E-mails shed light on Steve Jobs winning e-book negotiations

The emails have mostly been viewed in the context of the lawsuit, but they also provide an extraordinary view of high-stakes negotiation between the leaders of two powerful firms, Apple and News Corp. They start far apart, but over the course of five days, Apple’s then-CEO Steve Jobs successfully pulls the son of News Corp. CEO Rupert Murdoch over to his side.

Via the Atlantic (who illustrates the thread with talking head icons that are pretty helpful to follow a mental visual of what’s going on) ~ Here’s how it went down:

Newscorp starts…


Thanks for coming in again this morning. We’ve talked over the proposal and I want to make sure that you have a summary of the deal that HarperCollins would be willing to do in your timeframe.

1. Pricing: We need flexibility to price on a title by title basis outside the prescribed tiers in the contract. We will use our best efforts to meet the tiers we discussed.

2. MFN [“most favored nation” status]: In the event that HarperCollins and Apple disagree on a consumer price for a title, HarperCollins needs the ability to make that title available through other agents who support the higher price.

3. Commissions: We need a lower commission on new releases for the economics to work for us and our authors. We believe a 30% commission will lead to more authors asking for ebooks to be delayed a result that will not work for Apple or HarperCollins.

4. The new release window: We need to have flexibility on the agency window. We believe this window should be 6 months rather than 12 months in the event that one or more large retailers do not move to an agency model.

Leslie will be sending Kevin a contract that reflects these points in the event you wish to move forward on these terms.


Next, the publishers opening bid in the negotiation happening with just 5 days until the iPad debuted.


Thanks for your call earlier today, and for the time last week.

I spoke to Brian Murray and Jon Miller [then the head of digital media at News Corp.]–and Brian is sending a note to Eddy today. I thin I have a handle on this now. In short–we we would like to be able to get something done with Apple–but there are legitimate concerns.

The economics are simple enough. [Amazon] Kindle pays us a wholesale price of $13 and sells it for 9.99. An author gets $4.20 on the sale of a hardcover and $3.30 on the sale of the e-book on the Kindle.

[A portion of this email was redacted by the court.]

Basically–the entire hypothetical benefit of a book without raw materials and distribution cost accrues to Apple, not to the publisher or to the creator of the work.

The other big issue is one of holdbacks. If we can’t agree on the fair price for a book, your team’s proposal restricts us from making that book available elsewhere, even at a higher price. This is just a bridge too far for us.

Also, we are worried about setting prices to high–lots of ebooks are $9.99. A new release window with a lower commission (say 10[%]) for the first six months would enable us to proce much more kenly for Apple customers. We’d like to da that.

More on this below in Brian’s note to Eddy. We outline a deal we can do.

Feel free to call or write anytime over the weekend to discuss if you like.

I am in the UK (so eight hours ahead of CA). My home number is [redacted]. I check the email regularly.

Steve, make no mistake that across the board (TV, Studios, Books, and Newspapers) we would much rather be working with apple than not. But we, and our partners who produce, write, edit, and otherwise make all this with us, have views on fair pricing, and care a lot about our future flexibility. I hope we can figure out a way, if not now and in time for this launch of yours, then maybe in the future.


Jobs replies…


A few thoughts to consider (I’d appreciate it if we can keep this between you and me):

1. The current business model of companies like Amazon distributing ebooks below cost or without making a reasonable profit isn’t sustainable for long. As ebooks become a larger business, distributors will need to make at least a small profit, and you will want this too so that they invest in the future of the business with infrastructure, marketing, etc.

2. All the major publishers tell us that Amazon’s $9.99 price for new releases is eroding the value perception of their products in customer’s minds, and they do not want this practice to continue for new releases.

3. Apple is proposing to give the cost benefits of a book without raw materials, distribution, remaindering, cost of capital, bad debt, etc., to the customer, not Apple. This is why a new release would be priced at $12.99, say, instead of $16.99 or even higher. Apple doesn’t want to make more than the slim profit margin it makes distributing music, movies, etc.

4. $9 per new release should represent a gross margin neutral business model for the publishers. We are not asking them to make any less money. As for the artists, giving them the same amount of royalty as they make today, leaving the publisher with the same profits, is as easy as sending them all a letter telling them that you are paying them a higher percentage for ebooks. They won’t be sad.

5. Analysts estimate that Amazon has sold more than one million Kindles in 18+ months (Amazon has never said). We will sell more of our new devices than all of the Kindles ever sold during the first few weeks they are on sale. If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution.

