(Or How Doug Morris Gave Away The Record Industry)
Walter Isaacson’s terrific biography of Steve Jobs is full of interesting little gems. Of interest to most of my readers is, of course, the section dealing with iTunes and Jobs’ negotiations with the record industry.
As Isaacson describes it, Jobs launched a massive charm assault to win over the heads of the major labels. He started with Roger Ames, then of Warner Music, and quickly moved on to Doug Morris, then CEO of Universal Music. The two execs quickly fell under Jobs’ spell, impressed with the iTunes end to end solution.
After dazzling these two knuckleheads, Jobs ran into a road bump in the person of Andy Lack, then the new CEO of Sony Music. Andy learned from the great Jack Welch and Welch taught him “not to fall in love”. Andy is a smart, affable, good humored guy, but Jobs thought he “could be a dick”. And why is that? Because Andy saw through Jobs’ modus operandi and realized, unlike Morris and Ames, that by licensing their music to Apple, they would drive the sale of millions of iPods which in turn would drive the sales of millions of Macs. And that’s exactly what happened. Like Gillette with razor blades and Hewlett Packard with printer ink, the music industry’s content would sell a whole bunch of hardware. While the other guys had stars in their eyes, Andy connected the dots and pushed Jobs for a royalty on the sale of each iPod.
I remember during that time I was talking to a very high level executive at one of those labels (still in the same position today, in fact) who told me there was “no way I am going to let Andy Lack be the savior of the record industry”. Jobs, Morris and Ames made sure of that. Morris and Ames refused to go along with Lack’s strategy to get a royalty from iPod sales and thus isolated him in the industry. As a result, Morris and Ames gave Steve Jobs and Apple the keys to the shop and there’s been no turning back. Apple, in effect, controls the music industry today.
A couple of years later Morris woke up from his coma, demanded and got a one dollar royalty from Microsoft for the sale of every Zune music player. Good call, Doug. You were right on top of that one. He probably made Universal Music an extra $276 on that deal.
The music industry hates outsiders, and they considered Andy Lack an outsider just like Eric Nicoli, Jim Fifield, Elio Leoni Sceti and Guy Hands. But unlike those guys, Andy was a genuine media mogul. He may not have come from the music industry but he is very savvy and understood how major media companies run and the value of their content. I remember when Andy was catching a lot of grief about giving Bruce Springsteen a big check for re-signing with Sony, especially from the BMG half of Sony BMG. He said “If they’re pissed off about how much I’m giving Springsteen to stay here, how pissed do you think they’ll be if he signs with Universal instead?” Good point. Springsteen renewed with Sony and it’s not been talked about since.
Andy Lack is a decent man. He was always fair and honest in his dealings with me and I always appreciated that. He never went back on his word. Steve Jobs didn’t like the fact that Lack was doing what was right for Sony and the music industry. If Doug Morris had been smart enough to take Andy Lack seriously the record industry would not be in the anemic state that it’s in today. The Steve Jobs book proves that Andy Lack was right all along.
So what happens? Andy Lack now heads new media for Bloomberg and Sony ends up hiring bedazzled septuagenarian Doug Morris in Andy’s old job. These guys will never learn. No wonder Lucien Grainge is thrilled he’s at Sony.