1211 7i‘13
`
`Coolest Inventions: Invenlion Of The Year: The 995.6666 Solution -~ Printout -— TIM E
`
`Back to Article
`
`1% Click to Print
`
`Monday, Nov. 17, 2003
`
`‘
`
`I ‘I Coolest Inventions: Invention Of
`
`The Year: The QQAOQQQ
`Solution
`
`I
`
`By Chris Taylor
`
`When Steve Jobs holds forth in public, it's usually to a mob of fawning Apple-ites--the true believers who
`
`still develop software and accessories for Apple products. Not so last month at the Moscone Center in San
`
`Francisco. This crowd was 111 ore 111 ack daddy than Macworld. Bonn, Mick Jagger and Dr. Dre made video
`
`appearances. Grateful Dead drummer Mickey Hart was in the audience. Sarah McLachlan sang her latest
`
`hits live. What was pulling these musical supernovas into J obs‘ magnetic field? A software product that just
`
`might save their free-falling industry: the iTunes Music Store.
`
`It's a disarmingly simple concept: sell songs in digital form at for less than a buck and let buyers play them
`
`whenever a11d wherever they like--as long as it's on an Apple iPod. Jobs had proved the idea back in April
`
`when he launched the Music Store for Mac users, who represent only 3% of the computer world but
`
`promptly gobbled up a million naclzs in the first week of business. By October he was ready to set the
`
`Music Store aloft in the 97% of the world that uses Windows PCs, and the prospect of converting millions
`
`of music pirates into credit-card wielding music buyers was enough to in ake even the most jaded rock stars
`
`take notice. How did Jobs do this trick? In a word: simplicity-‘-the transparent ease of use that is the
`
`halhnark of Apple's entire product line, including the Music Store. "I'1n a complete computer dummy,"
`
`McLachlan told TIME after the event. "If I can use this, anyone can."
`
`And, it seems, just about anyone is. Three days after the Moscone event, PC owners had downloaded a
`
`million copies of the software a11d paid for a million songs (adding to the 14 million music downloads
`
`already ITI ads by Mac users). In a year when record labels hit a sour note by suing students, grandparents
`
`and 12~—yeaI'-«old file sharers, Jobs had effectively brokered a peace agreement: he had shown the music
`
`industry how to win friends and turn a profit on the very Internet that was being used to steal their songs.
`
`Other inventions this year may have more altruistic intentions (like Dean Kain en's water purifier) or be
`
`more visible on street corners [like those ubiquitous camera cell phones]. But for finally finding a middle
`
`ground between the foot—dragging record labels and the free-for—all digital pirates and for creating a
`
`content.tirnecorriilirrieIsuhscrit2eriprinlouil0,8316.1fl0E5197,O0.htn1#
`
`113
`
`SIGHTSOUND TECHNOLOGIES
`EXHIBIT 2120
`
`CBM2013—00020 (APPLE V. SIGHTSOUND)
`PAGE 000001
`
`

`
`12117113
`
`Coolest lmerrlions: lmention Of The Year: The 99136900 Solution -- Printout -- TIME
`
`bandwagon onto which its competitors immediately jumped, Apple's iTunes Music Store is TI ME's Coolest
`
`Invention of 2003.
`
`Long before the Music Store came on the scene, frantic record-industry executives had been searching for
`
`some way to combat their nemesis: Napster, the original file~sharing service, but to no avail. Their first
`
`online ventures, Musichlet and PressPlay, were disasters, largely because the labels didn't trust their users-—
`
`or one another. I-Iighsubscripijon fees and poor selections turned off would—be customers; most skulked off
`
`to the underground services, such as Kazaa and Lini ewire, which had sprung up after Napster's demise.
