Eddy Cue on Apple's 50 years: launching the online store, 99-cent songs, and the iPhone moment

Basic Technology Research Co. LTD dedicated to building Chinese style AGI. I simply couldn't pass up the opportunity to become a billionaire in R in RMBB. Uh he had a lot of fun with it. We had fun putting up a card and uh we're big fans of Will Depw. Well, without further ado, we have Eddie Q in the reream waiting room. Let's bring him in from the TV. Eddie, how are you doing?

What's going on? It's great finally to be here. I've uh wanted to be on this show and I got to tell you, I I've gotten more text messages from friends about being on here, including my kids, than uh probably anything I've ever done. So, it's it's great uh for you to have me.

That's amazing. And what and what a what a what a special moment. What an amazing time. Uh I would love to just start with some reflection. Uh I want to hear uh particularly about your your first decade at Apple. what was that like um leading you know what what led you to the company? What were some of the first projects you worked on? Uh sort of take us through some of the early history.

Yeah, I was lucky. I was I was uh a junior in high school when the Apple 2 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 uh I said there's two things I want to do. I want to work at Apple and I want to meet Steve Jobs.

Wow. uh and uh dreams come true. Here I am 38 years later at Apple. I came in as a programmer and uh was working on HyperCard and uh sort of the precursor to Blue Links with lines underneath uh linking uh and I've been uh done so many things here at Apple. I've had a amazing team and continue to have the the be 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 it's the innovation of creating these products uh that let people do amazing things.

Uh and I felt that way when I was using the product. the attention to detail of those products. There was a connection that you could just feel.

Yeah.

Um and so it was more than just what you could see and uh 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 of the original Apple online store? I feel like a lot of people assume that this always existed. No, it was a herculan effort, I'm sure. uh what was the inspiration? What was the the backdrop there? What was the mood like as you entered into that market?

Yeah, it was a crazy time because people forget, but in those times we sold all of our computers through channels like Compusa and and local computer stores and and the idea of building an online store and selling direct. Uh there were a lot of people inside of Apple even that felt like if we did that, the channel's going to walk on us and they're going to stop selling. And uh Steve and and we wanted to to move forward and and be able to do custom configurations so people could order exactly what they wanted. Yeah.

And uh we thought it was something that customers, you know, it was just beginning, but it was something that customers really wanted. and uh Steve and I and uh a small team worked on it and 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

uh the Bondi blue one with the clear and so we launched the uh

the store and the the Bondi blue um 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 uh 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 and then we had apple.com already and so some people were coming from that and uh and so it was that part was a little bit easier and 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 you'd want to be on the cover of uh you know a magazine and and the front page of the newspaper and so we had all of that

uh pretty well and I think our design when we did this it was called good better. you could buy different configs and and change them. But our design for shopping for a computer in a Mac at that time um was something no one had ever seen. It was it had all of the things that we cared about. The simplicity, uh really easy to check out, easy to buy, all of the the the specs and the questions you would have, things that were difficult when you went to other sites. Uh I thought we did a great job and and and it really resonated with customers.

Yeah. Can you can you help me understand like the services division of Apple is is is massive. It's a huge growth engine. There's so many interesting uh 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 or actually uh 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. Uh, you know, there wasn't a lot there. Was very early days of of the internet and doing things like email and

uh things like storage and the cloud, but it was very very early. The

the the thing that was a big change uh for us was really music. Yeah. and and it was iPod plus iTunes.

Mhm.

And uh that was something that was it truly revolutionized music. Uh and it really gave us a whole different perspective of what services can do. When you take the hardware product in a sense, the operating system and the software and the services and you tie them together, which is something I think we do better than anyone. Yeah.

Uh it really showcased when we did iPod plus iTunes. And so all of a sudden, uh, we did that. Not only did we do it for the Mac, but we also did it for Windows.

Yeah.

And so it opened Apple to a whole new ecosystem of customers that had never used our products before, but we're using iTunes and iPod for the first time.

That was my first Apple experience was iTunes and iPod on on a Windows PC. Yeah. Uh, and now I have 25 Apple. My first is I was so I was so loyal to Apple products that I refused to get a g like a PC for gaming. And so I worked I probably refed like 300 soccer games like some absurd amount to get the maxed out MacBook Pro at the timeing because I was just so so loyal that I was like I'm not I've got to if I'm stay play video games I'm going to do it on on on Mac.

Yeah, it's great. You know, when we launched when we launched iTunes on Windows, I remember we did a a poster and and Steve called it on the presentation. It was like hell froze over.

Yeah. Uh what what was uh actually getting iTunes off the ground like? And how was it different than the other uh just motions that Apple had developed? because it's not only a software product, but it's deeply linked to rights holders and agencies and musicians and you have to get uh 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 a a computer, but it's a very different uh go to market or building motion. Like, how was that different? Yeah, it was painful because um I think there were three three pieces. You had us,

you had the label, and you had the artist.

Yeah.

Um

we were really good with artist. So, which is something we've always been about, the creators. And I think when we look when you look at all the things that we've done,

um the two primary people that we focus on and think about are people that are the in customers that are using it and and the creators that are creating all these incredible products. So we had a good relationship with musicians at the time but we really didn't have any relationship with labels and and ultimately they did control the environment and uh at the time they had a different perspective you know it was really the beginning of Napster and piracy and

and instead of thinking about you know how to move forward into a future their view was to lock things down um and and really stop it. And as you know, when you have something that's better like that, there 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. Uh they weren't really interested in in us at all. And 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 you could buy 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 push back against like just $99 a song 99 cents. I mean, uh is like, you know, typical Apple style, just like let's just make it simple, easy to understand. Uh, but was their push back like kind of concerned that people would, 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 like

Yeah. The problem was whether you sold it at $1.29 or 79 cents that wasn't going to change that.

