There’s been a change in plans at the Code Conference: following Apple’s announcement Wednesday that it has acquired Beats Electronics and the Beats Music service for $3 billion in cash and stock, two separate appearances scheduled for Beats and Apple executives have been combined into one. Eddy Cue, senior vice president of internet software and services at Apple, and Jimmy Iovine, legendary music producer and CEO of Beats Electronics, will make a joint appearance starting at 8pm PT (or thereabouts) and I’ll live blog that session here.
Obviously most of the conversation will likely center on the deal for Beats, which was first reported a few weeks ago but has taken its sweet time coming to a conclusion. It’s Apple’s first foray into a subscription music service, and the company likely has some interest in the Beats headphone lineup. No sign of Dr. Dre yet, but it’s early.
Come back and join us at 8pm. And they’re serving cocktails before this session, so it should be a fun one.
And we’re going to end on that note. An interesting performance from Eddy and Jimmy, and I’ll be really surprised if we see Jimmy Iovine speak on behalf of Apple too often in the future. Thanks for hanging out with us, everybody, and I have seen about enough of this day.
“Those of us who were fortunate to know him know he didn’t suffer fools,” Jimmy says of Jobs, and he sees that influence in the management team. “Any team that loses its point guard has to change its offense a little bit.” He has high praise for new retail chief Angela Ahrendts.
“I think he’d be extremely proud of all the work we’re doing today and the products we’re building,” Eddy says.
Eddy claims he never felt a “reset.” Jobs was sick for a while, so the process was gradual, he says. The executive team has also been a unit for a long time. That doesn’t mean there wasn’t a transition.
We’re winding up with a question about Jobs: does his influence still hang over Apple? Steve wanted to create “an amazing culture that was going to last longer than he was going to be CEO. We always talked about this as something we wanted to last for 100, 200 years. The attention to detail. Caring about every little, little detail about our products. Not trying to do too many things.”
“We’ve got the best product pipeline I’ve seen in 25 years with the company,” Eddy says. Jimmy pipes up “I get to see it tomorrow! They put tarps over everything when I visit. I’m serious.”
We’ve shifted to talking about Cook. I can’t imagine Eddy is going to say anything interesting about his boss other than the fact that he thinks he’s a good boss.
Eddy points out that Apple and Jimmy worked together on the U2 iPod, which came out in (I think) 2005.
Will you tell me the story? Kara asks? “I’m at Apple now, I can’t say anything.” Jimmy says.
Jimmy approached Eddy about the deal, although it sounds like something that’s been on the back burner for a long time. “Eventually, you date for a long time….how does somebody date for 10 years and all of a sudden get married? It happens.”
Eddy and Tim Cook were “incredibly involved” in the Beats deal, Jimmy says. The record industry has a lot of respect for Apple, he says. One of the reasons Jimmy and Dre built the company was to build a product (music/headphones) that they could push out through media. Beats spent nothing on marketing for its first few years, he said, focusing instead on product placement.
When it comes to cloud-based services, does Apple plan to bring those products to any other platforms? iTunes going cross-platform was huge. “Many of the things you’re talking about are really integrated with our software and hardware,” Eddy says. “Those types of opportunities are difficult or impossible to do.” Beats Music, for example, is on Android and Windows Phone.
Is Apple going to buy more companies now? “We’ve never had a rule that says ‘thou shalt not buy,'” which Eddy is absolutely right about: some key Apple features, such as its mobile chips, were the result of acquisitions. Apple has bought 27 companies since last year, he says.
Why Apple doesn’t offer more free storage with iCloud is beyond me. Eddy says “we’ll see what we can do” about that, in response to a question from Walt.
“We’re not trying to make iCloud to have a face. We’re trying to make services that seamlessly integrate with hardware and software,” Eddy says. Apple designed iCloud to fade into the background without people actually noticing that it’s “iCloud.”
Walt manages to shift the conversation back to iCloud, perhaps the weakest link in Apple’s armor and the part of Eddy’s job that likely gives him the most headaches.
“If there’s not good sound, people aren’t going to want to pay for it,” Jimmy says.
