Steve Jobs is back? How we could tell in 1996
The January 1996 cover of Red Herring magazine. One year later—in a stunning move—Apple announced the purchase of NeXT for $400 million and brought Steve Jobs back to the company he cofounded.
By Anthony B. Perkins
Red Herring, January 1996
Steve Job tell’s his new story
Steve Jobs was happy to tell us that Pixar Animation Studios is “the only true digital studio in the world.” Pixar gains this distinction, of course, by being the first digital effects house to actually produce a full-feature film entirely on a computer. Standing in front of a packed house at the San Francisco premiere of Pixar’s new blockbuster, Toy Story, Mr. Jobs was at his best. He told a story of how his four-year-old son watches the Disney classic Snow White and the Seven Dwarfs over and over again. “The thought of participating in the production of a classic film such as Snow White, which our grandkids may watch in 30 years, is what’s exciting for me.”
What is also special is that, on the heels of its first movie release, Pixar went public at an astounding market valuation, flying by the $1 billion mark by the end of its first day of trading. The preceding day, power journalist John Markoff of The New York Times wrote a story on the comeback of Mr. Jobs that landed on his paper’s front page under the headline “Apple Computer Co-founder Reaps a Billion Dollars on Stock Issue.” Mr. Jobs reached this billion-dollar zenith by buying Pixar from movie mogul George Lucas 10 years ago for $10 million, then pumping an additional $50 million into the company to keep it puffing until it finally showed a profit last year. Whether Pixar’s whopping market valuation holds up or not, Mr. Jobs deserves all the success he can garner for hanging in there with his fledgling company. Few venture capitalists we know would have done the same.
This magical success is neither the beginning, nor will it be the end of the Jobs story. In 1976, at the age of 20, Mr. Jobs co-founded Apple Computer. Over the following decade, Mr. Jobs designed the Apple II, and led the development, manufacturing, and marketing of the Macintosh and LaserWriter, two products that still make up the lion’s share of Apple’s $10 billion revenues. In 1985, Mr. Jobs left Apple to found NeXT Computer, a pioneer in object-oriented software. While the NeXT story is not nearly as glamorous as Pixar’s, we think the company is going to have a hugely successful year in 1996, and may also go public soon. [The Herring got a full update on NeXT in our below with Mr. Jobs.] Mr. Jobs is betting NeXT on two new initiatives, by building software development frameworks for both Windows and the World Wide Web.
When we met up with Mr. Jobs for the interview, we noticed that some of his legendary idiosyncrasies still exist. The minute we showed up, he slipped out the back door “for a walk” — for 45 minutes. His PR people still dote on him. When our photographer tried to take photos during the interview, he snapped at her sarcastically and made her stop. Manipulation, selfishness, or downright rudeness, we couldn’t figure out the motivation behind his madness. But he gave us a great interview, so we don’t really care.
What we do care about is that Steve Jobs is an original. He’s a guy who loves “people who work their butts off on a concept…and bring it to market.” It is very clear that he isn’t in business for the money, but for the opportunity to create, as he used to say, “insanely great” products. Over the course of the couple of hours we talked with him, he spoke proudly of the Mac, he described several of NeXT’s new technologies as “far-and-away the best in the world,” and his eyes sparkled when we asked about Toy Story. There is a slight difference in Mr. Jobs’ demeanor these days, however. He has ventured out of the infamous “Steve Jobs reality distortion field.” He understands now that the best technologies don’t always win. He thinks that the biggest issues that will determine the fate of the Web are not technical issues, but geopolitical. He also made several references to being “older” (he just turned 40), and even ironically commented that although Netscape co-founder Marc Andreessen is very smart, he is still “very young.”
British psychologist and author Anthony Storr points out in his book Solitude — A Return to the Self that there is a fine line between the madman and the genius. Both require a rich fantasy life; to be the latter requires that you keep at least your big toe on the ground. Over the years, Steve Jobs has been both. But today he seems more firmly grounded in reality, and it is beginning to pay off. No matter what his plans are for the future, we hope he keeps pursuing his imagination. All you have to do is see Toy Story, or see a demo of WebObjects, and you’ll know what we mean.
