Page 153 of Steve Jobs

Publishing and Journalism

With the iPod, Jobs had transformed the music business. With the iPad and its App Store, he began to transform all media, from publishing to journalism to television and movies.

Books were an obvious target, since Amazon’s Kindle had shown there was an appetite for electronic books. So Apple created an iBooks Store, which sold electronic books the way the iTunes Store sold songs. There was, however, a slight difference in the business model. For the iTunes Store, Jobs had insisted that all songs be sold at one inexpensive price, initially 99 cents. Amazon’s Jeff Bezos had tried to take a similar approach with ebooks, insisting on selling them for at most $9.99. Jobs came in and offered publishers what he had refused to offer record companies: They could set any price they wanted for their wares in the iBooks Store, and Apple would take 30%. Initially that meant prices were higher than on Amazon. Why would people pay Apple more? “That won’t be the case,” Jobs answered, when Walt Mossberg asked him that question at the iPad launch event. “The price will be the same.” He was right.

The day after the iPad launch, Jobs described to me his thinking on books:

Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that—they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books

cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”

Jobs acknowledged that he was trying to have it both ways when it came to music and books. He had refused to offer the music companies the agency model and allow them to set their own prices. Why? Because he didn’t have to. But with books he did. “We were not the first people in the books business,” he said. “Given the situation that existed, what was best for us was to do this akido move and end up with the agency model. And we pulled it off.”

Right after the iPad launch event, Jobs traveled to New York in February 2010 to meet with executives in the journalism business. In two days he saw Rupert Murdoch, his son James, and the management of their Wall Street Journal; Arthur Sulzberger Jr. and the top executives at the New York Times; and executives at Time, Fortune, and other Time Inc. magazines. “I would love to help quality journalism,” he later said. “We can’t depend on bloggers for our news. We need real reporting and editorial oversight more than ever. So I’d love to find a way to help people create digital products where they actually can make money.” Since he had gotten people to pay for music, he hoped he could do the same for journalism.

Publishers, however, turned out to be leery of his lifeline. It meant that they would have to give 30% of their revenue to Apple, but that wasn’t the biggest problem. More important, the publishers feared that, under his system, they would no longer have a direct relationship with their subscribers; they wouldn’t have their email address and credit card number so they could bill them, communicate with them, and market new products to them. Instead Apple would own the customers, bill them, and have their information in its own database. And because of its privacy policy, Apple would not share this information unless a customer gave explicit permission to do so.

Jobs was particularly interested in striking a deal with the New York Times, which he felt was a great newspaper in danger of declining because it had not figured out how to charge for digital content. “One of my personal projects this year, I’ve decided, is to try to help—whether they want it or not—the Times,” he told me early in 2010. “I think it’s important to the country for them to figure it out.”

During his New York trip, he went to dinner with fifty top Times executives in the cellar private dining room at Pranna, an Asian restaurant. (He ordered a mango smoothie and a plain vegan pasta, neither of which was on the menu.) There he showed off the iPad and explained how important it was to find a modest price point for digital content that consumers would accept. He drew a chart of possible prices and volume. How many readers would they have if the Times were free? They already knew the answer to that extreme on the chart, because they were giving it away for free on the web already and had about twenty million regular visitors. And if they made it really expensive? They had data on that too; they charged print subscribers more than $300 a year and had about a million of them. “You should go after the midpoint, which is about ten million digital subscribers,” he told them. “And that means your digital subs should be very cheap and simple, one click and $5 a month at most.”

When one of the Times circulation executives insisted that the paper needed the email and credit card information for all of its subscribers, even if they subscribed through the App Store, Jobs said that Apple would not give it out. That angered the executive. It was unthinkable, he said, for the Times not to have that information. “Well, you can ask them for it, but if they won’t voluntarily give it to you, don’t blame me,” Jobs said. “If you don’t like it, don’t use us. I’m not the one who got you in this jam. You’re the ones who’ve spent the past five years giving away your paper online and not collecting anyone’s credit card information.”

Jobs also met privately with Arthur Sulzberger Jr. “He’s a nice guy, and he’s really proud of his new building, as he should be,” Jobs said later. “I talked to him about what I thought he ought to do, but then nothing happened.” It took a year, but in April 2011 the Times started charging for its digital edition and selling some subscriptions through Apple, abiding by the policies that Jobs established. It did, however, decide to charge approximately four times the $5 monthly charge that Jobs had suggested.

At the Time-Life Building, Time’s editor Rick Stengel played host. Jobs liked Stengel, who had assigned a talented team led by Josh Quittner to make a robust iPad version of the magazine each week. But he was upset to see Andy Serwer of Fortune there. Tearing up, he told Serwer how angry he still was about Fortune’s story two years earlier revealing details of his health and the stock options problems. “You kicked me when I was down,” he said.