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Apple has become so successful that people start attributing amazing strategies to them that are really accidental. I've emailed a high up Apple executive about something before and not heard a thing only to get a reply to my email 9 months later while he was on a flight and had time to kill. From what I heard, dealing with all of the legal mess around the major labels (e.g., contract upon contract numbering dozens to get a single album onto iTMS) was a huge part of the 2003-2004 era work at Apple. It bogged down executives and even programmers who had to constantly revise code to accommodate legal requirements.

It could be that Steve Jobs was somehow being manipulative and singling out CD Baby. Or it could just have been that the company was bogged down. You said yourself that hundreds of others were at that original meeting. That's like herding cats. In fact, the entire iTunes Music Store was an exercise in herding thousands of cats. I still have a hard time believing it got done.

Regardless, it's still a good tale. You never know, right?