Steve Jobs emails that show how to win a negotiation

http://qz.com/87184/the-steve-jobs-emails-that-show-how-to-win-a-hard-nosed-negotiation/

by Pasanpr • 13 years ago

499 174 13 years ago

danso• 13 years ago

A little OT from the actual content, but I have to say, this is an excellent example of web storytelling format, much more illuminating than the usual journalistic method of "here's some selective quotes, if you want more, here's a dump of emails for you to read in Acrobat Reader." And just as importantly, it's simple to implement: blockquotes, image tags, and subheads

larrys5• 13 years ago

Agree. Although I think the titles are prejudicial "Jobs goes in for the kill" in terms of telling someone the conclusion they should be drawing like the Elton John song Candle in the Wind "all the press had to say is that Marilyn was found in the nude". The paragraph commentary of course is a version of this as well (color) but I don't see it as bad since there are more words there.

zseward• 13 years ago

(I'm the author.) That's a totally fair point about the subject headings, Larry. They're intended to make the emails more accessible and scannable, but of course they oversimplify things. On the other hand, these emails are ultimately more about being Steve Jobs than winning a negotiation.

And thanks, Dan. Much love to DocumentCloud for making the OCR of those PDFs super easy.

waterside81• 13 years ago

This was fascinating. Perhaps what's most interesting is how real Jobs seems. I mean, these emails read like some of the ones that I've sent in negotiations. With all the hoopla around him, it's easy to forget sometimes that Jobs was just a normal guy.

rednukleus• 13 years ago

Good and bad, there was very little that was normal about Steve Jobs.

larrys5• 13 years ago

Jobs most certainly sent the emails but we don't know who else was involved in drafting, wording, the tone, or strategy.

greyboy• 13 years ago

I agree - that didn't seem like the Jobs-esque writing I'm used to.

revelation2• 13 years ago

If you enjoy that kind of thing, you will love the email conversations in the federal lawsuit on no poaching agreements:

http://www.theverge.com/2013/1/23/3906374/email-exhibits-in-...

(sorry, couldn't find original documents)

brown9-23• 13 years ago

I like the last one where Jobs threatens to use it's patent portfolio against Palm if they do not work out a suitable "do not cold call" agreement.

xentronium• 13 years ago

This is pure gold, shows how sausage is made in the higher tiers.

matt_brushlabs• 13 years ago

If Jobs operates even peripherally like a typical executive -- or even the partner of a consulting firm -- he has both an extremely razor-sharp assistant working on copy for emails like this AND a bevy of beach-combing young professionals culling research to build this sort of correspondence.

Then he probably sprinkles in some of his own language and gets to it. Shablamo, profit.

dubcanada• 13 years ago

He was not really a typical executive. My guess is he probably wrote these emails himself.

regal• 13 years ago

Murdoch made a mistake sending Jobs that first clarifying email. HC shows a lack of any coherent direction having one junior person send a response, and then a senior person follow up with more exposition. The moment Murdoch does this, the dynamic is flipped, and HC is chasing after Apple.

Jobs's strategy is to jump all over this and make the argument clear: here's what we're offering, here's why it's good for you, here's why we can't budge, and it's out of my hands.

Murdoch comes back and says, well, how about some concessions. Jobs says no, sorry, no concessions. Do you want this deal or not?

But he already knows how Murdoch's going to answer. Once Murdoch started chasing, all Jobs had to do was keep backing up until the both of them were right where Apple wanted them.

Great negotiation case study here from Quartz.

baby• 13 years ago

It's more than strategy, it's also very good phrasing and choice of words :

* (I’d appreciate it if we can keep this between you and me)

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

damon_c• 13 years ago

It is really well presented here as "Jobs moving in for the kill", but in a way, Apple's terms really didn't seem to be about "killing" but more about taking in the situation and finding a realistic set of numbers that were actually tenable in the long run.

Jobs and Apple didn't have Murdoch backed into a corner here. Reality (and eventually Amazon) did. Jobs was just leading him to realize that.

seldo• 13 years ago

My two big takeaways from this are:

1. Amazon sells every Kindle ebook at a loss of $3 -- they pay $13 wholesale and sell it for $9.99. I thought this was a typo, but then Jobs repeated the figure (though he said $12.50). It was my impression that Amazon also sells the Kindle itself at near-cost, so does that mean that Amazon's entire ebook business has been running at a loss the whole time?

