Apple Music And Vertical Integration

I am deeply intrigued by Apple’s proposal to buy Universal Music Group from Vivendi. For one thing, it’s an interesting example of vertical integration, and it may very well generate some new business models for aligning the incentives of artists, customers, and intermediaries. The existing recording industry structure, with record companies and their mouthpieces at RIAA as intermediaries, continues to be premised on retaining the existing industry structure. Apple’s move could very well be the music industry equivalent of their 1984 commercial, throwing the computer through the big screen.

This is a discovery process move intended to see if there are benefits to be had from aligning incentives along the value chain through a different business model. And Steve Jobs has a record of making unlikely moves with serious risks actually work (he also has NeXT, but that’s the way it goes). Jobs has demonstrated that he can bring fresh thinking to the marriage of industries — in this case, technology and music.

But the new Apple music system will have to bring some value added to compete with existing free download services. I will be very curious to see where this all goes.