Acquired Episode 38 SoundJam (iTunes)



In episode 38 of Acquired, hosts Ben Gilbert and David Rosenthal discuss Apple's acquisition of SoundJam in 2000, the software that evolved into iTunes, and its pivotal role in Apple's digital music strategy. They highlight how the acquisition accelerated Apple's entry into the digital music space, allowing the company to quickly launch iTunes and subsequently the iPod, shaping the company's future. The episode also touches on the importance of developing products that resonate with consumers, the difficulty of competing with free software, and the potential of a digital hub strategy, as exemplified by the Echo Show. The hosts note that while the acquisition wasn't the sole reason for Apple's success, it played a significant role in catalyzing its digital music revolution.

Summary Notes

iTunes Critique

  • The hosts, Ben Gilbert and David Rosenthal, jokingly criticize iTunes, calling it bloated and acknowledging its unpopularity.
  • Despite the critique, they quickly pivot to how important iTunes (now Apple Podcasts) reviews are for their show's growth.

"And iTunes sucks." "iTunes does suck." "Well, yeah, it's bloated."

The quotes express a common sentiment that iTunes is not well-liked due to its perceived cumbersome nature. This sets the stage for a discussion about its origins and significance to the podcast industry.

Acquired Podcast Introduction

  • Ben Gilbert and David Rosenthal introduce themselves and the purpose of their podcast, Acquired.
  • They discuss the importance of listener reviews on iTunes for the growth of their show.
  • The hosts mention the Acquired Slack channel, which has over 600 members discussing technology, M&A, IPOs, and other topics.
  • They encourage new listeners to join their community via their website.

"Welcome to episode 38 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenthal, and we are your hosts." "We would love a review on iTunes. It is how we grow the show and make it better."

These quotes introduce the podcast's theme and the hosts' request for audience engagement through iTunes reviews, which they believe are vital for the podcast's success.

Podcast Evolution and Professionalism

  • The hosts reflect on the show's evolution from a casual format to a more professional one.
  • They discuss the challenges and benefits of raising the quality bar for their podcast.
  • The hosts humorously acknowledge that new listeners might not find their show very professional despite their efforts.
  • They reminisce about the early days of the podcast, which involved drinking beer and recording casually.

"We're just getting more professional here." "It's funny how with these things, when you decide to up level a little bit, that becomes the new bar, and then that's just the bar that you have to hit every episode after that."

The quote highlights the hosts' journey towards professionalism and the self-imposed standard they now strive to meet in each episode.

Sponsorship by Pilot

  • Pilot is introduced as a sponsor of the Acquired podcast.
  • Pilot is an accounting, tax, and bookkeeping firm for startups and growth companies.
  • The hosts discuss the philosophy of focusing on core business strengths and outsourcing non-core activities like accounting.
  • They mention Pilot's growth and its backing by notable investors such as Sequoia, Index, Stripe, and Jeff Bezos.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs." "Startups should focus on what makes their beer taste better... and outsource everything else."

The quotes explain the role of Pilot as a comprehensive financial service provider for companies, emphasizing the strategic advantage of outsourcing non-essential tasks.

Acquisition History of SoundJam

  • The hosts prepare to discuss the acquisition history of SoundJam, which was acquired by Apple and became iTunes.
  • They set the stage by reminiscing about the digital audio revolution of the late '90s.
  • The hosts share personal anecdotes about their music listening setups before iTunes.
  • They highlight the importance of SoundJam for Mac users wanting to participate in the MP3 revolution.

"Today we are covering Apple's 2000 acquisition of SoundJam, which would go on to become iTunes." "Jeff Robin and Bill Kincaid step into the fray and emerge as the saviors for teenagers pirating music in America."

The quotes introduce the main topic of the episode—the acquisition of SoundJam by Apple—and its significance in shaping the digital music landscape.

SoundJam's Development and Impact

  • Jeff Robin and Bill Kincaid, former Apple engineers, founded SoundJam after leaving Apple.
  • They developed SoundJam to address the lack of Mac-compatible MP3 management software.
  • SoundJam quickly gained popularity for its functionality and customizable user interface.
  • The software's brushed metal UI became a trendsetter for Mac applications for years to come.

"Jeff Robin and Bill Kincaid worked at Apple in the mid '90s... when it never shipped and Apple acquired NeXT, they ended up leaving the company." "SoundJam MP is the most complete. It's the only Mac MP3 tool capable of not only playing back MP3 files, but also encoding tracks from audio CDs."

These quotes provide background on the founders of SoundJam and the software's capabilities, which were groundbreaking for Mac users at the time.