Jimmy is quick to praise Spotify, but he thinks they need to work more on curation. A lot of this stuff is being funded by VC, he says, and at some point that’s going to end because the business models aren’t proven, as several 40-something white men in sportcoats shift nervously in their chairs.
“I wish I made (Pink Floyd’s) The Wall,” Jimmy says. Me too, buddy.
Could you make content for Apple? “I’m not even thinking about that. I’m trying to get the distribution right, to get the delivery right. I like chocolate but I’m not Willy Wonka.”
Jimmy claims he really is retired as a music executive. He won’t say flat-out that he won’t make any more music, but he sounds tired of the game. People are making albums now on the road because the economics are different, since you have to tour so much to invest in recording. “Investing money in new artists is very, very difficult.”
“Right now it’s a morass of information and content and you get lost in the flood,” Jimmy says.
Walt and Kara now try to pick on Jimmy for TV insights. “I’m four hours old. I just retired from the entertainment business.” He’s actually more concerned about movies than TV.
They’re trying to get Eddy to announce a real Apple television. I bet you a copy of Jacksonville City Nights that he’s not going to do it.
Solving the problem is hard because there are a lot of parties involved. Music is actually easier because there are standards involved with music, Eddy says.
Eddy is a cord-cutter, apparently, and can be frustrated by the experience of trying to watch shows on different devices. There are no standards, there are copyright issues. “It’s a complicated landscape.”
“There’s so much interest in TV because the TV experience sucks,” Eddy says. That’s almost exactly what Jobs said when introducing the iPhone about mobile phones. “What we have are basically glorified VCRs.”
So what’s up with Apple and television? Eddy says Apple has sold 20M Apple TV units, and made a billion dollars off that business.
Walt shifts gears to the cloud and TV. We’re going down the Apple TV rabbit hole.
Apple has been successful in working with Hollywood because it respects the art, Eddy says, and a lot of tech companies don’t. And the entertainment industry looked at technologies felt they’d have been noting without entertainment. “There’s been a lack of appreciation for what the other side does,” Eddy says. He notes that a lot of that came about because of Jobs’ relationship with Pixar and Disney.
Kara asks about the worlds of technology and media, which are sort of like oil and water. 1999 was a poisonous year for that relationship, Jimmy says, without naming Napster. “The entertainment industry feels that the tech industry doesn’t care about copyright.”
The Hi-Fi was perhaps the most glaring example of a Steve Jobs product introduction that flamed out pretty quickly.
Remember the Apple Hi-Fi? Walt does. It wasn’t selling well, Eddy acknowledges, and at the time it just didn’t make sense for Apple to continue spending time on the product.
“You listen to Apocalypse Now, and the helicopter sounds like a mosquito.” Jimmy is good with the word stuff.
Walt notes that Apple makes earbuds. “They make those to make sure the machine works,” Jimmy snorts derisively as Eddy grins, acknowledging that Apple’s headphone work has been pretty basic.
What about headphones? “We like headphones,” Eddy says, although of course he doesn’t announce the iCans. Headphones are really important to people, he says; it allows them to focus, and he’s noticed that engineers really like them.
What about the HP deal? “We wanted computers to sound better. Every other computer sounds like a portable television. They’re made for talk but they get used for music,” Jimmy says. He doesn’t clarify what will happen to that deal now.
Why didn’t you go to Apple in the first place? “I asked him every day for 10 years!” Jimmy says. “The time wasn’t right,” Eddy says, although he knew that Beats was moving forward with the HTC deal.
So why did Jimmy first sell the company to HTC? “First of all, we needed a partner. HTC was very interested, and I felt that the only chance music had was through the telephone. It was really a culture clash. It crashed and burned.”
He later acknowledges that artists follow what other artists are doing, but “we don’t think like that every day.” In consumer electronics, “you copy what somebody successful did.” In music, “It’s embarrassing to copy.”
Who’s your competition? “When you’re creating music, you don’t look at the studio next to you, you move at your own pace,” Jimmy says, which I don’t entirely believe.
So how is an Apple subscription service going to be different? “We have a lot of customers,” Eddy says, also pointing out that Apple has a ton of credit card numbers through iTunes and “great relationships with artists.”
