Talk about a possible Apple tablet has increased over the past week, starting with an Apple Insider story Friday and a Financial Times story yesterday. The sources for the FT one seem to be in the music industry:

The device is expected to be launched alongside new content deals, including some aimed at stimulating sales of CD-length music, according to people briefed on the project. The touch-sensitive computer will have a screen that may be up to 10 inches diagonally.

Those “content deals”?

Recording industry executives said Apple planned to use the larger screen to offer new services such as interactive booklets and liner notes that come along with purchases of entire music CDs.

While iTunes moved legal sales of digitised music into the mainstream, the digital take-up for full CDs has disappointed the industry. Consumers usually select just one or two tracks.

Wow—liner notes and interactive booklets!

Whenever I read the word “interactive” it reminds of me of last year, during the presidential campaign, when everyone I knew was following electoral college scenarios on various news websites. A friend of mine told me he liked the one at LATimes.com. “They have an interactive map,” he said.

It wasn’t until later, after more discussions, that I realized he didn’t know what “interactive”meant—that he could, in this instance, click on the states to turn them red or blue and so change the electoral vote totals. He just liked the colors and accepted that it was, somehow, “interactive.”

All of which is to say that such packages aren’t going to do anything for digital sales of full CDs. People buy just their favorite songs from their favorite artists because, now, they can.

In the great pop era coursing through the first decades of the last century, people bought sheet music—of songs, not albums. In the first ten or fifteen years of the rock era, too, they mostly bought songs, in the shape of 45s.

There followed, in a happy confluence of commercialism and art, the album era, which lasted right up until 2001. It was a good thirty years for the record industry—particularly when it got folks to rebuy their collections on cassette and then CD—but it’s over now. We’re back to people buying songs, and there’s no reason it’s going to revert.

My theory? Steve Jobs is tossing another handful of gossamer dust into the eyes of the industry. The last time was when he allowed the prices of music at the iTunes Store to rise.

It seemed like a defeat for Apple. In fact, to the extent the increase—up to $1.29, from its previous across-the-board 99 cents—drove people back to the file-sharing networks and undercut the music industry’s sales even more, it worked to his advantage.

(I won’t be surprised, should the fancy-schmancy new album packages come to fruition, if the labels charge a premium for them. How much more would you pay for an “interactive booklet”?)

Whether the tablet will be a hit or not no one knows—there’s an argument against it here—but I do know that music fans are not going to go back to shelling out $10-plus for filler-laden hour-plusses of music, interactive or not.

The Journal’s crushing scoop on Steve Jobs the other day—which said Jobs had had a liver transplant in Tennessee a couple of months ago—left competitors flat.

Generally when news like that breaks, the reporters who got scooped are sent off on one of the most humiliating jobs in journalism—calling sources and asking, rather pathetically, if they could possibly confirm the story for you so that you can report it to your own readers as straight news, crediting the competitor who got the scoop originally as far own in your own story as possible.

(Howard Kurtz has this down to a fine art.)

Anyway, the odd thing about the WSJ story is that it cited no sources in its flat lede, and backed up the lede’s assertions nowhere else in the story:

Steve Jobs, who has been on medical leave from Apple Inc. since January to treat an undisclosed medical condition, received a liver transplant in Tennessee about two months ago. The chief executive has been recovering well and is expected to return to work on schedule later this month, though he may work part-time initially.

A hint to who did leak can be found in this key graph, similarly delivered with no sourcing:

At least some Apple directors were aware of the CEO’s surgery. As part of an agreement with Mr. Jobs in place before he went on leave, some board members have been briefed weekly on the CEO’s condition by his physician.

I don’t buy a lot of the complaints about anonymous sources, myself; much of the problem is just a subset of the game-playing papers get into with governmental officials, trading anonymity for incremental disclosures on an ongoing political agenda that have no real value for readers.

In other words, a big part of the vacuous use of anonymous sources are part of stories that are shitty in the first place. But it is fun to watch the papers enforce rules about it, producing some nice semantic juggling as they try to both still use the anonymous sources and simultaneously explain why the sources are unnamed

I suspect that this was a one-source story. The usual formulation would be to make the attribution as vague as possible: “… sources familiar with the matter said.” (The use of the plural in that phrase is one of the biggest lies in journalism.)