2. Jobs certainly did win this negotiation, but ultimately they were both wrong. As Jobs says, "Heck, Amazon is selling these books at $9.99, and who knows, maybe they are right and we will fail even at $12.99." Amazon's share of the ebook market in the US is 65%, with Barnes and Noble (who also charge $9.99 for most books) another 25%. iBooks has the remaining 10%, nothing like the success of iTunes in the music market.

adventured2• 13 years ago

1) No, because Amazon does not always pay $13 wholesale, and they do not always sell for $9.99. There has never been a segment wide set figure on either.

fragsworth3• 13 years ago

So was Steve just making shit up? i.e., he won the negotiation because he was so full of shit that they didn't see any way to talk sense into him?

peterkentdsen• 13 years ago

Amazon never sold every Kindle book for $9.99; many were sold for higher. The DOJ reported after their investigation that they found Amazon was making a profit.

k-mcgrady• 13 years ago

>> "Amazon's share of the ebook market in the US is 65%, with Barnes and Noble (who also charge $9.99 for most books) another 25%. iBooks has the remaining 10%"

That's in the US. Worldwide Apple is estimated to have around 24%. Not great but not too bad either.

grimtrigger• 13 years ago

2) Doubt this is a fair comparison. Kindles are clearly a superior device for reading than iPads.

lostlogin3• 13 years ago

Not for all. 1) Reading for me involves access to a browser and typing on a kindle is deeply unpleasant.

2) Reading in the dark requires a light and the attachments for the kindle have all seemed a kludge to me. That said, the iPad is imperfect here are the screen doesn't dim enough.

fuebar• 13 years ago

well, kindle paperwhite is awesome but the fact that I cannot load my pdfs or other ebooks format keeps me away from it.

rkudeshi• 13 years ago

A little backstory to explain the $13 wholesale -> $9.99 retail thing:

Books have traditionally been sold to wholesale at $14, then sold at retail for $28 MSRP. When Amazon started selling ebooks, they stuck with the same model - they were buying ebooks wholesale from the publishers at $14 each.

However, they proceeded to sell them to consumers at $9.99. Yes, they were losing money on every sale. Why? Because they knew this was their chance to dominate the books industry, just as iTunes had done in music. Amazon's MP3 store, despite launching with cheaper and DRM-free music, has never been able to make a serious dent in iTunes' market share. So Amazon knew there was a huge advantage in being the first to dominate the market.

Of course, as Jobs alludes to in the emails, this was unsustainable in the long term. The publishers knew that once Amazon became the dominant ebook seller, they would come back to the publishers and revise the terms of purchase. At that point, $9.99 would've become ingrained in consumers' minds and Amazon would've said they could no longer pay $14 wholesale, probably more like $7 wholesale instead.

The reason the publishers acquiesced to Jobs so quickly was because they knew 70% of $12.99/$14.99 would be better than 70% of $9.99 in the long run.

(Because of most-favored-nation clauses in the contract, publishers forced Amazon to also increase prices to $12.99+ and switch from the wholesale model to the agency model once the iPad went on sale. Amazon pulled HarperCollins books from their site briefly, hoping a groundswell of consumer backlash would force HC and Apple to revise their contract. It didn't happen and now ebooks are sold just like apps - publishers set the price and Apple/Amazon gets 30%.)

comrade_ogilvy2• 13 years ago

Thanks! That is helpful.

The bottom line is that Jobs knew that he was offering HC a fair deal. For HC to argue that they needed a bigger cut was based on smoke and mirrors. "Gee, if you want to make only the same amount of money you could just give the authors, um, more money, right?" That is an elegant way of calling a bluff.

mtgx• 13 years ago

> "Amazon's MP3 store, despite launching with cheaper and DRM-free music, has never been able to make a serious dent in iTunes' market share".

Maybe because iTunes selling DRM'ed music for so long helped them gain that market lock-in, just like it helped Amazon get the same lock-in with DRM ebooks.

If publishers knew what's best for them, they would force Amazon to offer DRM-free books before it's too late, and the process can't be reversed anymore.

ojiikun• 13 years ago

All I took away from this was that AAPL wanted to make about $0, AMZN wanted to make about -$3, and in both cases the author makes about $3, meaning that of the $13 wholesale, the publisher is getting a 75% cut of the sale.

I cannot fathom that the publisher performs any function possibly worth this much money. How, since we no longer have to ship dead trees, have we not evolved a system that gives authors 75% of the sale price?

Guvante• 13 years ago

Apple has always made 30%. They were the ones to start that model.

Publishers are actually about relationships, not dead trees. They can get your book to the customer, which is where the value is. From the consumer point, you only care about the producer, but the producer cares about the publisher a lot more than the customer.

hkmurakami2• 13 years ago

AAPL makes $3~4.

Publishers are who "make" the writers in the first place (unfortunately) by shouldering the distribution, marketing, etc. Without them (or without the author being e-famous(tm) already), an author can't hope to sustain himself through writing.

Maybe things would change if we were more willing to "pay" for discovering content creators through our own time investment, but this is doubtful.

adrianhoward• 13 years ago

Because the dead trees are only about 10% of the cost of publishing a book (and since the tax laws for ebooks are different in many countries that saving is often immediately eaten up by higher taxes).

Because many (most?) authors want to spend their time writing - not publishing. Because producing a book takes time and money. Because publishers also essentially act as the VCs of the book market. Most authors don't earn out their advances.

