Wednesday, December 10, 2003

Steve vs Arnold

Rolling Stone has a nice interview with Steve Jobs where he talks about his discussions with the labels regarding the contracting terms around iTunes music store.

He's being polite when he says that the labels can pick musicians, but aren't good at technology, because I'm not sure how good they are at picking acts (by the same token, VC's only have about 1 great company in 10, so I'm not sure what the right base rate is).

Arnold Kling is unimpressed by the interview. He does not believe that record companies invest in unknown artists the way Jobs claims they do. He says that unlike VCs, record companies do not give big up front advances to unknown artists.

I think this is unfair. Firstly, record companies do at the very least finance artists at a rate better than other sources, we know this because artists go to labels for backing instead of borrowing money from a bank and paying for their own act. Secondly, labels do put big money behind albums, and there have been notable busts there. The money might be going into failed albums, not failed bands. Arnold argues that the distribution costs of moving plastic around are the big cost, but I am skeptical. There are plenty of goods, of similar size, weight, volume, and fragility, available on the shelves for far less than CDs. If the distribution portion of the cost is the same, why is the price so different?


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