Is Jimmy going to get an office in Cupertino? “They’re going to give me the whole thing,” Jimmy cracks.
Is this about downloads cratering, Walt asks. Eddy takes issue with the notion that downloads are in freefall, but acknowledges that the growth rate has leveled off. Apple realized it had to offer subscriptions “but wanted to do it in the right way.”
“We’re keeping the Beats brand,” Eddy says. Walt points out that Apple hasn’t done that very often, which Eddy for some reason tries to deflect by pointing out that Apple has brands like iTunes, which, of course, it created. Anyway, he doesn’t seem to be committing long term to the brand, which makes sense.
Are you buying cool? Kara asks Eddy. “I don’t think you can buy cool. I think you just have to make the best products,” he says.
“We have a ton of ideas, but who doesn’t want their product made by Apple?” Jimmy says. HTC is crying softly in the corner.
“Both Dre and Jimmy have an incredible ear for sound, and that’s really important,” Eddy says. “Music is dying.” iTunes had the smallest number of new releases ever this past year, he says.
Walt notes that Apple did more than anybody to promote compressed music, which audiophiles hate. But the compression isn’t the problem, Jimmy says. A lot of people cut corners on audio for cost reasons, he says.
“We wanted to move to a better neighborhood. So I made a deal with Apple,” Jimmy says.
I can’t believe I managed to sit directly behind the video camera guy for the second straight night.
“The album is going away,” Jimmy says. “Music is made in bite-sized pieces. But you need an hour’s worth of music. These services are based on algorithms, and algorithms can’t do the job alone.”
Kara wonders about culture fit with Apple. “In the entertainment business, everybody is insecure. And the guys in Silicon Valley seem to be slightly overconfident.” That’s apparently a good mix.
“You got really lucky,” Kara says. “I got streaming lucky,” Jimmy retorts.
Jimmy gets a chance to talk about why he signed up with Apple. “Dre and I come from similar backgrounds,” he says, growing up poor hoping that music would change their lives. The record industry is obviously not what it once was, and Jimmy says that Apple just “gets it,” the modern industry.
Walt wonders why Apple didn’t just make its own headphones. “We can’t do everything, we just try to do a few things well,” Eddy says, noting that his and Apple’s relationship goes back a decade.
“Number two, they’ve built amazing audio headphones.” Not everyone agrees with that. “Number three is Beats Music. This is the first music subscription service done right.” That’s straight from the talking points in the various interviews Apple granted this afternoon.
“Beats in particular has three things we really wanted that we loved. #1 is incredible talent.” (points to Jimmy). “Dre is an incredible artist with an incredible ear” and an incredible team.”
“It’s been a long day, but it’s been a great day,” Eddy says. “You just heard why we did this deal. It’s about music.”
But Eddy and Jimmy are here, and we’re getting started.
But Eddy and Jimmy are here, and we’re getting started.
Apparently Apple is claiming some sort of weird regulatory thing, and won’t accept audience Q&A tonight because of the Beats deal. “It’s Katie Cotton,” Kara says, and shrugs.
Ryan is done and is off to find some whiskey. Walt and Kara are out.
Ryan Adams is covering the Pointer Sisters’ “Neutron Dance.” This is pretty cool.
Ooh wow, Ryan Adams.
Don is talking about how our brains process music, and emotions, and art, and stuff. He found a better cocktail bar at dinner than I did.
Lights are down, and out comes Don.
I mean, come on, Walk the Dinosaur? Classic.
Legendary producer Don Was is actually going to kick things off tonight, according to my program. There was a serious generation gap in the press room this afternoon when it came to the subject of Don Was.
A few Terranea pictures because it’s pretty gorgeous. This is a great part of Southern California.
I haven’t spotted Dre yet. But the Sonos booth was blasting “Dre Day” as we waited outside for the doors to open.
Hey all, welcome back (sort of) to the Terranea for the last session of the day. Recode changed things up this afternoon after Apple announced the Beats deal, as noted above, and we’ll be hearing from Apple’s Eddy Cue and Beats’ Jimmy Iovine shortly.