Take a look at the breakdown of the cost of a bestseller http://journal.bookfinder.com/2009/03/breakdown-of-book-cost... for some vague evidence on how much money publishers actually make out of a book.

(The slice taken by marketing in the above seems high from what others have told me. Its also a somewhat simplistic breakdown since it ignores some of the long-term costs from publishers that aren't related to "books" directly. e.g. the advances to authors who never get published, etc. - so the potential publisher profits aren't quite as large as they appear here - there's other overhead outside the printing/distributing/selling books bit)

Also see http://ireaderreview.com/2009/05/03/book-cost-analysis-cost-...

It's also something Charlie Stross has posted about a fair bit see this collection of posts http://www.antipope.org/charlie/blog-static/2010/04/common-m...

TL;DR - people think about book prices being related to cost of producing media. That's like thinking software costs are mostly about the price of printing DVDs or shifting bits. It's mostly about book development costs - not media costs.

6d0debc0712• 13 years ago

Well, publishers still do something - marketing and relationships mostly, I believe - but realistically they don't do anything worthy of that sort of money. It's just difficult to do things without them. I vaguely remember a story about a woman a while back who had just hired a publisher to do marketing for her though, rather than acting as a publisher and taking massive loads of money from it. So, it definitely sounds possible to get around them.

Sort of like the music market, from the sound of it - massive rip-off. But if they're the people who control the majority of the publicity....

TechNewb• 13 years ago

Another interesting note is the level of innovation. Apple is reinventing the 'book' in the digital realm, by providing authoring tools for free, while rethinking what a textbook can be in the digital real (videos, interactive content, etc.). I hope more publishers take advantage of it.

I personally still prefer the PDF for e-books, as it maintains original design, layout, and typography, as well as page numbers. I'd like to see Apple and Amazon both start selling these formats DRM free, with watermarking.

Amazon's Kindle has e-ink, and a great selection for fiction, but not too many text books. And honestly I would not want to read a programming book, or other text book, on the kindle for the reasons stated above.

chrisbolt2• 13 years ago

"I personally still prefer the PDF for e-books, as it maintains original design, layout, and typography, as well as page numbers."

That's great if your device happens to match up with the size of a book, but it's far less flexible when it comes to devices of different sizes. I want to read books on whatever device I have, phone, small tablet, large tablet, computer, whatever. And I want the ability to adjust the size of the text. I don't want to lose that just because some books might not have that flexibility, and most do.

Also, Kindle and iBooks have page equivalents, that solves the page number issue.

Xcelerate• 13 years ago

To be fair, Apple didn't have much to lose if the deal didn't go through. So I can see why the "take it or leave it" strategy works in this case.

It would be interesting to see how Jobs negotiated in a case where the other party had the upper hand.

foobarqux• 13 years ago

Kevin O'Leary and The Learning Company is a good example

http://www.youtube.com/watch?v=grqTieshD2U

fragsworth3• 13 years ago

Apple did have quite a bit to lose if the deal didn't go through. A huge reason for customers to buy an iPad is to read books, and if a large portion of popular books isn't available, customers will not be happy. Try to find a book that isn't available on Amazon. If you buy a Kindle, you can get all of them.

adventured2• 13 years ago

It's impressive how dramatically wrong Steve Jobs was about the iPad when it came to the ebooks market. He missed by a mile in understanding exactly how customers wanted to consume ebooks.

So here we are, Apple has sold a bazillion iPads, and yet Amazon dominates ebooks. And there's absolutely no threat on the horizon coming from Apple in the ebooks market.

matt-attack• 13 years ago

And why is that?

stock_toaster2• 13 years ago

  > So here we are, Apple has sold a bazillion iPads, and yet Amazon dominates ebooks.

There is a kindle app for the ipad. Even while the kindle experience on the ipad is sub par[1], I think the difference in price (cheaper), features (whispersync, email to kindle), and existing library keep people in the amazon ecosystem (via kindle app).

  [1]: you can't purchase books from inside the app because amazon doesn't want to pay apple

ricardobeat• 13 years ago

The lack of in-app sales is overrated IMO. You don't sit down with an iPad and think "hmm, maybe I should buy a book". There's a great chance you're browsing the web when you get the idea, so you just hop over to amazon and do a one-click purchase.

freyr• 13 years ago

Did Jobs actually expect the iPad to dominate the ebooks market?

I think he was determined to create the best iPad he could, not the best ebook reader. So his goal was to optimize the ebook experience for the iPad (not optimize the iPad for ebooks). And given that goal, he negotiated a good deal.

joyeuse6701• 13 years ago

HC was already at a disadvantage since their rivals were already signed with Apple. I liked how Jobs positioned himself as if he were Amazon and compared the short-term long-term advantages for HC. I think that insight was really the big part of the negotiation.

On the softer side of things, the language choice really shows the positions of power, the yielding tone of HC, contrasted with the very unyielding Apple position.

jwwest• 13 years ago

I really liked this part:

>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.