So it could be that the Journal decided rather than broadcast how flimsy their sourcing was they’d just go with a pronouncement from on high. More charitably, you can read it as a little bravura flourish. It intimidated the NYT so much, for example, that the paper’s follow-up could not only do nothing but report the fact that the Journal had reported the operation, but also didn’t even bother to state something that would cry out to be mentioned (and would, for example, be exhibit A if the story were later found to be inaccurate): That the WSJ, with an unusual disregard for big-time journalism’s first law, cited no sources for its information.

It looks like the company did, finally giving in last month and allowing the record companies to jack up prices for hit product. The cover was the removal of DRM, something Steve Jobs had long campaigned for.

Today however, comes news that the real heart of the deal was an agreement with the labels to allow wireless downloads to the iPhone.  The story is somewhat vague on the details:

But according to one music industry executive involved in the negotiations, Apple’s primary goal was securing distribution of music over its iPhone, as mobile phones are expected to become an increasingly important outlet for music.

Much later in the story, we read:

Apple indicated it was willing to make the switch to variable pricing [”variable pricing” is an industry euphemism for “raising prices”] provided that the music companies — which negotiate individually with Apple to avoid colluding — would agree to license songs for wireless downloads on the iPhone, as well as drop copyright protections using digital rights management, or D.R.M., software.

All the labels agreed except Sony Music. […] Eventually, Sony gave in ….

But it looks as if Jobs, by selling out consumers on the pricing issue, gained for himself both a new income stream and an enviable new selling point for his iPhone.

… is detailed after the jump in today’s quite good NYT story on his importance to Apple:

But there are other aspects of his role that do not get as much attention and may be more difficult to replace. […]

Mr. Jobs, former Apple employees say, has the authority and long-term vision to yoke Apple managers and employees together under a single cause. At many technology companies, various divisions often work at cross purposes, competing with one other to develop related products. This can lead to devices and software that are sometimes incompatible, frustrating customers.
[…]
Mr. Jobs has also been Apple’s chief deal maker. After introducing the iTunes store in 2003, he persuaded entertainment companies to sell digital versions of their products when they were largely bivouacked, hiding in fear of piracy. In large part because of Mr. Jobs’s efforts, those barriers have fallen, though other challenges remain like getting the Hollywood studios to relax their restrictions on renting or downloading movies over the Internet.

Emphasis added. For the first point, consider the WSJ’s very harsh front-page assessment today of Microsoft’s many missed opportunities to get in the ring with Google:

[B]ehind [Steve Ballmer’s] push to capture a bigger piece of Google’s lucrative business lies an untold story: Nearly a decade ago, early in Mr. Ballmer’s tenure as CEO, Microsoft had its own inner Google and killed it.

In 2000, before Google married Web search with advertising, Microsoft had a rudimentary system that did the same, called Keywords, running on the Web. Advertisers began signing up. But Microsoft executives, in part fearing the company would cannibalize other revenue streams, shut it down after two months.

And for the second, Jobs’s potent intelligence and persuasive abilities may be his most under-appreciated features. As I wrestle with the two most backward technological presences in my life, the car stereo and the cable box, I find myself idly wishing Apple would get into those products. Jobs could knock heads and design and manufacture new editions that would bring them into the 21st century—a Tivo cum iPod for car radios and a combo cable box/computer/Tivo/Apple TV for the TV.

Both products a) make sense and b) would spur growth in all sorts of ways for all the industries involved, but neither will ever get done because those industries work at cross purposes, and none of the borgs involved—car companies, radio broadcasters, cable companies, and the movie studios, for starters—are known for their big-picture vision.

It doesn’t have to be those products in particular; but if Steve Jobs ever comes back to Apple, won’t the loss of that vision and the grit to realize it be the two big things the company loses?

Digital developments come so fast that it is, in the end, understandable why so many execs can be found saying senseless things. Even if you get one part of the equation, plain old ignorance (or corporate moneyminders above) keeps folks in a rut.

(I’ve seen this phenomenon a lot in places I’ve worked. Favorite example: The news exec who intoned to an assembled staff meeting, “We’re not getting Blackberries!” He then went on to announce that the company was going to hire some consultants—at who-knows-what cost—to analyze the news division’s reporting procedures in the digital age. Six months later, the consultants report came in. Task Item No. 1: “Reporting staff needs Blackberries.”)

