Important prop: iTunes

It is said that Metallica is actually responsible for the iPod. More precisely, it was their lawsuit against Napster, a music sharing and downloading network, where the unreleased song I Disappear from Metallica’s upcoming album Mission: Impossible II had just appeared. That was the proverbial last straw that made Steve Jobs decide where Apple would focus its efforts. It was clear from the sales results of iMacs in 2000 that the company needed to do something about its pro-music orientation; their inability to burn CDs was an obvious and serious problem. And the music field was awaiting a boom that no one had really seized yet, because it wasn’t entirely clear how to seize it. The Napster case made it clear that people would want to download music to their players. The challenge was to offer a comprehensive alternative that would allow publishers to deliver music securely and users to enjoy it seamlessly on their music players. That’s easy to say, but in 2000, it wasn’t so easy to do.

At that time, Apple didn’t even have a proper music player for its Macs. Quicktime could be used for simple playback, but it couldn’t handle, let alone process and catalog, a more extensive music collection, and Jobs quickly realized that rather than embarking on the uncertain path of internal development, it would be better to buy someone on the market who already had an idea of what a proper music player should look like.

There were three decent music applications for Mac OS X on the market: Audion from Panic, MacAmp, and SoundJam MP. Jobs was initially interested in Audion, but Panic was negotiating with AOL at the time to use Audion’s code, so it had to decline Apple’s offer to discuss a joint future in mid-2000. Apple began negotiations with SoundJam, whose co-founder Bill Kincaid had once worked for Apple and was still in contact with the company. Jeff Robbin and Dave Heller were still working at Apple as developers and were interested in the project to create software for playing music and enabling Macs to work with Rio MP3 players.

Image: Soundjam

Caption: SoundJam MP, the basis for today’s iTunes.

Panic’s negotiations with AOL dragged on, and on Christmas Day 2000, Panic co-founder Cabel Sasser received an email directly from Steve Jobs asking if he would like to meet. They meet in January 2001 at MacWorld, where Steve Jobs has already introduced the first version of iTunes, but at that time it is not yet clear that iTunes was based on SoundJam. However, at the meeting between Sasser and Jobs, it was already clear, as Jeff Robbin, the developer of the SoundJam application, was also present on behalf of Apple. Jobs and Robbin tried to recruit both Panic founders to the iTunes team.

The founders of Panic ultimately refuse, and iTunes remains composed of the people who created SoundJam MP. Instead of a company that changed the world of digital music, Panic remains a small company creating beautiful shareware for Mac OS X. Six years later, their Audion was discontinued because there was no point in continuing to develop it. Today, the company’s best-known software is the file transfer client Transmit and the HTML editor Coda. Jeff Robbin continues to lead the development of iTunes and is now Apple’s vice president of user experience. According to unofficial information, he is now in charge of developing the legendary “Apple TV.” It should be noted that the situation was even more complicated because Jeff Robbin was already working at Apple before the purchase of SoundJam. SoundJam was his private project, and it is not known exactly how much Jobs paid Apple for it. The truth is, however, that the products of Casady & Greene, which sold SoundJam, were gradually integrated into Apple’s software and ceased to exist independently in 2003, although Casady & Greene was “only” a marketing company, with products supplied by individual and independent development teams, which it actually only oversaw.

Why did I mention this story, which is neither unusual nor significant in the context of the computer industry? In the end, nothing really happened. Panic is still a small software development company, and Jeff Robbin became the head of the iTunes project, but someone had to do it, so why not him? Who knows if Cabel Sasser would have been a better boss for him. And yet there is a reason. This part of history illustrates well how Apple will gain market dominance and its main competitive advantage in the future. That is the ability to make quick decisions and quickly acquire resources in exchange for money. Apple used the “premium price resource acquisition” method, even though it could have used internal development and started developing iTunes from scratch, as was common at the time. But that would have meant hiring and setting aside developers who were just getting acquainted with digital music and the blind alleys of GUI and software development. It would have taken many months before Apple, even with all its financial resources, could get to the point where such a team would be able to develop something that would have a satisfactory response, and who knows if it would have been successful the first time around. Jobs was already familiar with the idea of the “third version of Microsoft,” a somewhat derisive but largely accurate claim that only the third version of a Microsoft product would achieve success. Apple was in a very similar situation, as its own development of software products from scratch was not exactly groundbreaking. Jobs dealt with the situation pragmatically and, surprisingly for the time, bought the company for a considerable amount of money (undoubtedly tens of millions of dollars), primarily for its people, and completely redesigned its product from the ground up under great pressure. Indeed, although iTunes took over a number of things from SoundJam under the hood, apart from the “brushed metal” look, the two programs were diametrically different. Similarly, Jobs wanted to buy more people from Panic to expand the team with “A-list” people, and he was willing to pay a premium price for that, even though he didn’t care about their product at all. He was interested in their insight, experience, and knowledge of the field.

