Apple's Brain Trust -- Iovine, Reznor, Cue and Kondrk -- on Streaming's New World Order and Why 'We All Should Be' Worried

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Eddy Cue, Apple senior vice president of internet software and services, helps introduce the new iOS software at an Apple event at the Worldwide Developer's Conference on June 13, 2016 in San Francisco.

Twelve months of Apple Music have brought the service 15 million paid subscribers and, for its architects, a sense of optimistic, if slightly cautious, calm. Or so it looked at the Apple Worldwide Developers’ Conference on Monday afternoon, where Apple senior vice president of Internet Software and Services Eddy Cue, ‎vice president of Content and Media Apps Robert Kondrk, Nine Inch Nails frontman and Apple Music Chief Creative Officer Trent Reznor and the still title-less Jimmy Iovine gathered for a talk with Billboard.

Apple’s entry into streaming has been among the most-watched launches in recent music business history -- pressure that’s not lost on the executives -- but even as a relative newcomer in a crowded market where on-demand leader Spotify boasts twice the subscriber base, its impact has been felt with successes in album windowing (Drake, Chance the Rapper) and its Beats 1 global station, which, thanks to spirit guide and star DJ Zane Lowe, has been well-received.

The next priorities for the platform, according to demos provided at the conference, are an increased emphasis on the service's popular curated playlists, more intuitive discovery, and video. Apple has hired in the “hundreds,” according to Cue, to see this vision through. Of course, plenty of hurdles remain, not the least of which is appeasing an anxious music industry as it watches revenues from downloads tumble.

To hear the Apple Music brain trust tell it, foremost on their collective mind is the artist, who, they point out, is seeing full rates from their paid service. Still, Reznor notes, he fears for musicians' future.

Billboard: An announcement on future expansion of Apple’s Beats 1 wasn’t addressed at WWDC, though it was expected.

Eddy Cue: Well, we had a lot to cover. On the Beats 1 side, it’s growing very rapidly and the one thing we wanted to do is make all the shows be available on demand and really easy to find. We redesigned the whole radio piece with enhancements to make the experience of Beats 1 that much better.

Jimmy Iovine: And Beats 1 is going to be creating a lot more content as well, [including] video. The thing about Beats 1 is its impact. The right people are listening and people are really interested in getting their records on there.

Robert Kondrk: All of the redesign that we did generates so much content, both video and audio, and we made sure that it could be found, both in the radio tab and also when there’s a promotion, like one that Sting is doing, for example. Those things will be connected in the new interface... The teams have learned how to work together, so Beats 1 is almost the tip of the arrow. Zane will introduce something, and then it goes into Apple Music, and it goes into iTunes and all the promotion we do across our whole music ecosystem, and you end up with a result like we had with Drake. It’s all stitched together now.

Beats 1 seems to lean more heavily on major label releases. How do you feel the recorded music business has adapted internally to working with tech, and Apple specifically?

Kondrk: Those who were radio promo people have to work as one with us now, because we have a full suite to provide to them. That has changed.

Cue: The success is clear now. And while Drake is one thing, it’s another thing to do it with Chance. You can call those both sides of the house -- from the most famous and very successful to the unknown.

Iovine: And Zane plays what he thinks is great.

Who do you liaise with most on the label side when it comes to promotion? And do they get the new world order or is there a tendency to be stuck in old ways?

Cue: Like everything in life, some [get it] and some don’t.

Iovine: That was the same way with MTV. Some labels were early on MTV and others were late. [Republic Records chairman and CEO] Monte Lipman gets it right away... There’s a few people like that out there.

Kondrk: It’s the individual label heads that will come and we’ll work with and then they’ll roll it out throughout their organization. But we have something for each one of the pieces of the pie.  

Record labels and publishers are also concerned with the decline in download sales. Will we see a streaming-only future and when?

Cue: There’s no end date, and as a matter of fact, they should all be surprised and thankful to the results that they’re seeing because our music iTunes business is doing very well. Downloads weren’t growing, and certainly are not going to grow again, but it’s not declining anywhere near as fast as any of them predicted or thought it would. There are a lot of people who download music and are happy with it and they’re not moving towards subscriptions. We talked about subscriptions bringing a lot of new customers in, people who have never bought music. And if you look at Apple’s music revenue on a quarterly basis, because of subscriptions and because of sales, it’s now higher; it’s actually growing, which is great for the labels.

Trent Reznor: It feels as though we’ve turned a corner in terms of the adoption of streaming. I think it’s inevitable that downloads will diminish, much like CDs. But I’ve started buying vinyl -- probably out of nostalgia, but also there’s something about a physical thing that has meaning to me as an artist. I think coexistence can take place.

As an artist, have you found royalty checks to be growing?