Anyway, with the National Association of Broadcasters meeting next week, NBC Universal’s top digital officer, George Kliavkoff, is making news with just this sort of thing. On the one hand, there are noises coming from NBC Universal that the company would be looking into making Hulu available on cellphones. It’s pretty vague as yet, but the notion is out there.

Why? Well, here’s an AP story on the effects of debuting the premiere of a new episode for free online:

CBS Corp. executives took an unusual risk last fall before its series debut of “Big Bang Theory” — it offered the entire episode online despite the chance it would sap viewership for the TV premiere.

The show, about two geeky physicists and their beautiful female neighbor, got 90,000 views on CBS.com and other Web sites over a week, followed by a better-than-expected 9.5 million for the Sept. 24 on-air premiere.

(The story as a whole is a good overview of the state of the ad industry online for the networks.)

But there are still huge logical flaws. For example, Kliavkoff told Fortune that making video available online combats privacy:

Hulu offers users “all the value of aggregation, one-stop shopping for premium content,” Kliavkoff said. At the same time, he thinks it will reduce the illegal exchange of the content on peer-to-peer networks. “The best defense [against piracy] is providing a legitimate place for people to enjoy the content,” he said. For example, if NBC can post the latest episode of “Saturday Night Live” one minute after it’s finished airing, as happens with unauthorized posting on YouTube, viewers are more likely to watch the authorized stream.

Which is fine, except that NBC still isn’t making the video available for a move to one’s iPod. That’s where the piracy roars back in. In the digital age, if data can be moved, it will, whether NBC’s top digital officer wants it to or not. So kids will just torrent the show and stick it on their iPods.

… Which brings us back to the network’s war with the iTunes store, which it left in a huff last year because Steve Jobs wasn’t letting the company making its wares—what was the word?—more “attractive”—for its consumers. (Making prices “attractive” and “flexible” in NBC-speak is synonymous in normal English with “higher.”)

Now, over at Cnet, Kliavkoff is saying that the real issue with Apple is piracy. From an onstage interview at the Ad:Tech conference in SF, Cnet quoted Kliavkoff thusly:

“If you look at studies about MP3 players, especially leading MP3 players and what portion of that content is pirated, and think about how that content gets onto that device, it has to go through a gatekeeping piece of software, which would be a convenient place to put some antipiracy measures,” Kliavkoff said in an onstage interview at the Ad:Tech conference here.

In case you didn’t get the reference, he’s talking about Apple. Maybe I’m missing something, because the tech sites aren’t making a big deal about this, but Apple does have DRM restrictions on its video. With some tweaking you can move video files (along with anything else) around on an iPod, but even that way video from the iTunes Store doesn’t play on non-authorized computers. Kliavkoff seems to be upset that one download can be moved to more than one iPod (though each one needs to already be tied to the main computer), but in real life that’s too awkward for it to be a big piracy generator.

It’s common to hear the Apple iTunes music store described as a “loss leader” for the company; that’s an image Steve Jobs has encouraged, as well. Billboard recently crunched the numbers and discovered, as you might expect, that that’s not the full story. (I can’t give you a link because the magazine’s incomprehensible web site can’t find it for me.)

Ed Christman, the Billboard’s retail columnist, figures Apple sold 1.7 billion tracks last year out of the store, which makes for about $1.9B in revenue, taking into account slightly higher prices overseas. Apple turns over 70 percent of that to the music companies, leaving $570M for the company.

Apple doesn’t break down its figures for Christman as to marketing and technical expenses; so he looks at how Amazon works and concludes the company spends about $180M a year on such things, meaning that Apple might make about $390M profit on the iTunes operation, before depreciation, amortization or taxes.

Four hundred million dollars in profit would be a lot of any company, including Apple—until last year, when its profits rocketed up (65 percent and more, in some quarters, to more than $4B for the year) and its stock price doubled.

Still, in the end it seems that the iTunes store represents about 10 percent of the company’s profit. That’s not decisive, but it’s not chump change, either. And the nature of digital sales is such that, as the stores sales grow, Apple’s profit margin will grow as well.