Mark Zuckerberg uses a similar strategy today at Facebook, buying companies from market segments he wants to enter and then practically throwing away their products and rebuilding them from scratch. He, too, is interested in teams, experience, and knowledge of the segment he wants Facebook to penetrate. And who advised him to do this? His friend Steve Jobs…

Other companies, such as Microsoft, were buying products at the time, i.e., something they believed they could incorporate into their offerings with virtually no changes and profit from sales. It was difficult to imagine that they would simply buy a team at a premium price, discard the product, and introduce a new one. This agility gave Apple a significant competitive advantage, which contributed significantly to the speed with which Apple was able to respond to trends. While in mid-2000 it became apparent that the iMac was not a good platform for digital music, by early 2001 Apple was offering everything needed for digital music—from CD-RW burners to the convenient iTunes player. And the big blow was yet to come.

Image: 10itunes_main.tiff

Caption: iTunes version 10.5 for Mac OS X has changed significantly since the first SoundJam MP. After all, it has more than 10 years of development behind it.

The truth remains that it didn’t look like a big breakthrough at first. Although iTunes 1.0 was downloaded about 275,000 times during its first week, this was also due to the fact that competing players were relatively expensive, with SoundJam costing $40. iTunes, which was free and gradually pre-installed on all Mac computers, spread quickly. The disadvantage was that iTunes could not burn CDs on external burners, which disqualified iMac owners—burners were only available for Power Macs at the time. Apple quickly remedied this and introduced iTunes 1.1 with support for third-party burning software and the new iMac and Apple Cube with CD-RW drives. The controversial “Rip, Mix, Burn” advertising campaign topped it all off, with Apple loudly announcing to the world that its computers were the best for ripping, mixing, and re-burning music. This was very bold at the time, as until then, large companies had only cautiously and awkwardly skirted around the issue of “music burning” and would not have dared to mention it officially.

iTunes Timeline

January 9, 2001: iTunes 1.0 officially released: capable of burning CDs, available for Mac OS 9
October 23, 2001: iPod 1G, 5GB, $399, and iTunes 2.0 with Mac OS X support
July 17, 2002: iTunes 3 with smart playlists and ratings, end of support for Mac OS 9
April 2003 iTunes 4 with iTunes Store and network music sharing
October 2003 iTunes 4.1 adds support for Windows XP and 2000
May 9, 2005 iTunes 4.8 adds support for video content
September 7, 2005 iTunes 5 Smart Shuffle, support for syncing Windows calendars and contacts with iPod
October 12, 2005 iTunes 6 with support for purchasing and playing video content from the iTunes Store.
September 12, 2006 iTunes 7 introduces Cover Flow and VGA movie quality instead of QVGA
9.9.2008 iTunes 8 with Genius, grid view
September 9, 2009 iTunes 9 with home network sharing and iTunes LP format for interactive album presentation.

September 1, 2010 iTunes 10 with Ping

What have we shown in this section?

•Apple is abandoning slow interfaces and low-capacity media such as floppy disks and old serial interfaces. It is focusing on USB and, above all, FireWire, which at that time is the only interface for high-speed data transfer, mainly from video cameras.

•Apple focused on video processing through Final Cut and iMovie, but this was not successful among ordinary users.

•The choice of a slot-loading CD drive meant that the company was unable to innovate quickly in the field of burning media. People wanted to create music compilations. Apple took note of people’s interest in music.

•Apple is able to remedy the situation in the hardware area by shortening production processes and in the software area through a rapid acquisition policy.

•A tandem for home users, iMac + iTunes, is emerging.

•And to top it all off: Jobs decides to focus his efforts on developing a pocket music player.

The context of this story

Important prop: iTunes

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