FULL INTERVIEW: Apple Exec on How Apple Builds Products That Actually Win

0:00Well, without further ado, we have Eddy Cue in the Restream Waiting Room. Let's bring him in to the TVP in Elsterdome. Eddy, how are you doing? What's going on? It's great finally to be here. Thank you so much. I wanted to be on this show, and I've got to tell you, I've gotten more text messages from friends about being on here, including my kids, than probably anything I've ever done. So it's great for you to have me. That's amazing. And what a special moment. What an amazing time. I would love to just start with some reflection. I want to hear particularly about your first decade at Apple. What was that like leading?

0:39What led you to the company? What were some of the first projects you worked on? Sort of take us through some of the early history. Yeah, I was lucky. I was a junior in high school when the Apple II was out, and I wanted to be an architect. and when I discovered a computer, I realized I wanted to be a programmer and engineer. And I said, there's two things I want to do. I want to work at Apple and I want to meet Steve Jobs. Wow. And dreams come true. Here I am 38 years later at Apple. I came in as a programmer and was working on HyperCard and sort of the precursor to blue links with lines underneath linking.

1:18And I've done so many things here at Apple. I've had an amazing team and continue to have the best. I'm working with the best people in the world at what they do. Yeah. What was the lore of Steve Jobs like when you first sort of heard about him? Because, you know, my generation knows, like, the iPhone keynote. There's videos online. There's interviews. There's whole books. There's multiple books written. But what was your experience learning? What drew you to Steve early on in your career? I just think it's the innovation of creating these products that let people do amazing things. And I felt that way when I was using the product.

2:02The attention to detail of those products, there was a connection that you could just feel. And so it was more than just what you could see. And then it let me do things that I couldn't imagine doing before. And I think that's something that we've continued over our 50 years. Yeah. Can you talk about the launch of the original Apple online store? I feel like a lot of people assume that this always existed. No, it was a Herculean effort, I'm sure. What was the inspiration? What was the backdrop there? What was the mood like as you entered into that market? Yeah, it was a crazy time because people forget.

2:41But in those times we sold all of our computers through channels like CompUSA and and local computer stores and the idea of building an online store and Selling direct there were a lot of people inside of Apple even that felt like if we did that the channel is gonna walk on us and they're gonna stop selling and Steve and we wanted to move forward and be able to do Custom configuration so people could order exactly what they wanted and we thought it was something that customers, you know, it was just beginning, but it was something that customers really wanted. And Steve and I and a small team worked on it and built it and launched it at the same time that one of our, you know, best products we've ever done was the iMac, the Bondi blue one with the clear.

3:29And so we launched the store and the Bondi blue iMac at the same time. And I remember at the end of the day, we were wondering, you know, Steve, I came by his office and he's like, well, how did we do on the first day? And we had sold a million dollars worth of IMAX and we were high-fiving each other and going, this is amazing. How did you drive people to the, did you just have apple.com? Were people already typing in apple.com? Like how do you tell people that a website is launching before you can go viral on social media or do live interviews on, you know, how do you promote this? Yeah, we were lucky in that we had apple.com already.

4:07And so some people were coming from that and uh and so it was that part was a little bit easier and in those days you relied a lot on on press interviews and print sure and so we did a lot of okay you know you'd want to be on the cover of uh you know a magazine and the front page of the newspaper and so we had all of that pretty well and i think our design when we did this it was called good better best you could buy different configs and change them but our design for shopping for a computer and a mac at that time was something no one had ever seen. It had all of the things that we cared about, the simplicity, really easy to check out, easy to buy, all of the specs and the questions you would have, things that were difficult when you went to other sites.

4:53I thought we did a great job and it really resonated with customers. Yeah. Can you help me understand, like the services division of Apple is massive. It's a huge growth engine. There's so many interesting pieces of that. I want to go into a lot of those. But when was the first time in your career that you realized that there was something that you could sell or actually turn into a business line that was not a physical product and would live in this services category? When did services even become like a division or concept or an opportunity at Apple? Yeah, I think we started as a hobby. You know, there wasn't a lot there.

