But what really happened? Could Apple instantly turn on a dime like that, assuming that this was not all a pre-planned publicity stunt? Based on my prior observations with high-stakes corporate negotiations, I think so. Here is what I think happened.
You don't go into a high-stakes negotiation without knowing the price tag for various outcomes. I guarantee that Apple had their financial analysts model a scenario in which Apple would foot the bill for all those royalties. I know, because I'm often the numbers guy modeling the data for the negotiating team. So, when Taylor Swift threw down the gauntlet on Friday, it wasn't like Eddie Cue had to call up the guys in Accounting and ask for a full cost rundown on the ramifications of making this decision. He already knew full well what the consequences would be.
Apple wanted to pay the artists all along but the record labels caved too soon
I worked for a company that negotiated for terms with a city government on establishing a new manufacturing plant in a city-owned building. As part of the negotiations, this unnamed company asked for a full remodeling of the property in which they would locate their new manufacturing operations. Honestly, the remodel was a bargaining chip thrown in to allow some strategic compromise at a later date, so when the city agreed to do it, we weren't sure how to proceed other than to accept. Then, at the first whiff of a public outcry against the city government for spending a great deal of money to remodel a perfectly good building, the company graciously dropped the requirement.
My theory is that on a much larger scale, this is what happened to Apple. Apple expected some difficult negotiations with the record labels and needed to establish some room to maneuver future compromise. The problem is, they never expected the record labels to accept their demand that they simply not pay royalties for three full months. It really is a rather outrageous demand. When the record companies caved, Apple must have been stupefied and didn't know what to do other than to accept. But as soon as the public outcry began, they graciously relented since it was what they wanted to do all along.