“
Although in 2005 compact discs still represented over 98 percent of the market for legal album sales, Morris had no loyalty to the format. In May of that year, Vivendi Universal announced it was spinning off its CD manufacturing and distribution business into a calcified corporate shell called the Entertainment Distribution Company. Included in EDC’s assets were several massive warehouses and two large-scale compact disc manufacturing plants: one in Hanover, Germany, and one in Kings Mountain, North Carolina. Universal would still manufacture all its CDs at the plants, but now this would be an arms-length transaction that allowed them to watch the superannuation of optical media from a comfortable distance. It was one of the oldest moves in the corporate finance playbook: divest yourself of underperforming assets while holding on to the good stuff. EDC was a classic “stub company,” a dogshit collection of low-growth, capital-intensive factory equipment that was rapidly going obsolete. In other words, EDC was a drag on A that added little to B. Let the investment bankers figure out who wanted it—Universal had gone digital, and the death rattle of the compact disc had grown loud enough for even Doug Morris to hear. The CD was the past; the iPod was the future. People loved these stupid things. You could hardly go outside without getting run over by some dumb jogger rocking white headphones and a clip-on Shuffle. Apple stores were generating more sales per square foot than any business in the history of retail. The wrapped-up box with a sleek wafer-sized Nano inside was the most popular gift in the history of Christmas. Apple had created the most ubiquitous gadget in the history of stuff.
”
”