What is NeXT?
In 1976, at the age of 20, Steve Jobs co-founded Apple Computer, where he not only built the Apple II, but helped develop and manufacture the Macintosh and LaserWriter. Since ’85 his entrepreneurial energies have been focused on running NeXT Computer, a leader in the object-oriented software market. Mr. Jobs spent an afternoon with Red Herring philosophizing about Netscape versus Microsoft, the Internet promise, and the pros and cons of youthfulness.
Perkins: Beginning when Jim Clark met Marc Andreessen and founded Netscape, every technology executive seems to have had their own “road to Damascus” experience regarding their newfound faith in the Internet. How long have you been thinking about it?
Jobs: For probably seven or eight years. I don’t know if you have tried the NeXT e-mail system, but it is really the best in the world. So we’ve been using the Internet for a long time to send mail to people. They never did that at Apple. The more relevant question, I think, is when did we start recognizing the value of the World Wide Web. NeXT has had a long association with the Web. Tim Berners-Lee, the European physicist who led the team that developed the original foundation for the Web, used NEXTSTEP. So we were somewhat exposed to it from the very beginning. But I don’t think we quite got it until maybe two years ago. That’s when we started to see that the Web was going to be phenomenal, and it was going to change the way people think of computing.
Perkins: How so?
Jobs: The old way to look at computing was as a straight line between the desktop and the enterprise, with the primary focus on improving desktop productivity. That world, as we all know, is owned by Microsoft. But the Web is changing all of that. One way to view the Web is as the ultimate direct-to-customer distribution channel. At least that’s how NeXT looks at it. Now who cares about that? Businesses! Suppliers! They are the people who can best leverage the Web by using it to conduct business and make money. So the Web completes the computing loop by providing businesses with a new way to interact with their customers.
Perkins: Perhaps ironically one could say it’s like the old mainframe computing model, but with all of your customers hooked into your network, too.
Jobs: Exactly! The browser is just a 3270 terminal [IBM workstation] on multimedia steroids. Right?
Perkins: What do you think about Netscape’s vision that someday soon we will all be automatically hooked to the Net when we boot up our computers, and their Navigator platform will be our primary interface to the world?
Jobs: I wish the world could work that easily, but it doesn’t. You are talking about ideas, I am talking about reality. Look, I love Marc Andreessen, he’s a great guy. But he’s young, and he’s got Microsoft to deal with.
Perkins: But Netscape does have 10 million customers using the Navigator, and that is reality.
Jobs: Yeah, but they give it away. They have probably made $20 million off their browser business. Do you think they will make a lot of money on 2.0? It just ain’t gonna happen. They don’t have 10 million customers anyway, they have four million.
Perkins: We haven’t personally checked the numbers, but Netscape claims to have a system in Mountain View that identifies users every time they fire up Navigator, and so they can verify those numbers.
Jobs: Okay. So maybe they do. And I think that’s wonderful. But, by the way, I couldn’t give a shit about the browser. We are not going to make any money by selling browsers, and I personally don’t think they are going to make any money from it either. If you can get a browser from Microsoft for free, why are you going to pay $39 to Netscape?
Perkins: But if Navigator is platform-independent, and…
Jobs: But everybody uses Windows. Come on — 90%+ of the people use Windows, so 90%+ of the people are going to hook into the Internet using Microsoft. Now, you know me, I love the Mac too, but I am trying to be really objective here. Plus Microsoft is…
Perkins: …busy making all its apps Web-friendly.
Jobs: Microsoft is busy trying to kill Netscape. And it has a certain track record of being successful at those kind of things. So I wouldn’t write off Microsoft right now. But all I am trying to say is that no one is going to make money by selling browsers. I do think a lot of people are going to make money off the pipes, but that ain’t us. The pipe is going to be owned by the RBOCs. Pac Bell and all those guys are going to provide cheap ISDN lines into the home that come with a little box that turns it into Ethernet, and they are going to be impossible to compete with. But, as we’ve been talking about, the new Web set-up is just like the mainframe computing model, where all the apps will run off the server, and these will mostly be custom apps.
