s portable music devices. “The move was immediately understood as a way to unite the sometimes
conflicting electronics and content divisions,” the
New York Times
reported. “That internal battle
was seen by many as the reason Sony, the inventor of the Walkman and the biggest player in the
portable audio market, was being trounced by Apple.” Sony Connect launched in May 2004. It
lasted just over three years before Sony shut it down.
Microsoft was willing to license its Windows Media software and digital
rights format to other
companies, just as it had licensed out its operating system in the 1980s. Jobs, on the other hand,
would not license out Apple’s FairPlay to other device makers; it worked only on an iPod. Nor
would he allow other online stores to sell songs for use on iPods. A variety of experts said this
would eventually cause Apple to lose market share, as it did in the computer wars of the 1980s. “If
Apple continues to rely on a proprietary architecture,” the Harvard Business School professor
Clayton Christensen told
Wired
, “the iPod will likely become a niche product.” (Other than in this
case, Christensen was one of the world’s most insightful business analysts, and Jobs was deeply
influenced by his book
The Innovator’s Dilemma.
) Bill Gates made the same argument. “There’s
nothing unique about music,” he said. “This story has played out on the PC.”
Rob Glaser, the founder of RealNetworks, tried to circumvent Apple’s restrictions in July 2004
with a service called Harmony. He had attempted to convince Jobs to license Apple’s FairPlay
format
to Harmony, but when that didn’t happen, Glaser just reverse-engineered it and used it with
the songs that Harmony sold. Glaser’s strategy was that the songs sold by Harmony would play on
any device, including an iPod or a Zune or a Rio, and he launched a marketing campaign with the
slogan “Freedom of Choice.” Jobs was furious and issued a release saying that Apple was
“stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod.”
RealNetworks responded by launching an Internet petition that demanded “Hey Apple! Don’t
break my iPod.” Jobs kept quiet for a few months, but in October he released a new version of the
iPod software that caused songs bought through Harmony to become inoperable. “Steve is a one-
of-a-kind guy,” Glaser said. “You know that about him when you do business with him.”
In the meantime Jobs and his team—Rubinstein, Fadell, Robbin, Ive—were able to keep
coming up with new versions of the iPod that extended Apple’s lead. The first major revision,
announced in January 2004, was the iPod Mini. Far smaller than the original iPod—just the size of
a business card—it had less capacity and was about the same price. At one point Jobs decided to
kill it, not seeing why anyone would want to pay the same for less. “He doesn’t do sports, so he
didn’t relate to how it would be great
on a run or in the gym,” said Fadell. In fact the Mini was
what truly launched the iPod to market dominance, by eliminating the competition from smaller
flash-drive players. In the eighteen months after it was introduced, Apple’s market share in the
portable music player market shot from 31% to 74%.
The iPod Shuffle, introduced in January 2005, was even more revolutionary. Jobs learned that
the shuffle feature on the iPod, which played songs in random order, had become very popular.
People liked to be surprised, and they were also too lazy to keep setting up and revising their
playlists. Some users even became obsessed with figuring out whether the song selection was truly
random, and if so, why
their iPod kept coming back to, say, the Neville Brothers. That feature led
to the iPod Shuffle. As Rubinstein and Fadell were working on creating a flash player that was
small and inexpensive, they kept doing things like making the screen tinier. At one point Jobs
came in with a crazy suggestion: Get rid of the screen altogether. “What?!?” Fadell responded.
“Just get rid of it,” Jobs insisted. Fadell asked how users would navigate the songs. Jobs’s insight
was that you wouldn’t need to navigate; the songs would play randomly. After all, they were
songs you had chosen. All that was needed was a button to skip over a song if you weren’t in the
mood for it. “Embrace uncertainty,” the ads read.
As competitors stumbled and Apple continued to innovate, music became a larger part of
Apple’s business. In January 2007 iPod sales were half of Apple’s revenues.
The device also
added luster to the Apple brand. But an even bigger success was the iTunes Store. Having sold
one million songs in the first six days after it was introduced in April 2003, the store went on to
sell seventy million songs in its first year. In February 2006 the store sold its one billionth song
when Alex Ostrovsky, sixteen, of West Bloomfield, Michigan, bought Coldplay’s “Speed of
Sound” and got a congratulatory call from Jobs, bestowing upon him ten iPods, an iMac, and a
$10,000 music gift certificate.
The success of the iTunes Store also had a more subtle benefit. By 2011 an important new
business had emerged: being the service that people trusted with their online identity and payment
information. Along with Amazon, Visa, PayPal, American Express, and
a few other services,
Apple had built up databases of people who trusted them with their email address and credit card
information to facilitate safe and easy shopping. This allowed Apple to sell, for example, a
magazine subscription through its online store; when that happened, Apple, not the magazine
publisher, would have a direct relationship with the subscriber. As the iTunes Store sold videos,
apps, and subscriptions, it built up a database of 225 million active users by June 2011, which
positioned Apple for the next age of digital commerce.