Basically Jobs is saying "Hey, we can be in this together. Let's just give it a try." - which is rather humanizing in a way, and masks the negotiation as a soft sell.

skw• 13 years ago

Do publishers and authors not looks at statistics? I'm sorry but ebooks aren't even close to the same value as print books. I have an idea of the production costs involved. Not to mention that with ebooks you're saving trees and reaching larger audiences. If the mobile app market shows us anything it's that micro-transactions are the way to go. Either sell your books for <4.99 or sell your books by the chapter (eg: 99c per chapter, if your book is actually engaging).

That or an unlimited book (library) subscription fee. Like job says piracy is going to occur if you don't make content accessible, and in the country I reside in (Canada), it's largely inaccessible.

Erwin• 13 years ago

My Kindle books hold higher value for me than physical hardcover books (and also cheaper comparing to buying an imported paperback let alone hardcover). There's convenience in getting the book you want at any time and not having to store them. Distribution is also far more efficient.

Sentimental value of looking at the shelve and resale/lending are the only advantages physical books have. When I'm near Foyle's in London I buy any signed edition of authors I like, but other than that it's Kindle + Safari Online for me.

The author's work is the valuable part. I wouldn't support lowering the prices anymore for any established authors.

However the eBook market is a great opportunity for new artists -- take the "Hunger Games".

makerops• 13 years ago

The preview book feature alone makes it 100 times more valuable than a traditional book imo.

brown9-23• 13 years ago

Of course they know the economics of the situation. What they have been attempting to do is to cement a price point for eBooks in their customer's heads so that they can continue to charge $10, $14, $16 etc for a megabyte of text for a new release. I think they've been successful so far.

Just because they are doing something illogical doesn't mean they are stupid; they are doing it to make more profits.

smallegan2• 13 years ago

I guess it is the capitalist in me that doesn't really get what Apple was doing wrong by trying to set higher eBook prices with the major publishers.

felipeko• 13 years ago

I don't think there's a problem with Apple selling for eBooks more on their store. The problem is they forced everybody to sell for more on other stores.

smallegan2• 13 years ago

They didn't really force them to, they said if you want to be in our store, you can't charge less elsewhere. The publishers all could have said no, right?

josephlord• 13 years ago

This bit is the one that struck me as legally shaky.

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.

[Edit to add: This section implies a collective (amongst competitors) view/wish to shift prices being communicated by Apple. It isn't proof of illegal action but it doesn't look good and if there are other communications indicating how Apple acquired the understanding of the industry view they may be in trouble.]

_lex• 13 years ago

It's a digital good (so marginal cost is zero). Price floors are the only thing stopping the average price from falling to zero. This means that an apple-imposed price floor is enticing. However, apple can always remove the price floor once they have enough inventory to make their market appealing.

wavefunction• 13 years ago

To zero? Maybe asymptotically as time progresses...

conanbatt• 13 years ago

Its a valuable conversation, but ultimately Apple held all the cards in that position.

Its not a negotiation if one of the parts has no intentions of changing his position. This was a sale.

Although I appreciate the article, this is not a pinnacle for negotiation. I'd like to see a better case of conflicting demands and creative/collaborative solutions.

You can see that the decisions were made too quickly and for the impending announcement.

krmmalik• 13 years ago

This makes me wonder if Apple just happened to be in a very strong position from the outset and therefore it was easier for them to stick to their guns, or if they were just really good at creating that perception?

I was in a position of negotiation yesterday. Nothing anywhere near as grand as this, and i wonder if creating the perception that my position was stronger would have helped, or if it had to be ridiculously obvious to the other party.

gfodor2• 13 years ago

The only lesson about negotiation here is that negotiation is easy when you have all the leverage.

anonymous2• 13 years ago

Ah, yes, the old "On warfare with a heavy fortress, containing lots of supplies, that can withstand a prolonged siege: be the side with the fortress".

maxmcd• 13 years ago

Perceived leverage. HC would have been able to operate with greater flexibility without the deal and Amazon now has dominant market share. Jobs argues that Apple's digital subscribers are the important part of this deal when a very legitimate argument could be made (especially in retrospect) that Amazon's ownership of the book market, and book commerce traffic could help it's marketshare even more.

The lesson is to convince someone reading the negotiation that you have all the leverage, and Job's certainly seems to have done that. So much so that you dismiss any lesson as all.

gfodor2• 13 years ago

You didn't explain how HC had the leverage in this negotiation. Apple had already closed deals with a number of publishers. They were go for launch and it was inevitable that the overall market was going to ultimately decide if iBooks was a winner, not if HC's content was on board or not. If iBooks tanked after launch, it would almost certainly not have been due to HC not being on board, and if iBooks was successful, or at least was getting traction, HC would be groveling at Jobs's knees to participate with the stated terms, if not better ones. Essentially, Jobs saw HC's participation as a net positive for Apple, but only if they participated without altering any of Apple's terms. This mindset is exactly why Apple had the leverage: they could comfortably walk away, while HC saw themselves as potentially missing getting in on the ground floor of something that could kill their business if they weren't.

jtbigwoo• 13 years ago

There's a great moment in the first Jobs email:

>>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.