Visualizer and iTunes Launch

  • The visualizer in SoundJam became a notable feature in iTunes.
  • Winamp pioneered the visualizer concept, transforming sound waves into visual landscapes.
  • Steve Jobs found the visualizer reminiscent of his experiences with LSD.
  • Apple presented the visualizer feature as if it were a new invention at the iTunes announcement.

"in hindsight, infamous Ui element of soundjam was the visualizer. And Apple included this when they launched it in iTunes. But this was looking at this took me back 15 plus years at this point. Winamp, I think, pioneered this, but when you would listen to digital music on a digital music player on your computer, you could have the option to have a visualizer where it would take the sound waves from the mp3 you were listening to and then put it through all these transformations and make it into this psychedelic landscape that you were watching sort of in time to the music. And Steve Jobs loved this. Talked about how it reminded him of doing LSD in his youth."

The quote explains the origin and appeal of the visualizer feature in digital music players, highlighting its inclusion in iTunes and its nostalgic connection to Steve Jobs' past experiences.

Apple's Strategy in Music

  • Apple recognized the longevity of digital music and its potential for technology companies.
  • Steve Jobs, after returning to Apple, initiated a strategy focusing on music as a path to relevance and growth.
  • The strategy started with iTunes and soon extended to the iPod and the digital hub concept.
  • The iPod and iTunes ecosystem was central to Apple's success and user base expansion.

"So pretty quickly, Apple takes an interest in Steve Jobs and Apple realizes that, hey, digital music is here to stay. And there is now a big wave and big opportunity for computer companies and technology companies to invade the music business."

This quote emphasizes Apple's early recognition of the significance of digital music and the opportunities it presented for the company's future growth.

Development and Acquisition of iTunes

  • Apple developed a basic Music Player before iTunes.
  • They sought to accelerate iTunes development by acquiring an existing market player.
  • SoundJam and Audion were two indie dev software options considered by Apple.
  • Apple acquired SoundJam, which had a connection to former Apple employees.
  • Audion, developed by Panic, had its own rich history and contributions to Mac software development.

"Apple actually released something in June of 2000 called Music Player. That was six months before itunes came out. And it is like the most basic sort of the finder. When you look at it, you're like, that's a separate app. It's a pretty bare bones thing."

This quote details Apple's initial foray into music software, preceding the more advanced iTunes, and hints at their strategy to build upon a basic foundation.

Venture Capital and the Digital Music Landscape

  • During the tech bubble, venture capital was abundant, but the focus wasn't on digital music players.
  • Mac-only software represented a small market share, contributing to less VC interest.
  • The consumerization of the internet was in its infancy, and the potential for digital music wasn't fully realized by investors.
  • Steve Jobs' unique vision for music at Apple contrasted with the broader VC landscape.

"Well, yeah, I mean, there certainly was venture at the time. I mean, this was the middle of the tech bubble. But I think a couple of things. One, we're talking about Mac only and that was just a tiny, tiny portion of the market at that point, at least from a. And two, I mean, I think we're also just really early in the consumerization of the know."

This quote reflects on the state of venture capital during the tech bubble and the reasons why digital music players, particularly Mac-only software, did not attract significant VC attention.

Audion's Interaction with Apple and AOL

  • Audion's developers, Panic, were in negotiations with AOL, which affected their interactions with Apple.
  • AOL's corporate bureaucracy caused delays and missed opportunities for Audion.
  • Apple's acquisition of SoundJam went forward, while Audion remained independent.
  • Audion's developers had an independent spirit, which influenced their decisions regarding potential acquisitions.

"Apple tries to meet with both Soundjam and audion. They're obviously successful in meeting with Soundjam, and they know the folks there well, since they were all former Apple employees. But Audion and panic, they've separately been negotiating with AOL, which owned Winamp and was considering also acquiring audion and having it, bringing it into the fold and having it power, sort of the win amp version for macs."

The quote describes the situation where Audion, created by Panic, was in acquisition talks with AOL, which complicated their potential engagement with Apple. This highlights the business dynamics and decisions faced by indie developers at the time.

The Fate of Audion and Panic

  • Panic chose to remain independent despite Apple's interest in acquiring Audion.
  • Steve Jobs' blunt communication style and vision for Apple's music strategy were influential.
  • Audion's developers were committed to their autonomy and passion for software development.
  • The story of Audion provides insight into the challenges and choices of indie software companies during the rise of digital music.

"So they end up turning apple down, and cable doesn't talk about it in the blog post. But I wonder if Steve repeatedly telling them that he's going to basically insulting their chances and telling them he's going to steamroll them, which he was totally right, had something to do with it, too."