Perkins: Enter NeXT Computer.
Jobs: Well, as it turns out, the businesses that can best use the Web are the exact same people we have been talking to for several years about NEXTSTEP and Enterprise Objects. Those customers now have a real need to build custom apps on the Web so they can vend products, information, and services to their customers. As we started to think about it, we came up with four categories of things these customers are going to want to do with the Web. [Mr. Jobs gets up and starts drawing on his whiteboard.] One, they are going to do static publishing. That’s where somebody makes a Web page and vends it. Anybody can look at it at the same time as 3,000 other people, and it doesn’t change until someone goes in there and changes it by hand. The second thing people will be able to do, which is going to be a lot more exciting, is what we call dynamic publishing. There are already a few examples of people doing this — like the Federal Express package-tracking Web page. You give it a number, it goes into four or five different databases and finds the information you need, and then presents it to you so you can browse it. Now there isn’t a little gnome in there that makes up this page for you, the computer makes the page for you. It’s a custom page answering your custom request, dynamically created on the fly. And this is just the tip of the iceberg. Have you seen our Chrysler demo?
Perkins: Only when you demonstrated it on CNN.
Jobs: I will show it to you in more detail in a few minutes, so you can have a better idea of what I’m talking about. The third big application for the Web will be commerce. The security issue here is the red herring, so to speak. And frankly, it is going to take Visa and MasterCard to solve this problem. Netscape can’t solve this problem; we can’t solve it. Before you start sending your credit card number all over the Web, you want someone to guarantee that if there is fraud, you aren’t going to be held responsible. And who can guarantee that? Not Netscape. Only Visa can say that, and it will solve that problem. The real issue here, however, is that if you are going to sell something over the Web, and you’re a medium-to-big company, you’ve got to have an order management system. But guess what? You already have an order management system that you’ve been running your company on! So, to be efficient, you need to tie the Web into your existing order management system. It becomes multi-platform that way, right?
Perkins: Right.
Jobs: Now you are constrained with the UI [user interface], but a lot of apps can be written in constrained UI. Look at the number of 3270 apps that have been written in the world and are still used. So, if you can constrain yourself to the existing UI today and write your app, not only will you get multi-platform capability, but you can roll your apps out to the contracted agents working for your company, and eventually out to your end-customers. For example, Merrill Lynch works with over 10,000 people who do not work directly for them, but help Merrill Lynch sell its products and services.
Perkins: How long do you think it’ll be until this Web-centered world fully comes into play?
Jobs: Static publishing is already happening today. Dynamic publishing is just beginning to happen, but is really going to be the big thing in 1996. Web-based commerce should also start kicking in 1996, and, in my opinion, building internal apps for the Web won’t really get going until 1997. When we looked at these developments, we realized that the final three require custom software. And that’s what we do here at NeXT, Custom ‘R’ Us, right? So we created this thing called WebObjects to help make it easier for people to build custom apps for the Web. For example, it took Federal Express four months to build its Web site — using WebOjects, you could build that same site in four hours.
[Mr. Jobs then showed us the Chrysler Corporation Web site that the NeXT team built with WebObjects and an Oracle 7 database. During this demonstration, Mr. Jobs searched the site for several specific models of cars, at different price ranges, in different colors, and sorted in different ways, and each time he was instantly presented with a Web page that included all the cars he had requested. He also showed how the NeXT team had built a custom function into the site that allows customers to calculate their own financing options and identify which dealers have the exact models they are looking for.]
Perkins: That’s pretty cool. How did you do that?