This was the moment when he won, IMO. He's very deftly showing that he knows the publishers are screwing their authors on ebook commissions (which should be much much higher than for paper books). He's also subtly threatening Murdoch by reminding him that he doesn't control the means of production anymore.

devindotcom• 13 years ago

Yeah, this was the moment for me too. It's like he's saying "Who do you think you're talking to? You think we don't know what you people do?"

comrade_ogilvy2• 13 years ago

Agreed. It demonstrated that Jobs probably understood the numbers approximately as well as those he was negotiating with. It not so subtly alluded to the fact that HC was attempting to seize a bigger slice of the digital pie, without being confrontational.

"Gee, you could make the same amount of money by giving the authors, um, more."

jamesaguilar• 13 years ago

I think he won before the negotiation started. HC didn't have anything to gain by refusing to work with Apple, and potentially had a lot to lose. You cannot win a negotiation where you have no leverage, unless the other party is unaware of your position. But I do agree that this is a great moment in this email exchange.

6cxs2hd6• 13 years ago

Exactly. While Jobs may have been a great negotiator, this set of emails doesn't really show it. The outcome of this negotiation was clear before it started. All Jobs had to do was be patient and reasonably polite.

gavinpc• 13 years ago

Contrast with Murdoch's blunt use of weasel words:

"price-points you don’t like."

"does that give you enough comfort?"

"we are worried more about the absolute holdback of product elsewhere... than we are about the actual haggle over what the price will be" (read, you are haggling)

OrsenPike2• 13 years ago

What made this even more fun to read is knowing it was Murdoch he was twisting and twisting :)

ma2rten• 13 years ago

Steve Jobs had a clear vision: We are going to launch a device that is going to revolutionize the way people consume media. I believe, this is how he won that negotiation.

swah2• 13 years ago

[OT] I've been reading quite a few posts from qz.com and medium.com these days - what is going on?

wmf• 13 years ago

When a story hits the front page people will look for other links from the same site and submit them for easy karma.

meepmorp8• 13 years ago

They write content that people (yourself included, apparently) find interesting.

swah2• 13 years ago

Yes, but I mean... is the quality of good material from this kind of sites increasing for some reason? That's my impression. Wordpress alternatives? Etc.

paul• 13 years ago

The is beautiful. Jobs is great at stating his position in a way that is simple and direct, yet crushing.

epo• 13 years ago

Careful, anti-Jobs sentiment is strong here.

__chrismc• 13 years ago

I find it amusing that someone further up[0] believes the exact opposite - "Jobs hero-worship" is still strong here...

I'm sure it depends on the threads you read.

[0]https://news.ycombinator.com/item?id=5754440

anonymous2• 13 years ago

This part from Jobs's letter sounded strange to me:

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.

Publishers must realise that all books are already available in pirated variants, right? Their worst nightmare - everybody being able to download any book without paying them, is already a reality.

fwonkas• 13 years ago

I don't think that their worst nightmare is that everyone can download pirated copies — it's if everyone does.

joering2• 13 years ago

His statement abused me. Of course there will be people stealing stuff, but thats _minority_. Putting everyone in the same cart (either you with us, or you will see everyone stealing your stuff) matches Jobs overall ego.

jonknee7• 13 years ago

> 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.

Hindsight is a funny thing. Amazon's eBook/Kindle business is continuing to soar while Apple doesn't even mention iBooks anymore.

And then there was this, something believable only in the middle of a reality distortion field:

> 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.

In Steve's world, Apple's raising the price by 30% and then taking 30% is a benefit to the customer and not Apple. Fascinating!

austenallred• 13 years ago

Jobs could have set the price at whatever he wanted and they probably would have given in; Amazon was selling them for $9.99 and had already set the low bar, Jobs just had to pick his price and hold it.

Classic negotiation says the other party will give in if he or she can so long as you hold your points as not for debate. Jobs did just that. Brilliant.

jonny_eh• 13 years ago

It all depends on either party's willingness to walk away. For Apple, books was just one small avenue for potential revenue, for the publishers it's their whole business. If Apple was missing a publisher on iBooks, they'd hardly care. If a book publisher can't get their authors' books on an iPad, those authors might go elsewhere.

weixiyen• 13 years ago

Not hard to negotiate when you are in the driver's seat. The outcome was already decided before the negotiation even took place based on the given circumstances of both companies.

doctorpangloss2• 13 years ago

> Hindsight is a funny thing. Amazon's eBook/Kindle business is continuing to soar while Apple doesn't even mention iBooks anymore.

That's true, but for a few idiosyncratic reasons, if anything.