Trent Reznor: I’m not looking at the financials as much, but through [the lens] of a consumer. When Jimmy and I first sat down years ago, it was very clear that the future is streaming. And I bring to that the burden and legacy of having come from the system before that, where livelihood could be made selling physical products and life made sense, you knew who the enemies were and you knew how to get your music out... And in this state of disruption, what interests me most as an artist, and what has been great about working with Jimmy before Apple and within the Apple ecosystem, is trying to bring that sense of opportunity to the musician.

The last 10 years or so have felt depressing because avenues are shutting down. Little shrines to music lovers -- record shops -- are disappearing... And every time there’s a new innovation, the musician is the one that didn’t have a voice at the table about how it’s presented. I thought, if I could make a place where there could be more opportunities, and it comes with more fertile ground, and music is treated with a bit more with respect, that interests me. It’s not, “Oh, I hope I get on that taco commercial.”

Are you worried about artists making a living in the near future?

Reznor: Absolutely I am.

Iovine: We all should be.

Reznor: I’ve dedicated my whole life to this craft, which, for a variety of reasons, is one that people feel we don’t need to pay for anymore. And I went through a period of pointing fingers and being the grumpy, old, get-off-my-lawn guy. But then you realize, let’s adapt and figure out how to make this better instead of just complain about it.

Iovine: What happened with Drake is very important and should be looked at very closely. Drake broke every streaming record and did a million downloads -- all paid.

Cue: And all paid at a full rate. There’s a lot of streaming that doesn’t get paid at a full rate.

Are there any metrics you can share about the conversion rate from free trial to paid subscribers?

Cue: We’re not giving out any numbers, but we’ve been very happy with the results we’ve seen. And it’s stayed very consistent -- it hasn’t really changed at all, which I thought was interesting. We don’t have a lot of experience in this, and since we’ve never done this before, we tried to look at how other industries do. Our numbers have been very favorable to that. So we feel good. And that’s how we got to 15 million.

Will we see a Reznorification of the platform when it rolls out?

Reznor: I think you’ve seen the DNA of me in what we’ve shown [at WWDC] and the concepts behind what we released a year ago. It’s been really interesting for me to see how this works and how much time and patience it takes. The update of Apple Music is a result of us taking a hard look at how people actually use it -- not hypothetically, but realistically.

Iovine: Apple Music is a big idea and it’s going to take some time to fulfill its overall dream. Like, it took some time to get people from Beats -- Trent, myself and everybody else -- and Apple, with Eddy’s and Robert’s teams, to do that. And after one year, it really feels good. We’re working together.

YouTube has been increasingly vilified by the labels. How do you view its current standing?

Reznor: Personally, I find YouTube’s business to be very disingenuous. It is built on the backs of free, stolen content and that’s how they got that big. I think any free-tiered service is not fair. It’s making their numbers and getting them a big IPO and it is built on the back of my work and that of my peers. That’s how I feel about it. Strongly. We’re trying to build a platform that provides an alternative -- where you can get paid and an artist can control where their [content] goes.

Thirteen years of working with the music industry seems to have positioned Apple as a sort of bridge between north and south California -- the tech- and product-based Silicon Valley and Los Angeles, the hub of content creation. How do you view the divide, and Apple’s role?

Cue: One of the great things about Steve [Jobs] was that, because of his [stake in] Pixar, he had a very different understanding of entertainment and of L.A. and Hollywood... It’s one of the reasons we’ve been successful from the early days. How I met Jimmy, more than a decade ago now, was about that. I’ve always felt that technology companies have disrespected the content creation process and the content creation people disrespect technology. Both think, “How hard [could it be]?” The truth is, and I understand this really well, is that both of them are artists when it comes down to it. A programmer starts with a blank screen, no different than starting a song with a blank sheet of paper. 

Kondrk: Our teams also go back and forth. There’s a lot of travel to cross-hatch. The tech guys come down with us to Culver City and we bring the content guys up, almost every week. We stitch it all together. The teams respect each other and you can feel it.

Iovine: When Eddy and Tim [Cook] took Beats on, they brought hundreds of people in. We’ve integrated teams of people from both of the industries. I’m very proud of where we’ve gotten so far.

Reznor: I’ve been around musicians and creatives for most of my life. Now being immersed with engineers who think differently in a lot of ways, the secret to the relationship has been respect in terms of realizing the value of what creative can bring to the table. And on the other end of it, there’s no way I could do what these guys do, but it is that balance of realizing what is complementary.

Cue: Adding to that, I had a tremendous amount of respect for him as an artist, but I didn’t have any respect for him as a product guy. And what he has done has been amazing. Also amazing are all the arguments, the back and forth, not seeing things and getting in the room and going through all of that. Getting to the product that we introduced today, that’s what I love.

Does it get heated sometimes?

Reznor: We don’t always use our inside voices.

Cue: If you’re gonna do something great, that’s the only way.