This quote reflects on the decision of Audion's developers to reject Apple's acquisition offer, suggesting that Steve Jobs' aggressive approach may have influenced their decision to maintain their independence.

Acquisition of Audion vs SoundJam by Apple

  • Apple had the intention to create iTunes and sought to build upon a product with market validation.
  • Two companies, Audion and SoundJam, were considered for acquisition.
  • Apple chose SoundJam, which led to its team members holding long-term positions at Apple.
  • Jeff Robin, from SoundJam, became VP of Consumer Applications at Apple and was instrumental in various projects.

"There's one fork where maybe they acquire audion instead of sound jam and then sort of the same thing happens, but the two parties are switched."

This quote discusses a hypothetical scenario where Apple might have chosen to acquire Audion instead of SoundJam, suggesting that the end result of having a music player like iTunes might have been the same.

"Yeah, but they did grab sound jam. And as best as we can tell, all the sound jam guys are still 15-17 years later, all at Apple."

This quote confirms that the SoundJam team remained with Apple for many years, indicating the acquisition's long-term success in retaining talent.

Classification of the Acquisition

  • The acquisition was categorized by the speakers as primarily a people acquisition rather than technology.
  • SoundJam's team had significant expertise in MP3 software and the Mac operating system.
  • Apple valued the existing knowledge and experience of the SoundJam team.

"This was a people acquisition."

This quote emphasizes that the primary value of the acquisition was in the expertise of the SoundJam team rather than the technology itself.

  • The MP3 file format patents expired, making it patent-free.
  • The expiration of patents allows for the legal development of MP3-related applications without licensing concerns.
  • The speakers reflect on the ubiquity of MP3 and its impact on digital audio formats.

"The MP3 file format patents actually expired last month on the 16 April."

This quote highlights a significant event in the legal landscape of digital audio formats, which could influence the development of new MP3-related software.

Sponsorship by Statsig

  • Statsig is introduced as a new sponsor, with the CEO's background at Facebook highlighted.
  • Statsig offers feature management and experimentation platforms for product teams.
  • The tool is used by various companies to make data-driven decisions and manage product features.

"Our sponsor for this episode is a brand new one for us, Statsig."

This quote introduces the episode's sponsor, providing context for the discussion of Statsig's services and relevance to the technology industry.

Evolution of Music Consumption and Identity

  • The speakers discuss the transition from physical music collections to digital and streaming services.
  • Ownership of music has shifted to subscription models, altering how people identify with their music collections.
  • The conversation explores the broader implications of this shift on personal identity and individual expression.

"I went from being the music on a zip drive person to music on an external drive person to having every single one of my files on my computer itself."

This quote illustrates the personal evolution of one speaker's music consumption habits, reflecting the broader technological changes in music storage and access.

Acquisitions of Former Employees

  • The speakers consider the rarity of companies acquiring startups founded by their former employees.
  • They discuss whether this could be a common theme in successful acquisitions.
  • The conversation includes examples of this phenomenon, such as Steve Jobs's return to Apple.

"Companies acquiring people that used to work for them."

This quote introduces the theme of companies reacquiring talent that had previously left, which is not as common as initially thought by the speakers.

Platform Integration vs Third-Party Applications

  • The speakers discuss the concept of being "sherlocked," where platform owners integrate features that were once third-party utilities.
  • They debate the impact of platform integration on third-party developers, sometimes leading to increased category awareness.
  • The conversation touches on the balance between platform-provided features and specialized third-party applications.

"There's this concept of getting sherlocked, where Apple introduced search Sherlock, the feature, and that was a third party utility before and when it got built into the platform."

This quote explains the term "sherlocked" and its implications for third-party developers when their features are absorbed by the main platform.

Impact of Steve Jobs on Apple's Product Strategy

  • The speakers reflect on Steve Jobs's influence on Apple's focus and product quality.
  • They consider how Jobs's personal interests and vision shaped Apple's approach to product development.
  • The conversation speculates on whether Apple's product strategy has changed since Jobs's tenure.

"I wonder if it's really that both the focus that Steve had on really well on a, doing individual apps, right, and having a ton of focus on them, b, having them be key parts of his overall vision."

This quote ponders the unique impact Steve Jobs had on Apple's product direction and the depth of focus on individual applications.

Product Development Aligned with Market Demand

  • The speakers emphasize the importance of creating products that people want.
  • They discuss the alignment of product development with the interests of the mass market.
  • The conversation explores the role of personal passion in successful product innovation.

"You need to make something that people want, and the best way to do that is, and to know you're making something people want is to make what you want."

This quote encapsulates the philosophy that successful products often stem from the creators' own desires and needs, aligning with those of the market.