The Kindle app is available for the iPad, and for a period of time an iPad user could buy the book directly in the app.

If Apple wanted to, it could coerce Amazon to pay 30%, regardless of where the books are sold.

I wouldn't be surprised if Amazon makes most of its money off iPad users. But there are no hard figures. Though if the opposite were true, I'm sure Amazon would be trumpeting everywhere how successful the Kindle is.

notimetorelax• 13 years ago

> I suspect Amazon makes most of its money off iPad users

Just wondering, why do you think that?

CJefferson• 13 years ago

"It is easy to see from the numbers that the vast majority of Kindle book readers use Apple devices."

Out of interest, where are those numbers?

jonknee7• 13 years ago

> If Apple wanted to, it could coerce Amazon to pay 30%, regardless of where the books are sold.

That would be interesting to witness. Apple's second trial over their criminal behavior over eBooks would be a hoot.

MatthewPhillips• 13 years ago

> That's true, but for a few idiosyncratic reasons, if anything.

> The Kindle app is available for the iPad, and for a period of time an iPad user could buy the book directly in the app.

Are you sure you meant to use the word idiosyncratic here? Because being available on as many platforms as possible is the default behavior for a business that sells content. It's Apple that is idiosyncratic here, by choosing to not make its stores available on any device not made by them. It helps their hardware business, where the money is made, but it's a bad choice for consumers.

Steko2• 13 years ago

"In Steve's world, Apple's raising the price by 30% and then taking 30% is a benefit to the customer and not Apple"

The price was already $12.99. The fact that Amazon was willing to eat a large amount of that price on a tiny volume of ebooks in the short term doesn't mean that would have favored consumers in the long term. Today, with agency pricing, the average price of an ebook is around $8. Hasn't that benefited consumers?

jonknee7• 13 years ago

> Today, with agency pricing, the average price of an ebook is around $8. Hasn't that benefited consumers?

Thanks to the settlement, Amazon can now [again] charge what it would like and the result was an immediate drop for titles by publishers that settled. Consumers were hurt by Apple and have benefited from the DOJ's case against Apple's business practices.

http://www.politico.com/news/stories/0912/80961.html

> The settlement approved Thursday requires the publishers not only to kill their contracts with Apple within a week but also to end contracts with any e-book retailers that specifically place restrictions on a retailer’s ability to set prices on e-books. And the settlement also bars the publishers from granting a retailer “most favored nation” status for five years.

And: http://www.mhpbooks.com/amazon-begins-discounting-macmillan-...

Tloewald• 13 years ago

Amazon had to match Apple's price model (or at least maintain a facade of doing so — in fact amazon's royalties only come close to matching Apple's for books under $10). It's hard to compete with someone who sells at a loss to grow market share with no apparent sustainable business model in mind. What's really odd is that Amazon's investors are perfectly happy with this.

devinmontgomery• 13 years ago

This reminds me of when Jobs was proposing the new Apple headquarters to the Cupertino city council: http://www.youtube.com/watch?v=gtuz5OmOh_M, or heck, this dunk: http://www.youtube.com/watch?v=INK-Pr6Z82A. Thrilling to watch, but ultimately it's easy to win a negotiation when you're in the stronger position. What I really wish existed is a transcript from Jobs making his first sale.

fragsworth3• 13 years ago

This wasn't mentioned, but I'm sure HC was given the right to terminate the contract, considering the other terms in this deal. If they ever found that they were losing money from the deal with Apple (because they couldn't sell books elsewhere at prices they wanted) they can pull from Apple. So HC had absolutely nothing to lose and everything to gain by going forward with the deal.

This negotiation was too easy for Apple, and HC was just attempting to haggle. I doubt they expected Apple to cave on much of anything.

bravura• 13 years ago

Is it just me, or does the following quote suggest that Harper-Collins was strongly outleveraged in the negotiation, regardless of Jobs's negotiating skill?

"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."

If Harper-Collins was a "second-tier" publisher, and 4 of the 6 biggest publishers already agreed to these terms, did Harper-Collins really have much wiggle room?

ScottBurson3• 13 years ago

Yes, this was my takeaway too. Negotiating is easy, or certainly a lot easier, from a position of strength.

The subtlety, though, is that sometimes it's about creating the illusion of strength, or even of future strength, when the present reality doesn't fully demonstrate that strength. Jobs did that masterfully here.

abraininavat• 13 years ago

I'm confused. You agree with the parent that Apple was in a position of leverage, then you suggest the subtlety is that sometimes it's about creating the illusion of strength.

Either the position of leverage was an illusion or it wasn't. Maybe Jobs was a master at gaining leverage by creating an illusion of strength, but (if you agree with the parent) this isn't a good example of it. This was someone who had leverage acting as if he had leverage.

peeters• 13 years ago

> Apple doesn’t want to make more than the slim profit margin it makes distributing music, movies, etc.

