Apple to Music Industry: Monetize Your IP

“Put your full damned catalogues on-line already.”

In not quite those words, Apple CEO Steve Jobs pressed the music industry to fully monetize their intellectual property. In a conference call today on the one year anniversary of Apple’s popular iTunes Music Store, Jobs was was far subtler and more diplomatic than my own take on it. He correctly noted that most of the music industry’s IP lay fallow.

If only the industry would digitize the 2/3rds of their catalogue currently out of print, the big labels might find a potentially high margin revenue source.

Steve noted why most of the large music labels have only one third or less of their music catalogues available for purchase: It is simply not cost effective to physically press, distribute, warehouse and inventory the vast majority of the labels’ intellectual property. This makes a good deal of sense, especially for specialty and niche genres which may have small but dedicated fans.

However, those prohibitive costs do not apply to digitized music.

As the chief of both Apple and Pixar, Steve Jobs is a man who knows his technology, as well as his digital content. If the music industry is smart — and there is little to suggest that they are — they will sit up and pay attention to what he is suggesting.

If Jobs manages to convince the major studios to release their back catalogues to Apple initially, and ideally to Apple exclusively, then they become the defacto standard for “Digital Music Distribution.”

Perhaps Apple could even become to music what the the Library of Congress is to the printed book.

UPDATE: April 29, 2004, 3:18pm

Here’s the excerpt from the conference call:

Steve Jobs: Oh, there’s, you know, there’s a lot of challenges that we all face together. Let me give you one that’s really exciting to us, which is that if you look at a typical music company, less than a third of their music that they have in their vault is actually available for sale. And the reason for that is, is because with traditional CD distribution channels where you have to make a physical object, somebody has to carry the inventory, somebody has to make, you know, rent space to put it on a shelf, they can’t get distribution for a lot of their catalogues that’s sitting on their vault because it wouldn’t sell enough to justify, you know, the record company…the record stores carrying it. And it’s getting even worse with the demise of the small individual record store and the tendency of, you know, of Wal-Mart and Best Buy, et cetera, the selection is even narrowing further.

And one of the most exciting things for us is to get the rest of that catalogue, which has not been purchasable, in some cases, for decades, digitally encoded and online on the iTunes Music Store where there is no inventory, where there are no returns, where there is no rent for the shelf space, and make that music available to everybody.

Transcript courtesy of MacObserver
http://www.macobserver.com/article/2004/04/29.9.shtml