Fascinating glimpse: Steve jobs talking off the record about dealing with the music industry

Excerpt from a conversation brilliantly Blogged by Denise Howell. Note: ‘M’ is Walter Mossberg. ‘J’ is Steve:

“M: Were you looking ahead toward working with the labels?

J: That crossed our minds. (Audience laughs.) We understand about intellectual property issues. We make software.

M: Why did the labels do a better deal with you for the Music Store?

J: The content industry and the technology industry never have understood each other. They’re like ships passing in the night. One of the greatest achievements of Pixar was bridging this divide. One of the most important things record companies do is pick which of 500 people will be the next Sheryl Crow. If they don’t do that well, the rest of it doesn’t matter. It’s not surprising that they didn’t understand Napster, or that distributing content over the ‘Net was going to be big. We approached them initially and they said go away. About nine months ago, we began talking to them about this middle path. One of the things that appealed to them about Apple was its smaller percentage of the market, its control over hardware and software, its ability to be sued.

M: (Suggests that Jobs demonstrate the Music Store.)

J: How many people have never seen the iTunes Music Store, show of hands? (About 1/2 the room. Jobs gets up and demos the Music Store.) It’s important and unique to make it easy for a user to find and organize her music library. (Funny moment when software wouldn’t recognize Jobs’ password. Demonstrates one-click song purchase.)

M: If your seven year old gets on this and starts downloading, you’re hosed.

J: Well, you’ve got a lot of great music.

M: What happens if you upload it to Kazaa?

J: Songs will only play on three Macs, so it won’t be very interesting.

J: (Shows how fun it is to look up all the alternate versions of an old classic like “One for the Road:” Willie Nelson, Billie Holiday, Bette Midler, Frank Sinatra. You always hear about how mesmerizing Jobs is as a speaker and presenter. It’s especially apparent as he cycles through these versions of “One For The Road.” His joy in the coolness of the software is palpable and infectious. Demos the “browse by genre” feature. Pulls up Barry Manilow’s “Copa Cabana” at Walt Mossberg’s request, because he says it’s Kara Swisher’s favorite.)

M: By the end of the year, everyone’s going to have something like this. Microsoft, Real. What happens when everyone has it?

J: Maybe these guys are a lot smarter than us, they probably are. But it’s really hard to get the rights you need from the labels, it’s really hard to write the software, and you need a usable jukebox. We’ll find out, but I think it might be a little harder than it seems.”