Peter Kafka

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Beats’ Jimmy Iovine on Steve Jobs, Spotify and Why He Can Make Subscriptions Work

Beats Electronics has done a very good job at making expensive headphones a mass-market item. And that’s what makes them a good candidate to crack open the music subscription business, says CEO Jimmy Iovine.

Iovine’s pitch: It took guys who know music and culture to sell high-end headphones to the mainstream. And it’s going to take the same skill set for music subscriptions, which have been around for about a decade but are only now getting some traction.

In addition to Beats, Iovine has a very long resume and a very powerful perch at Universal Music Group, the world’s biggest label, which doesn’t mean he’ll succeed. But he’s certainly worth watching.

Iovine and his team aren’t talking about details yet, but he is more than happy to talk about the history behind his next venture — he says he wanted to get into music subscriptions before he got into headphones — and why he thinks he can do better than Rhapsody, MOG, Rdio, Spotify, Deezer and the other competitors on their way.

Best to let him tell it in his own words, so here are excerpts from an interview we conducted yesterday at CES, where he was getting ready to announce his new hire, Ian Rogers.

On early efforts to get into the subscription business, and pitching former Apple CEO Steve Jobs on the concept:

I always felt that our content was really valuable, and that it could help the tech guys with differentiation. The tech companies really didn’t see that. The guy that smelled it the most was Steve, obviously.

Once I went to see [Intel executive] Les Vadasz. I was running Interscope at time. He was a very nice man and he listened to me. I said, “You know, we could really help you guys.” He said, “You know, Jimmy, it’s a really wonderful story. But not every industry was made to last forever.”

So I was like “wow,” and I called [former Universal head] Doug Morris, and I said, “We’re fucked. These guys don’t want to take over our land — they want to come over and take our water and go back. They like where they are.” So from that point on, I was like, “You know what, this is going to cave. We need subscription. We really do.” I’ve just been single-minded about it since then.

In 2002, 2003, Doug asked me to go up to Apple and see Steve. So I met him and we hit it off right away. We were really close. We did some great marketing stuff together: 50 Cent, Bono, Jagger, stuff for the iPod — we did a lot of stuff together.

But I was always trying to push Steve into subscription. And he wasn’t keen on it right away. [Beats co-founder] Luke Wood and I spent about three years trying to talk him into it. He was there, not there … he didn’t want to pay the record companies enough. He felt that they would come down, eventually.

I don’t know what [Apple media head] Eddy Cue would say — I’m seeing him soon — but I think in the end Steve was feeling it, but the economics …he wanted to pay the labels [for subscriptions], but [the fees were] not going to be acceptable to them.

Why tech companies can’t succeed at music subscriptions:

I was shocked at how culturally inept most consumer electronics companies are. And what I also learned is that you can build Facebook, you can build YouTube, you can build Twitter — you can be a tech company and do that. But those [sites] program themselves. Subscription needs a programmer. It needs culture. And tech guys can’t do that. They don’t even know who to hire. They’re utilities.

Why Beats/Daisy will be different:

[Other music subscription] companies, these services, all lack curation. They call it curation; there’s no curation. That’s what we did as a record label, we curated. There’s 150 white rappers in America; we served you one.

We are heavy on curation, and we believe it’s a combination of human and math. But it’s a give and take.

Right now, somebody’s giving you 12 million songs, and you give them your credit card, and they tell you “good luck.” You need to have some kind of help. I’m going to offer you a guide. You don’t have to use it, but it’s going to be there, and it’s going to be a trusted voice, and it’s going to be really good.

Why making headphones is good practice for getting into music subscriptions:

Steve called me in once. He said, “You know something, you should feel really good. You’re the only guys from software that ever built a piece of hardware successfully.” That means that we can be the guys who cracked this code as well. Because we live in both worlds. We’re actually arguably better at this than at hardware. You know why they call it hardware? It’s really hard.

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— Valleywag editor Sam Biddle