6. Customers will demand an end-to-end solution, meaning an online bookstore that carries the books, handles the transactions with their credit cards, and delivers the books seamlessly to their device. So far, there are only two companies who have demonstrated online stores with significant transaction volume–Apple and Amazon. Apple’s iTunes Store and App Store have over 120 million customers with credit cards on file and have downloaded over 12 billion products. This is the type of online assets that will be required to scale the ebook business into something that matters to the publishers.

So, yes, getting around $9 per new release is less than the $12.50 or so that Amazon is currently paying. But the current situation is not sustainable and not a strong foundation upon which to build an ebook business.

[A portion of this email was redacted by the court.]

Apple is the only other company currently capable of making a serious impact, and we have 4 of the 6 big publishers signed up already. Once we open things up for the second tier of publishers, we will have plenty of books to offer. We’d love to have HC among them.

Thanks for listening.


“Murdoch starts to bend”


I think the crux of this is our flexibility to offer product elsewhere at price-points you don’t like.

If we could offer to you that a certain percentage of releases (>50%) would be available within your pricing structure (< or = 14.99), does that give you enough comfort?

I think we are worried more about the absolute holdback of product elsewhere, and our ceding of pricing to Apple, than we are about the actual haggle over what the price will be.

I haven’t shared this with HC directly–so this is only hypothetical. But if you were willing to accept that a supplier can exploit other avenues (at prices not disadvantageous to you), with a guarantee of substantial volume through Apple–maybe I could work with HC to get to some common ground.

Please let me know.

A different question: we have four areas of discussion (related to our product) between our teams right now: Books, US Video, Int’l Video, and newspapers. All at different stages of maturity, these discussions are all centered, for us, around the desire to make our product widely available, and to make yours and our products more attractive for our customers. It seems though that we in each one we largely encounter a “take it or leave it” set of terms, and predictably we’ve so far failed to really strike the kind of partnerships that could move things forward.

Is it worth considering in the round, over the next few months or weeks, whether or not some of these loose ends can be tidied up? It’s clear that Apple is already becoming an attractive platform for so many of our customers–all over the world. As a creative company at our core, NWS [News Corp.] should be more engaged with Apple, and I think Apple could be more engaged with NWS, globally, than either of us are today.


Jobs goes in for the kill:


Our proposal does set the upper limit for ebook retail pricing based on the hardcover price of each book. The reason we are doing this is that, with our experience selling a lot of content online, we simply don’t think the ebook market can be successful with pricing higher than $12.99 or $14.99. Heck, Amazon is selling these books at $9.99, and who knows, maybe they are right and we will fail even at $12.99. But we’re willing to try at the prices we’ve proposed. We are not willing to try at higher prices because we are pretty sure we’ll all fail.

As I see it, HC has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started there will be no stopping it. Trust me, I’ve seen this happen with my own eyes.

Maybe I’m missing something, but I don’t see any other alternatives. Do you?




Steve Jobs’ original intention for Pixar

When Steve Jobs bought Pixar from Lucasfilm in 1986, he had no intention of doing animation – he wanted it to make high end computers. Imagine what a different world we’d be in if Pixar was a hardware manufacturer instead of a movie powerhouse…

Jobs focused Pixar almost exclusively on developing and selling the Pixar Image Computer (PIC), which debuted a mere three months after Jobs bought the company. (The product was in development beforehand, but Jobs shut down virtually every Pixar project but this one when he took over.)

The PIC was very clearly a Job-esque product, right down to its clean, gunmetal grey cubical design that is eerily reminiscent of the original NeXT PCs Jobs also developed. The PIC originally cost $170,000 when it debuted in 1987. Later versions of the PIC retailed for a mere $30,000, though that price could jump tenfold if you included the world’s first RAID system, which offered a then-radical 3GiB storage capacity. The intended markets for the device weren’t movie studios, but aerospace and medical organizations that relied on highly detailed 3D modelling.

To little surprise, the PIC was a total commercial flop, selling less than 500 units during its entire production life. Fortunately, the aforementioned John Lasseter developed a few promotional computer animations to demonstrate the power of the product. Principal among these was the famous Luxo Jr. short, which gave Pixar its mascot and wowed animation festival observers who saw it. This led to Pixar creating computer-animated commercials, which in turn led to a three-picture deal with Disney to produce some straight-to-video computer-animated movies.

