In May 2003, Apple invited me to their headquarters to discuss getting CD Baby’s catalogue into the iTunes Music Store.
iTunes had just launched two weeks before, with only some music from the major labels.
Many of us in the music biz — especially those who had seen companies like eMusic use this exact same model for years without much success — were not sure this idea was going to work.
I flew to Cupertino, California, thinking I’d be meeting with one of Apple’s marketing or tech people.
When I arrived, I found out that about a hundred people from small record labels and distributors had also been invited.
We all went into a little presentation room, not knowing what to expect.
Then out came Steve Jobs. Whoa! Wow.
He was in full persuasive presentation mode — trying to convince all of us to give Apple our entire catalogue of music, talking about iTunes’ success so far, and all the reasons we should work with Apple.
He made a point of saying, “We want the iTunes Music Store to have every piece of music ever recorded. Even if it’s discontinued or not selling much, we want it all.”
This was huge to me, because until 2003, independent musicians were always denied access to the big outlets. For Apple to sell all music, not just music from artists who had signed their rights away to a corporation — this was amazing!
Then the Apple guys showed us the software we’d all have to use to send them each album. It required us to put the audio CD into a Mac CD-ROM drive; type in all of the album info, the song titles, and the artist’s bio; click Encode for it to rip; and click Upload when done.
I raised my hand and asked if it was required that we use their software. They said yes. I asked again, saying we had more than a hundred thousand albums, already ripped, with all of the info carefully entered by the artists themselves, ready to send to Apple’s servers with their exact specifications.
The Apple guys said, “Sorry, you need to use this software; there is no other way.”
Ugh. That meant we’d have to pull each one of those CDs off of the shelf again, stick it in a Mac, and cut and paste every song title into that Mac software. But so be it. If that’s what Apple needed, OK.
I flew home that night, posted my meeting notes on my website, e-mailed all of my clients to announce the news, and went to sleep.
When I woke, I had furious emails and voice mails from my contact at Apple: “What the hell are you doing? That meeting was confidential! Take those notes off your site immediately! Our legal department is furious!”
There had been no mention of confidentiality at the meeting and no agreement to sign. But I removed my notes from my site immediately, to be nice. All was well, or so I thought.
Apple emailed us the iTunes Music Store contract. We immediately signed it and returned it the same day. I started building the system to deliver everyone’s music to iTunes.
I decided we’d have to charge $US40 for this service to cover our bandwidth and the payroll costs of pulling each CD out of the warehouse, entering all the info, digitising and uploading the music, and putting the CD back in the warehouse.
Five thousand musicians signed up in advance, each paying $US40. That $US200,000 helped pay for the extra equipment and people needed to make this happen.
Within two weeks, we got contacted by Rhapsody, Yahoo! Music, Napster, eMusic, and more, each saying they wanted our entire catalogue.
Maybe you can’t appreciate this now, but the summer of 2003 was the biggest turning point that independent music has ever had. Until that point, almost no big business would sell independent music.
With iTunes saying they wanted everything, and then their competitors needing to keep up, we were in! Since the summer of 2003, all musicians everywhere have been able to sell all their music in almost every outlet online.
Do you realise how amazing that is?
But there was one problem.
iTunes wasn’t getting back to us. Yahoo!, Rhapsody, Napster, and the rest were all up and running. But iTunes wasn’t returning our signed contract. Was it because I had posted my meeting notes? Had I pissed off Steve Jobs?
Nobody at Apple would say anything. It had been months. My musicians were getting impatient and angry. I gave optimistic apologies, but I was starting to get worried, too.
A month later, Steve Jobs did a special worldwide simulcast keynote speech about iTunes.
People had been criticising iTunes for having less music than the competition. They had 400,000 songs, while Rhapsody and Napster had more than 2 million songs. (More than 500,000 of those were from CD Baby.)
Four minutes in, he said something that made my heart sink to my stomach:
“This number could have easily been much higher, if we wanted to let in every song. But we realise record companies do a great service. They edit! Did you know that if you and I record a song, for $US40 we can pay a few of the services to get it on their site, through some intermediaries? We can be on Rhapsody and all these other guys for $US40? Well, we don’t want to let that stuff on our site! So we’ve had to edit it. And these are 400,000 quality songs.”
Whoa! Wow. Steve Jobs had just dissed me hard! I was the only one charging $US40. That was me he was referring to!
OK. That’s that. Steve changed his mind. No independents on iTunes. You heard the man.
I hated the position this put me in. Ever since I started my company in 1998, I had been offering excellent service. I could make promises and keep them because I was in full control.
Now, for the first time, I had promised something that was out of my control.
So it was time to do the right thing, no matter how much it hurt. I decided to refund everybody’s $US40, with my deepest apologies. With five thousand musicians signed up, that meant I was refunding $US200,000.
Since we couldn’t promise anything, I couldn’t charge money in good conscience. I removed all mention of iTunes from my site. I removed the $US40 cost.
I decided to make digital distribution a free service from that point on. I changed the language to say we couldn’t promise anything. I emailed everyone to let them know what had happened.
The very next day, I got our signed contract back from Apple, along with upload instructions.
Unbelievable. I asked, “Why now?” but got no answer.
We started encoding and uploading immediately. I quietly added iTunes back to the list of companies on our site.
But I never again promised a customer that I could do something that was beyond my full control.
Excerpted from “Anything You Want: 40 Lessons for a New Kind of Entrepreneur” by Derek Sivers, in agreement with Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © Derek Sivers, 2011.
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