Vision and Product Management

  • A clear vision and exacting product management can lead to successful products that align with technology trends and consumer desires.
  • Being too focused on specifications or timing trends without solving a core problem can result in product failure.
  • It's important to manage products by focusing on the user's needs and creating delight in the product experience.

"He had an experience in his mind that he had a vision of that was so clear to him and that he wanted, and then he was so exacting in managing the products to really, really solve that need and bring delight to what he wanted and that aligned with technology trends and with what lots of people wanted."

This quote emphasizes the importance of having a clear vision and being meticulous in product management to create successful products that resonate with both technological advancements and user desires.

Evolution of Technology and Programming

  • Technology has evolved rapidly, with past challenges like dealing with MP3 codecs becoming obsolete.
  • We build on the accomplishments of previous generations, leading to a self-reinforcing cycle of improvement in technology.
  • Programming has become more abstracted over time, moving from assembly language and binary to more visual forms of programming.
  • There's always a need for specialized knowledge of the underlying technology to create differentiated products.

"Layers of abstraction that you used to have to write assembly language or even before that, the hex or the binary. And then you get the aven and machine language. And then ever since, you just keep building more abstraction layers on top of the stack."

This quote highlights the progression of programming languages from low-level to high-level abstractions, indicating a trend towards simplification and increased efficiency in coding practices.

Competing with Free and Building Sustainable Value

  • It's difficult to compete with free offerings in technology, especially with utility apps.
  • Long-term value in technology comes from creating ecosystems or networks, not just standalone utilities.
  • Instagram is an example of a utility (photo filters) that created a network, adding sustainable value.
  • Ecosystems and networks can provide a defensible business model in the face of free competitors.

"It's really hard to compete with free in technology. And if you have a utility app and it's just a utility, somebody, if there is a big enough market for that, somebody is going to come along and make it free."

This quote underscores the challenge of competing with free services and the necessity of building ecosystems or networks to create long-term value and a sustainable business.

Acquisition and Value Attribution

  • The financial impact of acquisitions can be difficult to quantify, especially when the purchase price is minimal.
  • Acquisitions can provide immediate resources and distribution but may not be the sole reason for a product's success.
  • Apple's acquisition strategy, including the purchase of SoundJam MP, is praised for foresight and execution but did not solely determine the success of iTunes and related products.
  • The acquisition may accelerate a company's trajectory but not necessarily change its ultimate path.

"Apple was going to do this with or without either of these companies. They would have figured it out. They would have found a way to hire the right people. This is square in their core competency."

This quote discusses Apple's ability to develop its music ecosystem regardless of specific acquisitions, suggesting that while acquisitions can be helpful, they are not always the primary driver of success.

Amazon and the Echo Ecosystem

  • Amazon continues to innovate, with the Echo Show being the latest addition to its hardware lineup.
  • The Echo Show represents an evolution of the Alexa ecosystem, adding a screen for enhanced user interaction.
  • Amazon's strategy with the Echo devices is to become a hub for e-commerce, communication, and potentially other services.
  • The distinction between core product evolution and side projects is important for companies to manage.

"You can see the potential here for something like the show and future versions of Alexa and echoes to become the hub of Amazon, the hub of e-commerce."

This quote reflects on the strategic potential of the Echo Show and similar devices to become central to Amazon's business, particularly in e-commerce.

Facebook and Live Streaming

  • Facebook's deal with Major League Baseball to stream live games is an example of leveraging existing infrastructure for content distribution.
  • The move reflects the strategic value of content availability and the importance of serving content where the audience is.
  • MLB's decision to use Facebook's infrastructure over BAMtech's highlights the changing dynamics of business interests post-spinoff.

"But I would assume it will be done on Facebook's infrastructure, not BAMtech's, which is interesting given BAMtech is now an independent company outside of MLB."

This quote points out the strategic business decision by MLB to use Facebook's infrastructure for live streaming, indicating a shift in partnerships and distribution strategies.

Snap's First Earnings Call and User Growth

  • Snap's first earnings call post-IPO showed a significant loss, but much of it was due to one-time stock-based compensation.
  • Concerns about Snap's user growth are more pressing than the financial loss, as competition from Instagram features poses a threat.
  • Snap's future depends on its ability to reignite user growth and differentiate itself in the market.
  • The company's strategy in the next six to twelve months will be critical for its long-term success.

"They're going to need to definitively answer yes or no and how they're going to reignite user growth. And this is like we talked about on the episode. I mean, just the exact same situation that Facebook was in right after their IPO with totally missing mobile."

This quote draws parallels between Snap's current situation and Facebook's challenges post-IPO, emphasizing the importance of addressing user growth to ensure the company's future success.

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