Eddy Cue explains iTunes as Apple's services model

The iTunes Store transformed Apple and the music industry, creating a foundation for its flourishing services division.

Eddy Cue, Apple's senior vice president responsible for services, spoke with TBPN's daily tech talk show this Wednesday reflecting on his 38-year journey with the company.

Cue is responsible for Apple's services lineup, encompassing subscription platforms like Apple Music and Apple TV.

Long before Apple Music emerged, there was the iTunes Store, initially a hub for selling songs and albums. Cue noted that it marked a significant turning point for Apple upon its launch in 2003.

"It fundamentally changed the music scene and opened our eyes to the potential of services," Cue shared with hosts Jordi Hays and John Coogan.

This foreshadowed the modern Apple ecosystem — combining hardware, software, and services. Yet, convincing stakeholders was necessary to see it through.

During the Napster and music piracy days, record labels were hesitant about allowing Apple to sell individual songs at $0.99 apiece. They favored creating their own platforms instead, according to Cue. Apple cautioned against this idea.

"Each song had different pricing and rules," Cue explained. "It was chaotic."

Conversely, Apple's plan hinged on uniform pricing and a system that permitted users to purchase several songs over time, rather than incrementally buying them.

For instance, someone could acquire multiple songs within 24 hours and receive one combined charge, thus minimising credit card fees.

"Rather than concluding a transaction for each sale, we decided to merge them over time, leaving the transaction open," remarked Cue.

The approach proved successful, with most transactions exceeding the $0.99 mark.

This strategy helped revive a then "ailing" music sector, according to Cue. When cofounder Steve Jobs inquired about a successful launch in this sector, labels told Cue their goal was to sell a million songs in six months.

"We achieved this in just six days," Cue stated.

The triumph of iTunes set the stage for the services division to blossom. It showcased how Apple could forge direct connections with its users and generate revenue. Under CEO Tim Cook, this aspect of the business expanded swiftly.

Though smaller compared to Apple's product segment, it has grown faster, accumulating $109 billion in revenue by 2025, marking a 14% rise from the previous year.