Jobs: It takes your request, parses it in WebObjects, grabs all the data, and dynamically builds it into a Web page for you to browse. The way we set up the car financing feature is that it actually sends an OLE call to another Windows computer that launches an Excel spreadsheet that does the calculation for you, and then OLE messages the information back and shoves it onto the Web page. You can’t possibly do this in a static environment. I would think that this site is, what, an order of magnitude or two more dynamic than any other Web site out there right now. Wouldn’t you agree? And we set up the whole Oracle database, we built the whole app, we scanned in all the pictures — everything, in about 48 hours with four people. And, to reinforce something I talked about earlier, the site I just showed you will help Chrysler sell cars, because it distributes information to customers far better than Chrysler’s dealers can.
Perkins: And pretty soon, with 3D immersion on the Web, you’ll be able to get in the car and test drive it.
Jobs: I personally don’t think that will happen for a long time. But what will come soon, when we have MPEG decoder chips in every computer, is the ability to download a high-quality video so you can watch the car drive around.
Perkins: Does WebObjects work across all platforms?
Jobs: It’s very portable. It can run on our Mach operating system, it runs on Solaris, H-P UX, Digital UNIX, and it now runs on Windows NT. It’s also fully distributed, so you can have objects on different machines and one object can send a message to another object without even knowing where it is. In fact, you can move an object from one machine to another without ever changing the app, it just automatically works itself out.
Perkins: It also seems to work pretty seamlessly with the Oracle database.
Jobs: We discovered over the years that almost all mission-critical apps make extensive use of databases. So we tried to figure out the coolest way to integrate data sources with objects, and we came up with this thing called the Enterprise Objects Framework [EOF]. In essence, EOF allows you to graphically connect the data-structures in your objects with any SQL database, and it will automatically — automatically — make the data in your object persistent and coherent with that data in your database without any programming. And it is exceptionally powerful. EOF is far-and-away the most aggressive database technology out there for objects. It’s really slick. With EOF, you don’t have to know about SQL. It has full TCP/IP communications built in, so you don’t have to know about that. It also has Sybase and Oracle client libraries in it, so you don’t have go out and buy those. You literally just point it at the database on the network and it works! So when we wrote the WebObjects framework, we based it on our experience with EOF. What that means is that your object doesn’t have to know anything about the Web — it literally doesn’t have to know anything about its UI, it doesn’t have to know about HTML, it doesn’t have to know about URLs. And, like EOF, it doesn’t have to know about the database or the connectivity. Everything is taken care of automatically. So WebObjects is far ahead of anything anybody else is doing out there.
Perkins: Why do you think you have built up such an advantage?
Jobs: The reason we are ahead, I think, is because our understanding of the fundamental business model of the Web is more advanced than Netscape’s, or that of anybody else we’ve talked to. We’ve spent eight or nine years developing PDO [Portable Distributed Objects, NeXT’s object model], we’ve spent four years developing EOF, and we have just leveraged that by spending about 1.5 years developing the WebObjects framework. The other guys haven’t even gotten started yet.
Perkins: When will WebObjects ship?
Jobs: WebObjects is in alpha right now, it will go into beta by the end of this year, and we are shipping in production in the first quarter of 1996 — my guess is by February.
Perkins: Do you worry about Microsoft?
Jobs: My goal over the next few years is to stay far ahead of Microsoft, until the Web is so ubiquitous, that even Microsoft can’t own it.
Perkins: Could a Windows-compatible-only Web strategy become Microsoft’s Achilles’ heel?
Jobs: I gotta tell you, multi-platform compatibility ain’t what it used to be. Windows has won. It beat the Mac unfortunately, it beat UNIX, it beat OS/2.
Perkins: But it took 10 years. [Laughs]
Jobs: We can all laugh at how long it took, but then we can all cry about the fact that it did happen. An inferior product won, but it won. And there is no changing that. I still think multi-platform is important, but not as much as it used to be.
