go live with it. When the originally said they were going into searching multiple online music stores, and even trying to get there own payment system in operation where you pay Google for the song and then get it from wherever sounded great. Can’t wait to see if they get it to work that simply though.

    As for iTunes hmm, I dunno. Just look at the recent launch in Australia where its lacking Sony and EMI. If/when they pull out of all the other countries (believe its around April/May time when the next licensing round is due) iTunes why would anyone want to use it if it hasn’t any music? Apple will have to relent and do what the music companies want or they’ll be sunk. Can a music service survive only with garage bands and no big lables? We all know Sony wants the iPod dead. Can Sony do it? I wouldn’t put it past them or if not, severely messing up iTunes in the process.

    Nyadach had this to say on Sep 15, 2005 Posts: 29
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