The first of those films was a little classic called Toy Story, which proved too good not to put into theaters. The rest, as they say is, history. (Or, for bemused Apple critics who note that Pixar’s marketing arm outperformed its manufacturing division, history repeating itself.)

Apple products were overpriced from day 1

Apple Co-founder Steve Wozniak reveals a lot in this interview, but his discomfort with Steve Jobs’ profit plan in the beginning days are specially interesting. Not only because it confirms the price hiking profit plan but because it shows that that was the whole idea from day 1.

“Steve had a background working in computer stores buying stuff cheap and selling it for a lot more. I was shocked when he told me how you could buy something for 6 cents knowing he could sell it for 60 bucks. He felt that was normal and right, and I sort of didn’t. How could you do that? I was not for ripping people off. But then we started Apple and I went with the best advice which is that you should make good profit in order to grow.”

It really illustrates how wealth can be created from thin air. Just like that. There’s nothing, and then some sharp mind comes along and turns it into something. and then a bigger something. and then a billion somethings. Pretty awesome.

Woz talks more about his non-profit state of mind vs Jobs’ profit-centric mindset, which is particularly interesting considering Woz was the one with the tech employment and Jobs’ was the one working with plants in a commune.

I never wanted to run a business. I had a perfect job for life at HP. I went to club meetings every week and I passed out my schematics for the Apple I, no copyright, nothing, just “Hey all you guys here is a cheap way to build a computer.” I would demo it on a TV set.

Then Steve Jobs came in from Oregon, and he saw what the club was about, and he saw the interest in my design. I had the only one that was really affordable. Our first idea was just to make printed circuit boards. We could make them for 20 dollars and sell them for 40 or something like that. I had given the schematics away. But Steve thought it could be a company.

This was actually our fifth product together. We always were 50-50 partners. We were best friends. We first did the blue boxes. The next one I did was I saw Pong at a bowling alley so I built my own Pong with 28 chips. I was at HP designing calculators. Steve saw Pong and ran down to Atari and showed it to them and they hired him. Whether thought he had participated in the design, I don’t know and I could not care less. They offered him a job and put him on the night shift. They said he doesn’t get along with people very well, he’s very independent minded. It rubbed against people. So they put him on the night shift alone.

Our next project was when Steve said that Nolan (Bushnell, head of Atari) wanted a one-player game with bricks that you hit out. He said we could get a lot of money if we could design it with very few chips. So we built that one and got paid by Atari.

I’m allegedly related to Nolan Bushnell, though I forget how the family tree works out in that regard since it was explained to me.

Woz was also asked about the legend that Steve Jobs cheated him out of some money in that first computer deal.

The legend is true. It didn’t matter to me. I had a job. Steve needed money to buy into the commune or something. So we made Breakout and it was a half-man-year job but we did it in four days and nights. It was a very clever design.

The next project we did together was we saw a guy using a big teletype machine that cost as much as a car hooked up to a modem dialing in to the Arpanet. You could get into 12 universities and log in as a guest and do things on a far-away computer. This was unbelievable to me. I knew you could call a local time-sharing company. But to get access to university computers was incredible. So I went home and designed one myself. I designed a video terminal that could go out over the modem to Stanford and then on to the Arpanet and bring up a list of university computers.

The far-away computers would talk in letters on my TV set. Instead of paddles and balls in Pong, I put in a character generator. The terminal was very inexpensively designed. We sold it to a company called Call Computer. They now had a cheap terminal. Steve and I split the money.

When the interviewer raised the seemingly odd partnership between the two Steve’s, Woz said they weren’t all that different in his mind.

We were very similar. We would hunt through stores in Berkeley looking for Dylan bootlegs. Steve was interested in computers, and he really wanted to find a way to build a computer out of these new devices called microprocessors. He thought that someday they could replace big computers and everyone could have their own computer relatively cheap. Steve had a background working in computer stores buying stuff cheap and selling it for a lot more. I was shocked when he told me how you could buy something for 6 cents knowing he could sell it for 60 bucks. He felt that was normal and right, and I sort of didn’t. How could you do that? I was not for ripping people off. But then we started Apple and I went with the best advice which is that you should make good profit in order to grow.

Steve was willing to jump right into that. Mike Markkula was the mentor who told Steve what his role would be in Apple, and told me mine. He was the mentor who taught us how to run a company. He’s very low-key. He stays out of the press and he’s not that well-known. But he saw the genius in Steve. The passion, the excitement, the kind of thinking that makes someone a success in the world. He saw that in Steve.