Perkins: Netscape’s vision is that multi-platform capability is important, and…
Jobs: Wait a minute, let’s zoom back for a moment. It’s not Netscape’s vision, it’s Tim Berners-Lee’s vision. His original idea was that the Web would become the circulation system connecting us all together. Netscape embraced this vision, and it has done a better job than any other company in doing so. But as we all know, Microsoft has embraced the same vision Netscape did two years ago. So to state that Microsoft and Netscape have diametrically-opposed views would be foolish. They have both bought into the Tim Berners-Lee vision, and Microsoft is going to be a force on the Web, whether you like it or not. Look, I remember the day when Microsoft entered the application business for the first time — its first programs ran on the Mac, not the PC. It was back in 1984, when we launched the Mac. Today, half of Microsoft’s revenues come from application software, and it is the leader in that business. Now I am not a cheerleader for Microsoft, but I think it would be stupid to think it isn’t going to be a big player with the Web. And don’t get me wrong. I take my hat off to Netscape. I love Netscape.
Perkins: Why do you love Netscape?
Jobs: I love Netscape because I love any group of people willing to work their butts off for 18 months to get something done and take a new concept to market. I love that!
Perkins: How about Sun’s Java software?
Jobs: My view is that putting a programming language like Java in the client will slow the Web down, and allow Microsoft to catch up. So while NeXT thinks Java is a fine language, and eventually it would be great to see it in the client, I actually feel that for the good of the Web, and for the good of the industry, the Web ain’t broke, so let’s not fix it. The most important thing right now is to let the Web accumulate users and establish ubiquity, until it’s so entrenched that even Microsoft can’t own it, and then let’s add in all the cool stuff. Now I am not denying that the UI on the Web strains its use, but I am a little worried that in the microcosmic lust for perfection, macrocosmically we will give Microsoft the time it needs to own the Web. I hope that doesn’t happen.
Perkins: We suppose that’s one way to look at it.
Jobs: As an example, I predict that by the end of this year, Microsoft will announce that it has a Visual Basic variant or deviant that it proposes as the Web-client language. And Sun and Microsoft will have a war. And Microsoft will put everything it has into that war, because if it can win, it will have killed Netscape along the way. Netscape will put everything it has into that war, because if it loses, it is in trouble. So I ask you, who will win that war? Probably Microsoft. I hate to say it, but it has a lot more resources. So, in a way, Java may be the undoing of some very good things that are happening with the Web right now. I want to emphatically say that I like Java, but I am looking at it from a geopolitical perspective, not a technology perspective. So having said all of that, WebObjects works perfectly with Java. [Laughs]
Perkins: In our interview with Jim Clark, he said that Java “has a facility to protect you against the transmission of viruses, and a cryptography envelope that can wrap around and protect programs delivered over the Internet.”
Jobs: Well, that is just not a true statement. We know a lot about cryptography here. We have invented far-and-away the best public key encryption technology in the world outside of what’s inside the NSA. It blows RSA away. We have been told by people who know. Therefore we know that any language in the client is going to be susceptible to viruses.
Perkins: Any thoughts on @Home? You’ve already stated that the RBOCs will own the pipeline.
Jobs: I think several of the RBOCs will make a lot of money selling unlimited use of ISDN and an Internet account for $20 to $25. That’s reality, that’s product you can have in your home in January, and @Home is talking about a cable modem product that I may be able to get in a year or two. I mean, fine, asymmetric cable modems are very interesting. But all I’m saying is that you have these multi-billion RBOCs who already have customers in every home in their territory, and they have trucks with people who can install new products, and they have bought a zillion servers and have set up Internet farms, and they are ready to roll. I’m just mentioning that that is a fact.
Perkins: What about Apple?
Jobs: Well, I love Apple. I hope they make it.
Perkins: You sound concerned.
Jobs: [Shrugs]
Perkins: So what is NeXT’s growth strategy?
Jobs: We have three major new things coming out in the next nine months. One is D’OLE, the distributed OLE product which will be out by the end of the year. We have WebObjects shipping in the first quarter, which takes us into the Web market in a very big way. And we have OpenStep for Windows shipping in the second quarter. Our big initiatives then are really the Web and Windows. With the introduction of our Windows product, we are really going from having 10% of the seats available to us, to having over 90% of the seats available to us. And we think WebObjects should become pretty big, because we think the Web is going to be pretty big.
Perkins: Is an IPO in the near future for NeXT?