So given from what I've seen, that Apple takes 30-40% of each song sale, Steve is trying to say here that 30 cents per song sold barely covers Apple's costs? I have trouble believing that. I would imagine that many companies would kill for the profit margin Apple has on iTunes sales.

not_that_noob• 13 years ago

One thing not mentioned here - if the iPad launched without HC titles, and the iPad became a hit (which was unclear at the time of this negotiation), then customers would have an incentive to put pirated HC content onto the device. A few sophisticated customers would have figured it out, and then that knowledge would have spread. Even if Murdoch later succeeded in getting pricing flexibility from Apple at a subsequent date, it would be a pyrrhic victory, as many customers would have been trained on how to do it for free.

So HC had a lot to lose. And Steve knew it - all he had to do was to let Murdoch know that he Steve knew.

It's good to have a good hand.

mhaymo• 13 years ago

This was mentioned. In Jobs' last email, this was the 3rd option he saw for HC:

> 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.

smegel• 13 years ago

You win at negotiation by having a strong position. Getting a strong position, that's the tricky part.

base698• 13 years ago

My big take away from this: Have a multi-billion dollar national company with 120 million locked-in users and you can negotiate however you damn well feel like it.

leephillips• 13 years ago

Jobs had contempt for the whole idea of trying to sell books in any form and thought, wrongly, that there was no future business there, until Amazon proved him wrong.

"Today he [Jobs] had a wide range of observations on the industry, including the Amazon Kindle book reader, which he said would go nowhere largely because Americans have stopped reading." [0]

'“It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore,” he [Jobs] said. “Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”' [1]

Note the conspicuous lack of interest in using Apple's power to promote books and reading.

  [0]http://bits.blogs.nytimes.com/2008/01/15/the-passion-of-steve-jobs/index.html

  [1] http://mssv.net/2008/12/28/the-long-decline-of-reading/

maerF0x0• 13 years ago

Steve's method is classic Dale Carnegie ("How to win friends and influence people") . He phrases everything in what benefits HC will get by making certain choices. He guides HC with win/win thinking, getting HC to choose their way into what Apple wants.

hkmurakami2• 13 years ago

How to win a negotiation: have all the chips.

mhartl• 13 years ago

This really underscores perhaps the most important factor in negotiating, which is to have a strong negotiating position to begin with. This often takes work, but it allows you to drive a hard bargain. (Note: Don't forget to drive a hard bargain.)

nickpinkston• 13 years ago

Honestly - this doesn't show much of Job's negotiating (which I'm sure he was great at) because he was in such a position of power.

Being able to say "We already sold 4 of your competitors" and "we have 120M users that have paid for 2B products" is something any asshole worth their salt would use as leverage this way.

I'd love to see his negotiations in a more precarious position.

mrgoldenbrown• 13 years ago

I agree. Apple would have had no trouble walking away from HC, so they had all the power here. Maybe seeing the negotiation with the first publisher would be better. Or the first negotiations with the music labels when itunes was just getting started.

dgreensp• 13 years ago

I find it tragic that content distributors like Apple do this kind of strong-arming, to the point of asking for limits on distribution through other channels (and in some cases, exclusive contracts).

I understand that I can't force the companies who produce a book, movie, or album to make it legally playable on my TV, computer, tablet, or streaming service of choice. No store has all the content, and in some cases DRM schemes make the content unplayable. There's no guarantee that I can read a particular book on my iPad legally, or put a Britney Spears song on the device in my pocket, or play my movies off a network share on my LG TV. Too bad; the company that paid for the content owns it. However, extortive contracts from the delivery companies add a deleterious force on top of that, like when Netflix or Hulu get exclusive streaming rights to a show and shut the other out.

At some deep level, the players in the content game are fighting instead of cooperating. In the future, I hope content producers learn to exploit monetization models where they don't have to be so overbearing about exactly how content is delivered, and in general they promote rather than inhibit distribution of their content. The Internet provides unlimited ways to discover, consume, and purchase content, so rather than a vision of the future, I expect "digital storefronts" like we have now to look archaic.

That is, if the customers really do have the power to "demand" a good experience, as Jobs puts it. Otherwise, we're just along for the ride, occasionally pelted by shrapnel from wars between giant corporations.

elorant• 13 years ago

This Quartz site has one of the crappiest UI I've ever seen in a web site.

andridk• 13 years ago

Observing two people agreeing to fix prices is nothing to be admired. While it is eye opening to see how Jobs communicates, it is disturbing that we accept this sort of behavior by companies.

yason• 13 years ago

It's easy to win negotiations if either:

- you have leverage and the other party needs you more than you need him

or:

- you can make the other party think you have leverage and the other party needs you more than you need him

reillyse• 13 years ago

Seems to me that this never really seemed like much of a "hard negotiation", Murdoch pretty much held his hands up straight away and said he wanted to make a deal. Not the hard-nosed deal I was expecting.

whiddershins• 13 years ago

How to win a negotiation: have a positional advantage, wait for the other guy to realize it.

pizu• 13 years ago

Here is a vital lesson about how to make arguments and win in a negotiation, but nobody here has picked up on it. You are instead focusing on the numbers...which is a small part of the win...

