Capitol Records, LLC v. Redigi Inc.

Filing 20

DECLARATION of RAY BECKERMAN in Opposition. Document filed by Redigi Inc.. (Attachments: # 1 Exhibit A - iTunes Terms & Conditions, # 2 Exhibit B - Capitol Records Admissions at Oral Argument of MGM v Grokster March 29, 2005, excerpt, # 3 Exhibit C - Nielsen Billboard Report for 2011, January 5, 2012, excerpt, # 4 Exhibit D - Steve Jobs: The Rolling Stone Interview, Rolling Stone Magazine December 3, 2003, excerpt)(Beckerman, Ray)

Exhibit D

Steve Jobs: The Rolling Stone
Interview
He changed the computer industry. Now he's after the music
business
By Jeff Goodell
When Steve Jobs cruises into the airy reception area on the Apple
Computer campus in Cupertino, California, on a recent morning,
nobody pays much attention to him, even though he's the company's
CEO. He's wearing shorts, a black T-shirt and running shoes. Tall and
a little gawky, Jobs has a fast, loping walk, like a wolf in a hurry.
These days Jobs seems eager to distance himself from his barefoot
youth -- who was that crazy kid who once called the computer "a
bicycle for the mind"?-- and driven to prove himself as a clearthinking Silicon Valley capitalist.
Jobs punches the elevator button to the fourth floor, where his small
office is located. For a man who is as responsible as anyone for the
wonder and chaos of Silicon Valley, Jobs' view of it all is surprisingly
modest: shrubby treetops extending out toward San Francisco Bay,
the distant whoosh of the freeway below.
There is nothing modest, however, about Apple's recent
accomplishments. In the past few months, Jobs' company has rolled
out the PowerMac G5, arguably the fastest desktop computer on the
planet; has redesigned the Powerbook and iBook laptops; and
introduced Panther, a significant upgrade of the OS X operating
system. But Jobs' biggest move, and certainly the one closest to his
heart, has been Apple's plunge into the digital-music revolution. It
began two years ago, with the introduction of the iPod portable music
player, which may be the only piece of Silicon Valley hardware that
has ever come close to matching the lust factor of the original
Macintosh. Then, in April of this year, Apple introduced its digital
jukebox, the iTunes Music Store, first for the Mac, and then, in
October, for Windows. The result: 20 million tracks downloaded, close
to a million and a half iPods sold, aggressive deals with AOL and Pepsi,

and lots of good PR for Apple as the savior of the desperately fuckedup music industry.
Still, Jobs' bet on digital music is a hugely risky move in many ways,
not only because powerhouses such as Dell and Wal-Mart are gunning
for Apple (and Microsoft will be soon, as well), but because success
may depend on how well Jobs, a forty-eight-year-old billionaire, is
able to understand and respond to the fickle music-listening habits of
eighteen-year-olds in their college dorms.
Do you see any parallel between music revolution today and PC
revolution in 1984?
Well, obviously, the biggest difference is that we're on Windows. It's
still very early in the music revolution. Remember there are 10 billion
songs that are distributed in the U.S. every year -- legally, on CDs.
So far on iTunes, we've distributed about 16 million [as of October].
So we're at the very beginning of this. It will take years to unfold.
Bringing iTunes to Windows was obviously a bold move. Did you
do much hand-wringing over it?
I don't know what hand-wringing is. We did a lot of thinking about it.
The biggest risk, obviously, was that we saw people buying Macs just
to get their hands on iPods. So taking iPods to Windows was really
the choice. That was the big decision. We knew once we did that
that we were going to go all the way. I'm sure we're losing some Mac
sales, but half our sales of iPods are to the Windows world already.
How did the the record companies react when you initially
approached them about getting on-board with Apple?
Well, there's a lot of smart people at the music companies. The
problem is, they're not technology people. The good music companies
do an amazing thing. They have people who can pick the person
that's gonna be successful out of 5,000 candidates. And there's not
enough information to do that -- it's an intuitive process. And the
best music companies know how to do that with a reasonably high
success rate.

I think that's a good thing. The world needs more smart editorial
these days. The problem is, is that that has nothing to do with
technology. And so when the Internet came along, and Napster
came along, they didn't know what to make of it. A lot of these folks
didn't use computers -- weren't on e-mail; didn't really know what
Napster was for a few years. They were pretty doggone slow to
react. Matter of fact, they still haven't really reacted, in many ways.
And so they're fairly vulnerable to people telling them technical
solutions will work, when they won't.
Because of their technological ignorance.
Because of their technological innocence, I would say. When we first
went to talk to these record companies -- you know, it was a while
ago. It took us 18 months. And at first we said: None of this
technology that you're talking about's gonna work. We have Ph.D.'s
here, that know the stuff cold, and we don't believe it's possible to
protect digital content.
Of course, music theft is nothing new. Didn't you listen to
bootleg Bob Dylan?
Of course. What's new is this amazingly efficient distribution system
for stolen property called the Internet -- and no one's gonna shut
down the Internet.
And it only takes one stolen copy to
be on the Internet. And the way we expressed it to them is: Pick
one lock -- open every door. It only takes one person to pick a lock.
Worst case: Somebody just takes the analog outputs of their CD
player and rerecords it -- puts it on the Internet. You'll never stop
that. So what you have to do is compete with it.
At first, they kicked us out. But we kept going back again and again.
The first record company to really understand this stuff was Warner.
They have some smart people there, and they said: We agree with
you. And next was Universal. Then we started making headway.
And the reason we did, I think, is because we made predictions.
We said: These [music subscription] services that are out there now
are going to fail. Music Net's gonna fail, Press Play's gonna fail.
Here's why: People don't want to buy their music as a subscription.

They bought 45's; then they bought LP's; then they bought
cassettes; then they bought 8-tracks; then they bought CD's.
They're going to want to buy downloads. People want to own their
music. You don't want to rent your music -- and then, one day, if
you stop paying, all your music goes away.
And, you know, at 10 bucks a month, that's $120 a year. That's
$1,200 a decade. That's a lot of money for me to listen to the songs
I love. It's cheaper to buy, and that's what they're gonna want to
do.
They didn't see it that way. There were people running around -business-development people -- who kept pointing out AOL as the
great model for this and saying: No, we want that -- we want a
subscription business. We said: It ain't gonna work.
Slowly but surely, as these things didn't pan out, we started to gain
some credibility with these folks. And they started to say: You
know, you're right on these things -- tell us more.
Well, despite the success of iTunes, it seems that it's a little
early to call all of your competitors failures. Real Network's
Rhapsody, for example, has already won over some critics.
One question to ask these subscription services is how many
subscribers they have. It's around 50,000. And that's not just for
Rhapsody, it's for the old Pressplay and the old MusicMatch. 50,000
subscribers, total.
The subscription model of buying music is bankrupt. I think you could
make available the Second Coming in a subscription model and it
might not be successful.
When you went to see music execs, was there much comment
about Apple's "Rip, Mix, Burn" campaign? A lot of music execs
regarded it as a subtle invitation to steal music. Well, when we
did the Rip, Mix, Burn thing -- I mean, "rip" is the phrase that means
"take the bits off the CD and put 'em on your hard drive." Rip the bits
off your CD -- as if you're physically ripping them off and putting
them on your hard drive. The person who assailed us over it was