Jobs: We don’t have to go public, but there are other issues such as employee liquidity and credibility with our customers. So I see an IPO sometime down the road.
Perkins: Closing comments?
Jobs: The Web is great because it breaks down two big barriers. It breaks down the platform barrier, because it is multi-platform, and it breaks down the internal/external barrier. Small to medium-sized customers will be able to share information seamlessly across the Web with their customers, and that should increase everybody’s productivity. But, again, I think the biggest issues that are going to determine the fate of the Web are not technical issues, they are business and political issues. Maybe I am getting too old, but that’s what I think.
Steve Jobs’s Toy Story
Red Herring Interview, January 1996
On December 19th, 1995, Pixar became a charter member of one of the most exclusive clubs in Hollywood. On that day, Pixar's Toy Story surpassed $100 million in gross domestic receipts, making Pixar the only company besides Disney to create and produce a "blockbuster" animated feature film. When we spoke to
Pixar CEO Steve Jobs for last months issue, he could not talk about Pixar or Toy Story because of the company's pending IPO. Since then, however, Pixar has joined Netscape as one of the most successful IPOs of *95, making Mr. Jobs, who controls roughly 80% of thecompany, a very rich man. Now, Mr. Jobs can talk—and talk he did. Never one to mince words, he analyzes the current state of animation and explains why Toy Story is, in his words, "the first product of a new medium of filmmaking."
The Herring: How does 2D animation compare to 3D animation?
Jobs: Our point of view is this new medium —while it will not replace 2D— is far richer in the capabilities it gives to the artist to express story and character. I'll give you a simple example. As you know, 3D computer animation is not the computer animating but the computer doing all the drawing. For each frame in Toy Story, there is approximately 300 MB of data that is fed into the computer. Sun's fastest workstation —one of the fastest computers you can buy — cranked for three hours on average to produce one Toy Story frame. Computers can draw a lot in a second. Imagine what they can do in three hours! The subtlety of expression that you can see in our 3D film, in my opinion, goes way beyond anything done in a 2D film, because I the animator has| more information to work with.
The Herring: You can reuse those elements, too.
Jobs: Oh, we do. Our animation is the first reusable animation in the world. As a matter of fact, we reused all sorts of sequences throughout the film. We also reused major sequences from the film and re-rendered them for the appropriate resolutions for CD-ROMs that we're making. A lot of the animation for the CD-ROMs is of the same quality as the film re-rendered for CD-ROM. We might want to change a camera angle, so we take a few minutes to do that and re-render a scene from a different angle that looks totally different. In traditional animation. changing a camera angle means re-drawing every frame, because there isn't a camera. There's a person and a piece of paper drawing. It really is a new medium of expression. And I think Toy Story con-dusively demonstrates that this new medium has been extraordinarily well-received by the public.
The Herring: Do you think it was the medium or the second-largest creative team in the world, and we story that attracted audiences?
Jobs: I think story will dominate any medium. However the medium can bea tremendously integral parti in helping the storytellers tell their story. In the case of our medium, it was used by the storytellers very well to help them get across the story they wanted to tell, to help them portray the characters and the deoth of characters that they wanted to create. It's hard to imagine certain scenes in Toy Story in any other medium—-certainly the chase scene at the end I think that means the storytellers really used the new medium adroitly in telling their story.
The Herring: So CGI (computer-generated imagery) isn't a fad?
Jobs: Oh, no. No more than Snow White was a fad. Disney invented the animated feature film market in 1937 with the release of Snow White. It was the first of a new medium. We believe that Toy Story is equally the first of a new medium of entertainment, and what gives us tremendous satisfaction is not just that it's the first but that it's a good film. I think most people expected the first computer-animated film to be a landmark in terms of computer graphics but not a very good film. We have a four-year-old son. We bought Snow White when they released it last year, like about 30 million other families did. and my son has watched it a lot. That film is almost 60 years old. I think people are going to be watching Joy Story in 60 years, not because it was the first computer-animated feature film, but because it's a good film.
