We've always known that Steve Jobs was a visionary and have heard of his legendary business acumen, but we have never really seen him in action.
However, we caught a glimpse of his negotiation skills in email correspondence between Jobs and media mogul Rupert Murdoch's son, which was released by the US government in relation to its price-fixing lawsuit against Apple. In the emails, we see Jobs successfully convincing James Murdoch to get HarperCollins, a News Corp. subsidiary, to sign a deal to sell its ebooks in iTunes. Quartz has the email exchange in most of its entirety, but let's take a look and dissect one of the emails Jobs wrote.
Read on to see the email.
A few thoughts to consider (I’d appreciate it if we can keep this between you and me):
- 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.
- 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.
- 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.
- $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.
- 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.
- 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.
Jobs seems to have thrown a lot of what we know about negotiation out of the window. The most important thing to note is he wrangles over details via email, when we are often told that sensitive matters should be addressed in person. It just goes to show that if done right, negotiating is possible over email. Here are some of the other smart moves he made:
- Timely. When addressing sensitive matters, it's important to respond as soon as you can. Sometimes when you delay, it may disengage the recipient or you can come off as not prioritizing it. Jobs sent his response to Murdoch's email in the same day.
- Be assertive. Jobs doesn't back down on any point, and his language doesn't have a hint of uncertainty. He is assertive, but not to the point of being aggressive.
- Use bullet points. When you have multiple points to make in your email, it's best to divide it up in bullet points so they are more palatable to the eye and easier to get through.
- State numbers. At the end of the day, money makes the world go round and numbers are always a great negotiating point. It solidifies arguments and turns the rhetorical into data-driven statements. Jobs clearly is aware of this when he wrote, "Apple’s iTunes Store and App Store have over 120 million customers with credit cards on file and have downloaded over 12 billion products."
- Entice with potential. Jobs is at heart an expert salesman, and the key to every successful sale is to get the customer to believe in the product. He persuades by bringing up the potential of the iPad in this statement: "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."
- Bring up the competition carefully. Of course, nothing gets the blood going like competition, and Jobs teases this reaction out of Murdoch when referring to the other publishers. However, he does this with finesse and quickly adds a compliment after bringing up the competition by saying that Apple would love to work with HarperCollins. He wrote, "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."
- No exclamation marks. There were no exclamation marks used in the email, which tells us that to be taken seriously, perhaps we should avoid using exclamation marks in emails. It can make us look less assertive.
- Use name of the recipient once. I've seen emails in which the writer repeatedly uses the name of the recipient throughout the email, which can come off as trying to force familiarity. The fact that Jobs only calls out James's name once shows his assertiveness and confidence. Because he doesn't feel the need to keep repeating the reader's name to rouse a sense of camaraderie to make the negotiation work, it seems like Jobs already has the upper hand.
- The right sign-off. Although he doesn't use the same sign-off in every email, the one he used in this particular email was more personalized, yet still professional. Jobs signed off saying, "Thanks for listening." It shows a little more appreciation and is the perfect ending for this email, given that he didn't back down from his stance. To me, the statement says: "Hey I know you're busy, so thanks for taking the time to read this email."