5:33It was very early days of the internet and doing things like email and things like storage in the crowd but it was very very early that the the thing that was a big change for us was really music yeah and it was iPod plus iTunes and that was something that was it truly revolutionized music and it really gave us a whole different perspective of what services can do when you take the hardware product and it the operating system and the software and the services, and you tie them together, which is something I think we do better than anyone, it really showcased when we did iPod plus iTunes. And so all of a sudden, we did that.

6:16Not only did we do it for the Mac, but we also did it for Windows. And so it opened Apple to a whole new ecosystem of customers that had never used our products before, but were using iTunes and iPod for the first time. That was my first Apple experience, was iTunes and iPod on a Windows. Windows PC, yeah. And now I have 25 Apple.

6:36Eddy Cue:My first is I was so loyal to Apple products that I refused to get a PC for gaming. And so I worked, I probably reffed like 300 soccer games, like some absurd amount to get the maxed out MacBook Pro at the time. That's amazing. Because I was just so, so loyal. And I was like, I'm not, I've got to, if I'm going to play video games, I'm going to do it on Mac. Yeah, it's great. You know, when we launched iTunes on Windows, I remember we did a poster and Steve called it on the presentation. It was like, hell froze over. What was actually getting iTunes off the ground like? And how was it different than the other just motions that Apple had developed?

7:21Because it's not only a software product, but it's deeply linked to rights holders and agencies and musicians. And you have to get so many different groups. It's it feels much more permissioned than just building a computer and selling it Of course you need manufacturers and you need a lot of people on board to build a Computer but it's a very different Go to market or building motion like how is that different? Yeah, it was painful because I Think there were three three pieces you had us you had the label and you had the artist. Yeah We were really good with artists. So which is something we've always been about the creators And I think when you look at all the things that we've done, the two primary people that we focus on and think about are people that are the end customers that are using it and the creators that are creating all these incredible products.

8:14So we had a good relationship with musicians at the time, but we really didn't have any relationship with labels. And ultimately, they did control the environment. And at the time, they had a different perspective. It was really the beginning of Napster and piracy. And instead of thinking about how to move forward into a future, their view was to lock things down and really stop it. And as you know, when you have something that's better like that, there is no stopping it. And so we went to the labels and we had this idea of selling songs at 99 cents. And they kind of told us to go pound sand. They weren't really interested in us at all.

8:54and their idea was they were going to build uh some music services so there were five or six major labels and they built two music services and we told them like what you guys are doing is not going to work they had different pricing for each song they had different rules sometimes

9:08Eddy Cue:you could buy so they would like price a hit higher than like some random song on an album yeah i mean it was all all over the map yeah and and part of part of the pushback against like just $99 a song. 99 cents, I mean, is like, you know, typical Apple style. It's just like, let's just make it simple, easy to understand. But was their pushback like kind of concern that people, you know, hey, we're used to getting people to just buy an entire album and maybe what's going to happen if people just buy, you know, a song here or there? Yeah, the problem was whether you sold it at$1.29 or 79 cents, that wasn't going to change that.

9:47the key to there were two keys to 99 cents that um we really believed in and and people didn't see there were two two primary things number one is at night when the price is 99 cents and it's consistent you never have to think about price and so you would preview a song decide whether you like it or not and if you did you bought and so there was never any transaction a billing transaction that you had to think about because you knew it was 99 cents it's not a lot of money at the time and and it was really easy to do the second thing was that people could never do that because at 99 cents if you're charging a credit card you would lose money because credit cards have a fixed fee and they have a percentage that you pay well the fixed fee and the percentage on a 99 cent song was like a quarter yeah and the vast majority of the money went to the labels so every time we'd sell a song we would lose money and so nobody wanted to do that.