The Herring: Creative content is always a huge unknown. Is Pixar goug to have to continue working with Disney in order to create compelling content?
Jobs: Pixar conceived, wrote, directed, animated, and produced Toy Story. In other words, the story was Pixar's. Disney mentored us in some critical ele-ments. They were terrifie actually. But we have a 20-person story team. We have a creative team now that's 50 people. To our knowledge, we have the second-largest creative team in the world, and we believe we have the second world-class creative team outside of Disney.
The Herring: Maintaining that creative edge is essential.
Jobs: Oh, absolutely. John Lasseter was a part of Pixar the day we started. Before we went public, he owned approximately 4% of the company. He owns a big chunk of the company.
The Herring: Why do you think Disney decided to develop a feature animated movie with Pixar?
Jobs: When they first did the deal with us to produce these films, it was around the same time they did the deal with Tim Burton to do Nightmare Before Christ-mas. And it's my understanding that their perspective on this was that it was going to produce a boutique product. And that's exactly what Nightmare was. It did about $50 million in revenues-more than they had hoped-and everybody was happy That's what they expected our film to be like— until they started actually seeing some of the film output. Then they began to realize what we felt all along. which was, This is mainstream product.
The Herring: Are you going to renegotiate your relationship with Disney now that Toy Story is successful?
Jobs: No. We have a very good deal with Disney, and we share in the success of the film.
The Herring: And merchandising as well?
Jobs: Yes. We share in the success of the film and all other related profits, including merchandising. There was something written in Fortune that said we didn't, but we do participate in everything.
The Herring: So you don't want to renegotiate?
Jobs: You're asking the 'more question-"Would you like more?" Yes, we'd like more. And it's hard to imagine a time when we wouldn't say that. But we have the best deal in Hollywood of anyone we've heard of. except possibly Steven Spielberg. He probably had a better deal than us. But when he struck that deal, he had a lot of films under his belt. When we struck our deal, we had zero films under our belt. Twenty years from now, we think we will look back on our deal with Disney as the biggest single event in the company's history, because we have been able to work with masters in this industry, and we've learned not only creative skills but business skills, as well. But my view is that ultimately we hold all the cards, because we make all the films. We take the long-term view here. Pixar's going to make a lot of money on Toy Story, and I think Pixar is certainly getting a fair amount of recognition for it.
The Herring: How quickly do you anticipate turning out films in the years to come?
Jobs: We plan on being able to make a film every two years, although our second one will be coming out in 1998. But we'll be on a two-year cycle after that. Disney is in a cycle of one animated film every 12-18 months. We'll be at two years. That could increase in the future, but at the present time, we don't think that's wise. We better walk before we run.
The Herring: Is film the major revenue source for the company, or are you also planning on generatingrevenue from other sources.
Jobs: Here's our business model. Let's take the film first. Toy Story has generated $150 million in domestic box office, and a film of this success will probably generate equally that much in international box office. That's $300 million, of which the distributors keep half, so that's approximately $150 million to the studio. That's a pretty big product. Now Disney and Disney's marketing partners have spent roughly $125 million on marketing. That's a larger marketing budget than most things I know. Plus, it's all being spent in a three- or four-month window. That's up there with Chrysler. Now, what this does is create a consumer awareness that's very broad and drives demand for the film, which in turn creates demand for ancillary products that surround the film such as merchandising, home video, CD-ROMs, direct-to-video sequels, or theatrical sequels. These related products can draft, if you will, behind the marketing.
The Herring: Is this a hits business, then?
Jobs: Oh, absolutely. But I will put forth my theory to you, because, of course, I get asked this question a lot. My response is very simple— can only look back at my own history. The Apple 2 was a hit. The Apple 3 was a miss. Lisa was a miss. The Macintosh was a hit. Silicon Valley is a hits business. It's no less of a hits business than I see in the film business. At least Pixar's second film doesn't have to be backwards compatible with its first. So that's my answer. Life is a hits business as best as I can tell.
The Herring: Do you think there's going to be more competition in this field in the coming years, and whom do you see as your primary competitors?