Mike Markkula had worked at Intel in engineering and marketing. He really believed in marketing. He decided that Apple would be a marketing driven company. He was introduced to us by Don Valentine. Don had come to the garage and I ran the Apple II through its paces and he said, “What is the market?” I said, “A million units.” He asked me why that was and I sad, “There’s a million ham radio operators and computers are bigger than ham radio.” We didn’t quite get the formula. Steve Jobs and I had no business experience. We had taken no business classes. We didn’t have savings accounts. We had no bank accounts. I paid cash at my apartment — I had to, because of bounced checks.

Woz left Apple in the mid 80s to start his own company but remained an Apple employee all these years and receives a salary of 200 bucks every two weeks.

It will never happen, but I would like to see him replace Tim Cook (Apple CEO) as the event host rolling out new products. Cook didn’t look like he’s into it or wanted to be there in that role in his first try while Steve Jobs was alive but recently resigned. Woz could do it and could breathe new life into it.

Westboro Hate Cult Announces (via iPhone) that they will protest Steve Jobs funeral

I’m still hoping the Phelps family (the hate cult that hates everything and calls themselves a church – best known for the “God hates fags” and “thank God for dead soldiers” wings of their multi-tier platform) will all die in some kind of natural disaster, the type of which is traditionally reported as “an act of God”.

Earlier today Margie Phelps announced on Twitter that her minions will be picketing Steve Jobs’ funeral because he didn’t give God glory (he was Buddhist) and “taught sin”. The tweet was made via her iPhone…

A friend fantasized about how fun the exposition would be if it were revealed that the leader of the cult was gay and had been hooking up with male prostitutes, Ted Haggard style. That’d be fun, but highly doubtful. I dont buy the theory that most or even a lot of these gay bashers are actually gay boinkers. It’s a popular response and explanation but I don’t think it’s valid beyond simple mockery. People hate what is different than them more than internal struggles they might be ashamed of. Haggard wasnt hateful toward gays so his problems were only funny cuz people like to snicker when religious leaders slip up.

I think it’s more likely that the Westboro cult is actually a hardcore committed anti-religious satire by an improv group who has dedicated their life to mocking religious families.

In a classic case of “the good die young”:

Fred Phelps, the founder of the Westboro cult, is 81.
Steve Jobs, the found of Apple Computers, died at 56.

Steve Jobs: Hipster but Capitalist

Mr. Jobs, the adopted son of a family in Palo Alto, Calif., was born on Feb. 24, 1955. A college dropout, he established his reputation early on as a tech innovator when at 21 years old, he and friend Steve Wozniak founded Apple Computer Inc. in the Jobs family garage in 1976. Mr. Jobs chose the name, in part, because he was a Beatles fan and admired the group’s Apple records label.

I am glad he at least lived long enough to see The Beatles on iTunes. I thought it was silly that they made such a big deal out of it until I learned that it was a long struggling goal of Steve’s for many years and why.

Steve Jobs was Apple. He left Apple and Apple floundered. He came back in 1997 and made Apple boom. The company now produces $65.2 billion a year in revenue compared with $7.1 billion in its business year ending September 1997.

The prediction was just made on my Facebook that the Occupy Wall Street protest for socialism currently under way will probably include Steve Jobs memorializing since many of the protestors use and love his products. This would be wildly hypocritical.

I will be hugely insulted if those Occupy Wall Street protesters turn their anti-capitalism of rich people protest into a “oh, but not the one we deemed as being okay” addendum. fuck them. Steve Jobs spent his money better than any “Progressive” government has – and that includes his many donations to Progressive causes and candidates.

He made the products that hippies and hipster socialists use and love by the means that they protest: being non-union, utilizing corporate tax breaks and moving large operations overseas because it’s cheaper to manufacture and operate there.
His employees loved the hell out of him and he wasn’t evil and he wasn’t “greedy” just like the majority of the other CEOs and corporation founders who are responsible for the products and services we use and love.

Its because of people like them and non-“progressive” business practice like that that middle class income earners have the option of buying a hand held computer and telephone that can capture, store and send through the air high definition pictures and video all on a higher resolution screen than any television their parents ever owned growing up for $200 + a phone service contract.

It will be wildly hypocritical and insulting if anyone participating in the Occupy Wall Street protests publicly memorializes Steve Jobs. It would be nothing but flaunting their elitist douchebaggery. “we miss and love THIS billionaire whom we all benefitted from – but not the rest of you pigs! now join me, brothers and sisters in our fight to stop the next Steve Jobs from growing his business!”

