Drewbot

A street vendor outside is using an old Firewire cable to secure his wares on a handcart.

I have no sources. My predictions are based on what I’ve read, industry knowledge and (simply) what I’d do in Apple’s situation.

Everyone is postulating about this music-centric event. Guys: Apple doesn’t have a big blow out to talk about new iPod models when they’re blowing off the doors with the iPhone. And there’s no Beatles tomorrow. (Update: maybe not.) But: they’re not going to bring Jobs back just to talk about more storage and camera…

Here’s what I think will happen tomorrow: Apple is going to launch a record label on iTunes. Oh, and Jay-Z will be there.

Now, this isn’t a label in the traditional sense: it will be a stripped down distribution model. It will be similar to the developer program Apple has been running with the App Store. Because in the end, all a label really does is market, distribute, and schedule tours. Here’s why I think this makes sense:

• Digital music has reached an audience where this makes sense. 25% of all music sold in the US (physical and digital) is sold through iTunes. Surely, this figure is higher for certain genres (indie, hiphop) and less for others (country). When it comes to digital sales, iTunes has the market locked down. The size of this market place allows for two things:
• There’s financial incentive for most musicians to sell on iTunes through Apple. If Apple sticks to the dev store terms, there’s no reason any medium-to-small artist would turn this down. 66% of album sales is unheard of: major labels give artists 2-10%, indie labels ~50%. With a quarter of all music sales taking place on iTunes and Apple only taking 33% from sales, the financial incentive to move to Apple as a direct digital label is huge.
• The major labels have their hands tied. If Apple went straight to artists a few years ago it would have sparked a fight with any of the four major music labels. Today, there’s no major label that can justify to their shareholders abandoning 25%+ of their sales at this point. The labels are screwed and it’s too late for them to change anything.
• Apple has transactions down pat. Apple is one of those companies that tests out technology in niche devices or services before porting them to prime time markets. The early high price points of the iPhone, AppleTV as a whole (which Jobs has always called an experiment), and early OS X distros support this practice. Now that Apple has perfected financial transactions on computers and mobile devices through the app store, they’re ready to bring this to the music industry, where frankly, there’s a lot more market options available to musicians than their are platforms for developers. Plus the market is an order of magnitude bigger.
• Apple already has the back-end support for musicians. Beyond Garage Band, they own Logic which can act as an XCode for musicians.
• Rumors are that iTunes will be integrated with social networks like Facebook. There’s been legit screenshots around this. I feel like this feature only really makes business sense for Apple if there’s a label back-end. Because, if there’s one bad thing about the App Store it’s that you can’t find anything. Integration with Facebook will help this. Plus, Facebook will be chomping at the bit to steal the last feature MySpace still trumps them with. Imagine MySpace bandpages on Facebook with an iTunes backend. Magic.
• They’ve been hiring H&R types and artist relation managers. Alright, alright, I have no link to the post. But I remember seeing this position when job hunting about a year ago for client-side marketing roles.

In addition to the reasons above, I think there’s a bigger signal that the label will launch tomorrow. And that’s Jay-Z. I don’t think it’s Apple’s style to launch this without a heavy hitter. Look at how they launched the App Store: with EA and a host of other proven developers. Here, they’ll get Hova.

Why Jay-Z? Well, Jay-Z isn’t really on a major label. He runs his own shop with some help from Live Nation who handles his tours. Moving to Apple gets him more money from digital sales and doesn’t upset his business.

Plus, this announcement nicely aligns with his album release this week. And don’t forget: Jay-Z and Apple label rumors were being discussed way back in January of last year. Apple event regarding music with Steve Jobs showing up the same week of Hova’s new album? That’s a pretty big coincidence given the previous chatter.

Oh, and Jay-Z’s new album has been released early this week because of leaks and piracy. Instead of next week, it’ll hit store shelves today and has already been made available on Rhapsody. Guess where it’s still unavailable though?

I can’t wait. This is the nail in the coffin for this dusty industry.