10:45And so no other service did that. What we decided to do is as we were building this, and I remember it was a huge discussion because we would lose a ton of money, obviously, if you're losing on every song. We said, look, this thing is amazing. You're not going to buy just one song. You're going to buy a lot of songs when you go on there. And when you do that, instead of closing the transaction on every single one, why don't we just combine them Over a period of time. So let's keep the you know, let's keep the transaction open for a period of time Let's call it 24 hours or eight hours and everything you buy We're just gonna give you and then we're gonna charge you at the end and so therefore That's exactly what happened.

11:23Very few transactions were just 99 cents. Most of the transactions were multiple dollars and The fixed fee didn't matter

11:32Eddy Cue:interesting How how important was it to position? iTunes as sort of a step up from the status quo from like the Napster era and a positive, because I feel like anytime the economics of an industry change, there's natural uncertainty from artists. And iTunes did represent a change in the economic structure, but it was such a great countervailing force. What were discussions like at that time about positioning the economic opportunity that that artists would have in the new regime yeah I think we wanted during that time the music business was cratering okay from an economic point of view yeah and our feeling has always been the vast majority of people want to do the right thing yeah and they want to pay artists yeah and so but what they don't want is they don't want to be forced into something that doesn't make any sense or isn't really friendly or isn't the right way to do it and so we That's part of the 99 cents.

12:38It was part of like, in those times, you were burning a lot of CDs. They had limitations on the number of burns. We didn't want any limitations because that's not something a customer would understand. And so our feeling around this was, if you let us do this, you're going to grow again, as opposed to cratering. And I remember Steve asked me once before we had lunch, he says, well, what is success around this? And I said, honestly, I don't know. I'll go ask. And so I went into Universal Music and I asked them, what's success for you guys in this business? And they said, well, if you could sell a million songs in a month any time in the first six months, that's success for us.

13:24So I came back. I said, OK, that's the goal then. We sold a million songs in the first six days. That's amazing. I love it. That's great. Yeah, so it's like that's what we, you know, obviously it surpassed even our expectation, but it was an example of if you give people the right way, people are willing to pay, but it has to be done well. So talk about the shift to subscription, because it feels like a much more natural experience for all the Apple service that I subscribe to. What was the thinking? How long, like what were the hurdles along the way to get to the current situation with Apple TV Plus where you can consume everything?

14:11Was this just a market dynamic? Was it something that you saw in the future early on and it was more of how do we get there smoothly? What was the process? Yeah, the key to this is, it's hard to remember this now because we're so used to it, but it's having internet connectivity anywhere you are. Sure. And all the time. And pretty much, it's almost impossible now to be anywhere and not have actually fast internet. And so that allowed a whole different thing. Because before that, you didn't have, one, you either didn't have it, or two, you were paying by usage in a sense. So you wanted to limit the amount that you actually used.

14:52And so things like downloading and keeping things on device all the time was really important. When you have unlimited, in a sense, internet access or a network access, then you can provide all these capabilities and not have to worry about whether you have it downloaded or not. It's now invisible to you. You don't even think about it. Most of the time, we put things on device just to cache them or whatever, but you don't need to worry about whether it's on your device or not. Yeah. We have a question from the chat. it's a bit random but i'd love to know your uh your favorite keynote moment throughout your career that's great i'll say look there are two there's a personal one which was the first one when we launched the imac and the apple store because that was the beginning of turning apple around and it was a big moment for apple we were it's hard for people to imagine this but apple was going bankrupt at that time.

15:50And Steve came back. And that moment was the beginning of a change where at least we knew now that we weren't going to go bankrupt. And so it really gave us life. And so it was an incredible moment. And I remember going backstage with Steve after it was done and hugging, actually, because it had gone so well. And we knew that was a big step. the second one and and honestly now in hindsight i was i completely underestimated it was the iphone launch it's the only time i made my wife and my kids my two kids come to the event they were eight and eight years old and i was like this is a historic moment because i had had the ability of using the iphone uh for a few months before we launched and played with it and and and it was just amazing to it's it's the coolest best thing i had ever seen in the world and so i thought this is going to be amazing now i completely underestimated it because now you look at it and go it's like i don't even know what the world is like what would we what would you do without an

16:55Eddy Cue:iphone yeah what what lessons from steve or kind of memories do you find yourself coming back to the most in the present day of Apple? Well, I think something that people take for granted, but nobody worked harder than Steve. These things don't come easy, and he was the hardest worker of anybody I know. How did that manifest? Like long hours? Just deep focus? It's focused because it's focused and long hours. What it was was there are only two things that mattered to Steve. And I think when people ask me what's the difference between Tim and Steve? The reality is that's not the right question. The question is what's the same things between Tim and Steve?

