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Apple And Jay-Z: Will They Really Launch A Record Label?

Thursday, 3 Jan 2008 | 12:24 PM ET
Jay-Z
Source: rocafella.com
Jay-Z

There's an intriguing rumor floating through the web this morning that Apple is getting into the music business. Some would say Apple's already in the business with its iTunes web site selling well over 2 billion songs these last few years. Or that selling well over 100 million iPods makes Apple a music company.

But this new rumor is something totally different: That ousted Def-Jam CEO and star rapper Jay-Z is about to create a new recording label with Apple Inc.

While the deal is interesting, it faces some extremely steep hurdles, not the least of which is how other traditional recording labels would view Apple's move onto their turf. The company's relationship with them is already tenuous. Steve Jobs has been a vocal critic of digital rights management and the labels' traditional role as music-material gatekeeper.

Still, if Jobs can figure out a way to control content AND distribution, artists could flood his way and he might find himself in the catbird seat. Again.

Apple already assumes many of the roles enjoyed by traditional labels, most notably distribution. And that's why this becomes so interesting: big name artists with a strong fan base don't need "development." They need distribution. Look at Radiohead, Nine Inch Nails, and Madonna.

Traditional labels would cry foul but it's not clear they'd be able to do anything about it. Apple would be in the unusual position of using established acts from established labels to attract customers to iTunes, as it does already today, and then leverage all those eyeballs to sell its own music from its own artists. That'd be a neat trick, but it would sure anger some Hollywood heavyweights.

Could Apple even launch its own label? Sure. There's the misconception that after settling its long-running litigation with the Beatles and Apple Corps that Apple Inc. was prevented from entering the music business. Not necessarily true. There's nothing in the settlement that would prevent Apple from doing this.

One source I talked to said that "logistically this is possible, but unlikely." He asks, "Is this core to what they're doing? Answer? No."

And one other thing: Do a Google search of Jay-Z and Apple and you'll see that these two already have a contentious relationship. AppleInsider pointed this out as well: Jay-Z railed against Apple's iTunes a couple of months ago, saying his new album, American Gangster, would not be made available on iTunes since the service let shoppers buy individual songs instead of the entire album.

Apple's Musical Ambitions
Rumors have been running rampant that Apple is getting ready to create its own music label, and CNBC's Jim Goldman has the latest.

In a statement released at the time, Jay-Z said, "As movies are not sold scene by scene, this collection will not be sold as individual singles."

That's not to say a new Jay-Z/Apple label would do things differently, if it came to fruition. But something like this might be a lot more trouble than it's worth.

Questions? Comments? TechCheck@cnbc.com

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