It's all about psychology and understanding the situation and the customer..let me explain:

Notice how Murdoch uses "I" and "we" (referring to NewCorp/HC) all the time, while Jobs almost entirely uses "you" or "we" (as in HC and Apple).

Take a look at Murdoch's language: " I thin[k] I have a handle on this now" - he's not sure "we we would like to be able to get something done with Apple" - done what exactly? very vague statement, no specific. blah. "The economics are simple enough" - are they really simple?

"we are worried about setting prices to high" - again, he doesn't sound confident or sure of himself

"Feel free to call or write anytime over the weekend to discuss if you like" - he is making himself available to Jobs over the weekend, giving Jobs the power to interrupt him "anytime", he takes a subservient/beta position in the negotiation, and gives the lead to Jobs.

Same sentiment here: "we would much rather be working with apple than not"

And this is quite painful:

"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?" - Murdoch is actually trying to "comfort" Jobs, really? it crossed my mind, that he is almost trying to "please" Jobs here. Psychologically (probably reading too much into his story), his need to please a (fatherly) authority figure (Rupert), impersonated by Jobs. Too bad for Murdoch.

More worries: "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." - This sentence sounds extremely vague, nothing is clearly qualified or quantified. Jobs just comes across as infinitely more knowledgeable on publishing and economics than Murdoch...

"I haven’t shared this with HC directly—so this is only hypothetical." - HYPOTHETICAL? He sounds like a time-waster, almost asks to be hardly negotiated with? Also, do we know who makes decisions here? Murdoch or HC?

"Please let me know."- again...PLEASE

"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?" - Weeks or Months? Which one is it, James? More vague language...

Then contrast this with Jobs, "you" focused language and clear and simple arguments:

"The current business model of companies like Amazon distributing ebooks below cost or without making a reasonable profit isn’t sustainable for long. " - Jobs qualifies and frames Amazon's tactic in a sentence. Boom!

"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." - ALL THE MAJOR publishers are on our side...i.e. NewsCorp/HC side too...

And some more clear, concise and action-oriented language: "All the major publishers tell us" "Apple is proposing" "Analysts estimate" "Customers will demand"

Person A does action B etc etc

Jobs sounds like a man who has done his research, both among other publishers, his competition (Amazon), and knows what customers want. Murdoch has done NONE and only "worries" about NewsCorp, coming across as weak and vague. Pathetic.

Jobs' language is "YOU" focused ("focus on your customer and their pains / benefits mantra" used in copywriting, advertising,etc).

"you will want this too"

"If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution."

"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."

"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." - here Jobs almost frames HC as a second tier publisher...urging HC to move to first tier or else they are going to miss out...

Jobs gives reasons behind his statements, e.g.

"Our proposal does set the upper limit for ebook retail pricing based on the hardcover price of each book."

Why?

"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. "

Jobs offers reasons, solutions, analysis. Murdoch brings nothing, but "worries" and woolly arguments to the table.

And finally, to win Murdcoch over to his side, Jobs does a fair amount of fear-mongering:

"the current situation is not sustainable and not a strong foundation upon which to build an ebook business."

"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"

"Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them."

Kudos to Jobs! What a great display of: - Framing - Focus on the customer (YOU language) - Appeal to other's needs - Understand and address their fears - Provide reasons and analysis in support of your arguments

And many more little gems, that I most likely have missed out!

Jobs had truly been one of the bests (if not THE BEST) marketer/negotiators/CEO of our era.

Tomis02• 13 years ago

So it seems Jobs (skillfully) bullied Murdoch into accepting his offer.

jhuckestein• 13 years ago

FWIW, I recall Jobs' biography mentioning that he was not a great negotiator because he was at times impulsive and abrasive. I think somebody in the book, maybe Jobs himself, is quoted as saying that Tim Cook was a much more effective negotiator.

Like others have said, this was not a difficult negotiation for Apple. Maybe Murdoch could have used the other verticals (video and newspapers) in a better way or tried to leverage an upcoming big release. I don't think they had reason to give in either way though.

jabbernotty• 13 years ago

When I visit the URL, I appear to be reaching a different article, titled "China manufacturing shrinks in May, leaving policymakers with few good options"

What gives?

Edit: I end up on

the-steve-jobs-emails-that-show-how-to-win-a-hard-nosed-negotiation/#87589/china-manufacturing-contracts-in-may-leaving-policymakers-with-few-good-options/

I'm browsing with IE9, I assume the JS is borked.

ttrreeww• 13 years ago

This does seem to be price fixing on Apple's part. Also, this seem to be an anti-competitive deal.

Steve Jobs emails that show how to win a negotiation

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