17:40And, you know, their work ethic, they worked harder than anybody. They were completely focused on two things, their Apple and their family. Those are the only two things that mattered. And the third thing was the attention to the products themselves. It was about the products and what we delivered to customers. Believe it or not, not the financial results. That was a secondary function that you obviously needed to keep going, but it was never the primary thing. And so those three things are something that I still, you know, take to heart. And I feel, you know, that's what I try to do and how I feel.

18:18Can we talk about F1? I love that there's a movie. And also you can watch the actual races. This feels deliberate. What's the strategy? it seems to make a ton of sense but how long has this been cooking what's the thought process I remember it must have been last year

18:35Eddy Cue:John had talked about this on the show wanting this to happen to see it come together the way it has and it seems like soccer or football sort of faced a similar strategy but I'm very interested in how you see different media properties connect together yeah look the F1 thing is personal one I've been an F1 fan for a long time. I learned about F1 by going to the library and reading magazines because, believe it or not, F1 just wasn't televised at all in the United States. So you didn't know anything about it. So I knew a lot about it. Stefano, who's the CEO of Formula One, is somebody who was at Ferrari and then later on at Lamborghini, and I've known him.

19:19So when he took on Formula One, I remember meeting with him in London and saying, you know we're not quite there yet but someday i hope we can be working together on f1 and so i always envisioned that there was things that we could do that no one else could do the movie came about separately not kind of related but this this idea of doing a movie and and uh jerry and joe um kaczynski it was really joe's idea and i just love the idea because there hasn't been a huge racing movie. Most racing movies have not done that well. And I thought there was a real opportunity with F1 to tell an incredible story and Brad Pitt and the cars and the excitement and that we would, for the first time, had enough technology to show what it was actually like to be in an F1 car.

20:11Because when you watch on TV, it kind of looks like they're on a sunday drive it looks pretty easy you don't get the g-force and so we had these ideas of taking the iphone camera and putting them in all over the cars and different ideas that we thought would give that experience now the movie took a lot longer because we had to go through uh covid strikes all kinds of things um but it turned out spectacular and when we when we would show the movie one of the questions we would ask uh to people in the u.s is how many of you have seen an F1 race. And the truth is very few hands were ever raised.

20:44And then after the movie, you asked them how many people would want to see an F1 race. And, you know, every hand went up. And so we thought, wow, if we did this together now and these ideas of how we can really innovate on the whole experience of what it's like to watch an F1 race, we really could make a difference here. And it's been great. We've done three races so far. The ratings are way above what they've ever been in the U.S. And so, and we're just getting started, but things like Multiview, 30 % of the people watching F1 races are watching with Multiview so they can get different cameras, see their favorite team.

21:25So it's definitely changed a lot of how people are experiencing it. That's amazing. It's such a great product.

21:32Eddy Cue:Apple, Apple racing sim. You'll have two buyers. Yes.

21:39we just did uh vision pro yeah uh with uh sim racing so you could do that okay there you go

21:48Eddy Cue:we got it for you yeah the racing and the automotive world has a man on the inside so i'm the strongest supporter of the vision pro i watched another movie in it this weekend jordy if i call if i when i call john at 10 p.m on a friday night he's always he's always i love the product i'm a huge fan anyway thank you so much for it's truly truly been an honor it's truly been an honor congratulations on 50 years what an amazing accomplishment we'll talk to you soon i appreciate it thank you thank you have a great rest of your day