`
`Enter Jobs. Back in April, Apple's CEO revealed that he had spent the previous year negotiating an
`
`unprecedented deal with all five major labels and thousands of independents. His iTnnes software, which
`
`had previously been nothing more than a place to store and play digital music on a Mac, would become a
`
`gateway to the Music Store, where you could easily find and save music to your hard drive, CD or il?od
`
`music player--no subscription necessary, just 99¢ per song, or $9.99 for an album. Co1npen'tors tried to
`
`match that price but couldn't come up Wll'_l1 a service as free of resh*ich'ons. They said J obs had been given
`
`a sweet deal by the labels because Apple, with its minuscule share of the computer market, was never
`
`going to be a real distribution threat. "The Mac world is a walled garden," said BuyMusic.com vice
`
`president Liz Brooks. "The PC environment is lilre the Wild West."
`
`Then came iTunes for Windows, and suddenly there was a new sheriff in town. Not content with creating
`
`a music store for PC users that was a perfect clone of its Mac counterpart, including all of the 400,000
`
`songs Apple new has the rights to resell, Jobs added a couple of cool new features. The best is a monthly
`
`allowance you can set up for your kids to govern their online purchasesena godsend for any parent trying to
`
`curb an offspring's downloading habit.
`
`Jobs has another reason not to be concerned about the competition. "The dirty little secret of all this is
`
`there's no way to make money on these stores," he says. For every 99¢ Apple gets from your credit card,
`
`65¢ goes slraight to the music label. Another quarter or so gets eaten up by distribution costs. At In ost, Jobs
`
`is left with a dime per track, so even $500 million in annual sales would add up to a paltry $50 million
`
`profit. Why even bother? "Because we're selling iPods," Jobs says, grinning.
`
`That may r11 ake iTu11es the 11'! ost benign-looking Trojan horse in software history. The Windows crowd can
`
`get iTunes free, and it offers almost all the same functionality as the paid versions of MusicMatch and Real
`
`One, two PC—based rivals. But iTunes is the only music application that will work with the enorm ously
`
`popular iPod, and it has features—-like its powerful search function--that are unrivaled. "Once people are
`
`locked into using iTunes, the game's over," says Charles Wolf, an analyst at the New York City--based
`
`Needharn & Co. investm ent bank. "They could sell an extra 2 million iPods because of this." And the
`
`margins on these devices make the Music Store's arithmetic look like child's play. Each $4 99 iPod returns
`
`as much as $175 in profit, Wolf says.
`
`Such calculation may also explain why iTunes doesnt support Windows Media Audio files-—a Microsoft
`
`cor1ler1’L‘lirneeonrflirrielsubscriber/prinlout!I],8815.1[lG5197,00.hlrri#
`
`2J3
`
`PAGE 000002
`
`

`
`‘i2f1?l13
`
`Coolest inventions: Invention Of The Year: The QQAQQO-(3: Solution -— Printout -- TIME
`
`format that Bill Gates had hoped would become the music-industry standard. If iT1111es beeom es the player
`
`of choice for PC users, it would he a blow for Microsoft's grander audio altibifions--and may Well unearth
`
`the hatchet that Jabs and Gates buried back in 1997.
`
`For now, Jobs faces some sm alter hurdles, like fitting in a few significant gaps in the iTunes Music Store
`
`selection (the Beatles are the most glaring omission). Even so, Jobs continues to score. points with
`
`consum era for making available songs so easy to find and so easy to download The music indtlstry, of
`
`course, is anything but simple. That's probably why Jobs, an inveterate challenge seeker, likes it. But can it
`
`grow his business? Stay tuned.
`
`.13. Click to Print
`
`Find this article at:
`
`
`:h content.ti1ne.co1n time ma azine article 0 1 1 10061
`
`Copyright © 2013 Time inc. All rights reserved. Reproduction in w hole or in part w ithoui pernission is prohibited.
`
`Privacy Policy | Add TIME Headlines to your Site [ Contact Us
`
`| Customer Service
`
`corrient.tirne.eon1ItirrieIsubecriberIpriniouUiJ_831fi,1O0619?,UG.hin'l#
`
`3J3
`
`PAGE 000003