Steve Jobs: The Rolling Stone Interview

When is Apple going to start signing musicians — in effect, become a record label?
Well, it would be very easy for us to sign up a musician. It would be very hard for us to sign up a young musician that was successful. Because that's what the record companies do. Their value is in picking that 1 out of 5,000. We don't do that.

We think there's a lot of structural changes that are probably gonna happen in the record industry, though. We've talked to a large number of artists that really don't like their record company, and I was curious about that. And the general reason they don't like the record company is because they think they've been really successful, but they've only earned a little bit of money.

They feel they've been ripped off.
They feel. But then, again, the music companies aren't making a lot of money right now ... so where's the money going? Is it inefficiency? Is somebody going to Argentina with suitcases full of hundred-dollar bills? What's going on?

And it turns out, after talking to a lot of people, this is my conclusion. A young artist gets signed, and they get a big advance — a million dollars, or more. And the theory is that the record company will earn back that advance as the artist is successful.

Except that even though they're really good at picking, still, only one or two out of the ten that they pick is successful. And so, for most of the artists, they never earn back that advance — so they're out that money. Well, who pays for the ones that are the losers?

Kid Rock.
The winners pay. The winners are paying for the losers, and the winners are not seeing rewards commensurate with their success. And so they get upset. So what's the remedy? The remedy is to stop paying advances. The remedy is to go to a gross-revenues deal and to tell an artist: We'll give you 20 cents on every dollar we get ... but we're not gonna give you an advance.

The accounting will be simple: We're gonna pay you not on profits — we're gonna pay you off revenues. It's very simple: The more successful you are, the more you'll earn. But if you're not successful, you will not earn a dime. We'll go ahead and risk some marketing money on you, and we'll be out. But if you're not successful, you'll make no money — but if you are, you'll make a lot more. That's the way out. That's the way the rest of the world works.

So you see the recording industry moving in that direction?
No. I said: I think that's the remedy. Will the patient swallow the medicine is another question.

I want to ask you about your own interest in music. I know you're a big Bob Dylan fan. What does Dylan mean to you?
He was a very clear thinker, and he was a poet. I think he wrote about what he saw and thought. The early stuff is very precise. But, as he matured, you know, you had to unravel it a little bit. But once you did, it was just as clear as a bell. I was listening the other day to "Only a Pawn in Their Game." You know, when Medgar Evers was shot there were all these folk songs written about it. Dylan thought it through so carefully, and wrote this brilliant song about it. And that stuff's as good today as when he penned it.

When did you discover Dylan?
Steve Wozniak turned me on to him. I was probably ... oh ... maybe 13, 14. We ended up meeting this guy who had every bootleg tape in the world. He was a guy that actually put out a newsletter on Bob Dylan. He was really into it — his whole life was about Bob Dylan. But he had the best bootlegs — even better stuff than you can get today that's been released. He had amazing stuff. And so we had our room full of tapes of Bob Dylan that we copied.

Obviously music is important to Apple's future. But skeptics have long viewed Apple as little more than as the cool R&D lab for the computer industry. Apple innovates — everybody else takes it and makes money off it. How does Apple survive in an industry that's getting more consolidated, more mature?
Well, first of all, I don't think that's a terrible thing, what you've just portrayed. Right now, in the personal-computer business — in terms of companies that sell personal computers — everyone is losing a lot of money, except for two companies.

Hewlett-Packard just announced their results, and they just lost $56 million in the PC business in one quarter. That's over $200 million a year. Sony's losing a lot of money in the PC business; Gateway's losing a lot of money in the PC business; IBM's losing money in the PC business; Toshiba's losing a lot of money in the PC business. Everyone's losing money in this business — except for Dell, which is making a reasonable amount of money, and Apple, which is making a little money.

And Dell's making money because they're taking market share away from the guys, because they all sell the same product. We're making some money because we're innovating. And we decided to innovate our way through this downturn, so that we would be further ahead of our competitors when things turn up.

Still, Apple's market share seems stuck at about 5% in the U.Ss and 3% worldwide.
So our market share is actually greater than BMW's — greater than Mercedes — in the car industry. And, yet, no one thinks BMW or Mercedes are going away, and no one thinks that they're at a tremendous disadvantage because that's their market share. Matter of fact, they're both highly desirable products and brands.

But is that a fair analogy? Mercedes isn't dependent upon having a critical mass of developers writing software in order to make their product useful.
Except that we do have that critical mass now. In other words, the thing about Apple's market share that you have to understand is, when you get under the hood, we don't sell computers, en masse, to sit on every desk of every corporation. So when you take that out, the remaining markets — we have a much higher market share. Our consumer market share has doubled in the past few years — doubled. So our market share in the creative-professional marketplace is over 50%.

So when you look at the markets that we compete in, our market share isn't 5% or 3% — it's 10% to 60%. In some cases, it's up at 90%. So that's sort of the myth of the market share. If you throw in the boatloads of PC's that are sold to corporations, then that waters down our market share. But that's not a market we compete in, you know? That's like saying: Let's add the computers that are sold, you know, on Neptune.

Do you see a time when a version of the iPod will become more important to Apple than the Mac itself?
Well, Apple has a core set of talents, and those talents are: We do, I think, very good hardware design; we do very good industrial design; and we write very good system and application software. And we're really good at packaging that all together into a product. We're the only people left in the computer industry that do that. And we're really the only people in the consumer-electronics industry that go deep in software in consumer products. So those talents can be used to make personal computers, and they can also be used to make things like iPods. And we're doing both, and we'll find out what the future holds.

You're well-known as being a technological optimist. Do you still feel as hopeful about what technology has done for us as a culture as you did, say, twenty years ago?
Oh, yeah. I think it's brought the world a lot closer together, and will continue to do that. There are downsides to everything; there are unintended consequences to everything. The most corrosive piece of technology that I've ever seen is called television — but then, again, television, at its best, is magnificent.

Why do you call television the most corrosive of technology you've ever seen?
Because the average American watches five hours a day of television, and television is a passive medium. Television doesn't turn your brain on. Or, television can be used to turn your brain off, and that's what it's mostly used for. And that's a wonderful thing sometimes — but not for five hours a day.

When you talk about what technology has done for the world, though, it's not just TV and computers. It's also genetic research, cloning, nanotech. There are a lot people who feel like we're pushing technology too far, that we don't really know what we're messing with. Do you have any sympathy for that point of view?
You know, again — I'd rather just talk about music. These big-picture questions are just — (Snores) I think we're all happier when we have a little more music in our lives.

(Laughs) It's that simple?
We were very lucky — we grew up in a generation where music was an incredibly intimate part of that generation. More intimate than it had been, and maybe more intimate than it is today, because today there's a lot of other alternatives. We didn't have video games to play. We didn't have personal computers. There's so many other things competing for kids' time now. But, nonetheless, music is really being reinvented in this digital age, and that is bringing it back into people's lives. It's a wonderful thing. And in our own small way, that's how we're working to make the world a better place.

[From Issue 938-939 — December 25, 2003]