The the 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 n when the price is 99 cents and it's consistent, you never have to think about price.

Mhm.

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.

Um, and so nobody wanted to do that and and 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."

Yeah.

Uh 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 going to give you and then we're going to charge you at the end. And so therefore that's exactly what happened. Very few transactions were just 99 cents. Most of the transactions were multiple dollars and the fixed fee didn't matter.

Interesting. uh ho how how important was it to position iTunes as sort of a step up from the status quo uh 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 counterveailing force. How how what were discussions like at that time about positioning the the the economic opportunity that uh 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.

Um and our our feeling has always been uh the vast majority of people want to do the right thing.

Yeah.

And they want to pay artists.

Yeah. Um, 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 were that's part of the 99 cents. Uh it was part of like you can in those times you were burning a lot of CDs. Uh they had limitations on the number of burns. We didn't want any limitations cuz that's not something a customer would understand. And so our feeling around this was if you let us do this um you're going to grow again as opposed to cratering and and I remember Steve asked me once is before we had launched he says well you know what is success um around this and I said you know honestly I don't know I you know I'll go ask uh and so I went into Universal Music and I asked them you know what's what's success for you guys in in this business and they said well if you could sell you know a million songs in in a month, anytime in the first six months. Um, that's success for us. So, I came back, I said, "Okay, that's that's the goal." Then, uh, we sold a million songs in the first six days.

That's amazing.

I love it.

And so,

that's great.

Yeah. So it's like that 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 um people are willing to pay but it has to it has to be done well.

So so talk about the the shift to subscription because it feels like a much more natural experience for all the Apple service that I subscribe to. uh what was the thinking? How long like what were the hurdles along the way to get to uh the the the the the current situation with Apple TV Plus where you can you know consume everything. Was 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 the key to this is it's it's hard to remember this now because we're so used to it, but it's having internet connectivity um anywhere you are.

Sure.

Uh and all the time and and and pretty much almost it's it's almost impossible now to be anywhere uh and not have you know actually fast internet.

Yeah.

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. Mhm.

Um, in a sense, so you wanted to limit the amount that you actually used. And so things like downloading and and and keeping things on device uh 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 um whether you have it downloaded or not. It's now invisible to you. You don't even think about it. Yeah,

most of the time we we put things on device just to cache them or whatever, but we don't you don't need to worry about whether it's on your device or not.

Yeah. Uh we 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 I'll say look there 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.

Yeah. at that time and Steve came back and that moment was the beginning of a change where you 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 and I I remember going backstage with Steve after it was done and and and and hugging actually because it had gone so well and we knew that was a big step. Uh 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 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, ah, 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 iPhone?

Yeah.

What what lessons from Steve or kind of memories do you find yourself coming back to to the most in in the in the present day of Apple? Well, I think something that, you know, people take for granted, but nobody worked harder than Steve.

Um, you know, and these things don't come easy. And he was the hardest worker of anybody I know. Um,

how did that manifest? Like long hours, just deep focus.

It's it's it's focus because it's focus and long hours. What it was was there only two things that mattered to Steve. And and I think when people ask me what's the difference between Tim and Steve, the reality is that's not the right question. And the question is what's the same things between Tim and Steve?

And uh you know their work ethic they worked harder than anybody. Uh 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. Um believe it or not, not the financial results. um that was a secondary function that you obviously needed to keep going, but it was never the primary thing. And so those three things uh are something that I still, you know, take to heart and and uh I feel I I you know, that's what I try to do and and how I feel.

Can we talk about F1? I love that there's a movie and also you can watch the you can watch the actual races. This feels deliberate. What's the strategy? I'm it 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. John John had talked about this on the show. Wanting this to happen, so to see it come together the way it has been amazing.

I I and it seems like soccer 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 is personal. F1. I I've been an F1 fan for a long time. Um, you know, my my I learned about F1 by going to the library and and reading magazines because it, believe it or not, F1 just wasn't televised at all in the United States. So, you you didn't know anything about it. Um, so I I knew a lot about it. Um, Stephano, who's the CEO of Formula 1, is somebody who was at Ferrari and and then later on at Lamborghini, and I've known him. So when he took on uh Formula 1, 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 um 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 uh Jerry and Joe um Kazinski, it was really Joe's idea. And I just love the idea because there hasn't been a a huge racing movie. Most racing movies have not done that well.

Yeah.

And I thought there was a real opportunity with F1 to tell an incredible story. um and Brad Pitt uh 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 cuz 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 GeForce. And so we 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. Yeah.

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 US is how many of you have seen an F1 race? And the truth is very few hands were ever raised. And then after the movie, you asked them, how many people would want to see an F1 race? And you know, every hand went up. Um, and so we thought, wow, if if we did this together now and these ideas of how we can really innovate um on the on the whole experience of what it's like to watch an F1 race, uh, we really can make a difference here. And and it's been great. We've done three races so far. The ratings are way above what they've ever been in the US. And uh so and and we're just getting started, but things like multiv- view, 30% of the people watching F1 races uh are watching with multiv- view, so they can get different cameras, uh see their favorite team.

Uh so it's it's it's definitely changed a lot of how people are experiencing it.

That's amazing.

Apple Apple racing sim, you'll have two buyers.

Yes. You know, we just did

we just did uh Vision Pro. Yeah. Uh with uh Sim Racing, so you could do that.

Okay. Vision Pro.

So there you go.

We got it for you.

Yeah. The racing and in the automotive world has a man on the inside. So we're

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 taking 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. Goodbye.

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