Occupy Wall Street is a protest to prevent the Steve Jobs’ of the world from benefiting by serving humanity – which is what capitalism is. It’s the only philosophy that says (to quote myself):

Do what you want. do nothing if you want and the government won’t force you into action. but if you want nice things… you can’t just steal them from other people. if you want services from other people you can’t just force or enslave them – you must give them something they want to GET something you want. SO… if you want these wonderful advantages in life and if you want to be able to have the stuff and experiences your heart and mind desire: you can only do it by serving your fellow human being. Only by creating or providing something that someone wants can you amass wealth. Only by taking risks with your capital to make more of it can you become wealthy.

You have a choice. There are no guarantee’s except in your freedom to try.
Except when you DO try, you’ll find how true the wisdom of Yoda was:
Do. or do not. There is no “try”.

UPDATE: Judge Napolitano on Steve Jobs, Free Market Hero

Steve Jobs dead at 56

Steve Jobs is dead. I’ve been archiving jokes and puns for months, but I dont feel like posting any of them now. in time. but for now: R.I.P and thanks for the amazing products and software I use every day to pursue my own dreams.

I’m unusually sad about this. Like, approaching tears welling up, legit-Sad. Not just “aw, that sucks. he was cool” thoughts of someone I didn’t know. I didn’t even think he was particularly “cool” even. I think i’m sad because of the unfairness of his death. Only 56 and was still chugging along so hard, creating new and wonderful things that help people like me create our own new and wonderful things. He wasn’t some retired CEO lounging in his billions. He was actively creating and innovating.

The Image above is the current splash page at Apple.com. The file for the picture is “t_hero.png”.

He’ll never get to see the next Pixar movie (he was a founding member of Pixar, if you don’t understand why I say that). He’ll never get to walk around in that one-of-a-kind space ship style new Apple campus being constructed in Cupertino. He won’t get to host any more Apple events (I might as well unsubscribe from the video podcast right now). He won’t get to hold the iPad 3 or 4 or 15 – but worse: His mind won’t have designed them.

Human beings can’t absorb the pain and sorrow of loss of people they don’t know or they would self destruct. We HAVE to have some kind of barrier when we hear about a shooting or an earthquake or the passing of some celebrity.

I’m terribly upset over the loss of Steve Jobs because he did life right and still got robbed.

He was responsible for a record of new and “magical” things that hundreds of millions of people got to enjoy and showed no sign of slowing down until literally weeks ago when his health forced such a slowing.

The first Apple logoThe third and current Apple logo

From the WSJ:

“Steve’s brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives,” Apple’s board said in a statement. “The world is immeasurably better because of Steve.”

His family, in a separate statement, said Mr. Jobs “died peacefully today surrounded by his family…We know many of you will mourn with us, and we ask that you respect our privacy during our time of grief.”


In addition to laying the groundwork for the modern high-tech industry alongside other pioneers like Microsoft Corp. co-founder Bill Gates and Oracle Corp. founder Larry Ellison, Mr. Jobs proved the appeal of well-designed intuitive products over the sheer power of technology itself and shifted the way consumers interact with technology in an increasingly digital world.

Unlike those men, however, the most productive chapter in Mr. Jobs’ career occurred near the end of his life, when a nearly unbroken string of innovative and wildly successful products like the iPod, iPhone and iPad fundamentally changed the PC, electronics and digital media industries. The way he marketed and sold those products through savvy advertising campaigns and its retail stores, in the meanwhile, helped turn the company into a pop culture icon.

He turned fruit orchards into innovative technology that blew all our minds on a consistant basis. He was hard working, charitable, made countless lives better and he still got robbed by cancer. I’ve been teasing him and Apple hipsters just as much as anyone over the years, but damn. this is sad as fuck 🙁

Part of the reason, as many of you familiar with my world view and life aspirations may have guessed, that I’m so distraught over his death – even though it was known to be imminent – is that it’s a unique reminder of mortality. Everyone know’s they’ll die. I think I’m more conscious than most that my time is limited and that I could get incinerated in a plane crash or hit by a bus any day but that cant get in the way of attempting a full 90+ year plan on this earth. But Steve Jobs was hard at work doing big things and making billions at it and he still got robbed – not by a freak accident, but by a slow killing bottom feeder (which is why cancer is called that, btw: because it’s like a crab).

His commencement address at Stanford in 2005 contained the following:

No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960?s, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: “Stay Hungry. Stay Foolish.” It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.