Jobs: I think everyone is going to try to get into this field. But there are some significant barriers to entry. The first one is the creative hurdle. Disney invented the feature film market in 1937 with their release of Snow White. Ever since then, every major studio has tried to get into the 21) animated feature film busi-ness, [but] in almost 60 years, only Disney has succeeded in making a blockbuster animated feature film. The rest of them have all failed, including Spielberg—twice.
The second thing they need to overcome is tech-nology. Pixar did not go out and buy the technology to do what it does; it literally had to invent the wheel over the last 10 years. To our knowledge, more PhDs worked on this film than any other film in history. We have 10 years of proprietary software systems that you cannot buy anything close to in the mar-ketplace. You have to build them yourself. Although Disney has the creativity, they do not have the tech-nology, and it is not available for license or use or sale from Pixar to anybody, including Disney.
The third one is blending. We have spent 10 years merging two cultures together. It sounds really easy, like you put a technical person here and a creative person there, and they go out to lunch, and some-how, it all works. It's not. It's really tough. And it took us 10 years to figure out how to do this. No one else has even started. Add up those hurdles, and it's hard for us to understand who is going to succeed. Most of the folks now are trying to copy Disney.
The Herring: Do you have any scoop on Dream-Works?
Jobs: DreamWorks is trying to build a major studio.
And if you look at what they're doing, they're creating live-action pictures, animated features, a music company, and television content, They're doing a lot of stuff. We wish them well, because the more studios out there, the more studios we have to work with eventually if we want to have a studio distribute our product for us. But in terms of animated films, they're trying to copy Disney. They're using 2D cell animation exactly like they did at Disney. Their first film is about Moses! [Laughs] They'll probably be successful at it because they're smart guys.
The Herring: We talked to Jeffrey Katzenberg (see Hard wired. p. 120), and he seems to view CGI in the same manner as the work of a director-in other words, as one style of filmmaking, not necessarily as a new medium.
Jobs: You know, I have tremendous respect for Jef-frey, but Jeffrey has never appreciated technology. He never understood and never appreciated it, and that's line: there's room for all sorts of different people in the world. But we just respectfully disagree with him on this issue. Obviously, we do. We're doing 3D, and they're copying 2D.
The Herring: Who is going to manage Pixar going forward? Are you in the process of hiring a CEO?
Jobs: No. We have a pretty good management team. The three of us at the top are Lawrence Levy, who is the executive vice president and CFO; Ed Catmull, who is the executive vice president and chief technology officer; and myself, who is the CEO. We have an office of the president, and we run the company on a day-to-day basis. I think it's a pretty good team.
The Herring: How quickly do you anticipate turning out films in the years to come?
Jobs: We plan on being able to make a film every two years, although our second one will be coming out in 1998. But we'll be on a two-year cycle after that.
Disney is in a cycle of one animated film every 12-18 months. We'll be at two years. That could increase in the future, but at the present time, we don't think that's wise. We better walk before we run.
The Herring: Is film the major revenue source for the company, or are you also planning on generating revenue from other sources?
Jobs: Here's our business model. Let's take the film first. Toy Story has generated $150 million in domestic box office, and a film of this success will probably generate equally that much in international box office. That's $300 million, of which the distributors keep half, so that's approximately $150 million to the studio. That's a pretty big product. Now Disney and Disney's marketing partners have spent roughly $125 million on marketing. That's a larger marketing budget than most things I know. Plus, it's all being spent in a three- or four-month window. That's up there with Chrysler. Now, what this does is create a consumer awareness that's very broad and drives demand for the film, which in turn creates demand for ancillary products that surround the film such as merchandising, home video, CD-ROMs, direct-to-video sequels, or theatrical sequels. These related products can draft, if you will, behind the marketing phenomenon of a successful feature film. And that results in tremendous demand for these products.
The Herring: Is this a hits business, then?
Jobs: Oh, absolutely. But I will put forth my theory to you, because, of course, I get asked this question a lot. My response is very simple— can only look back at my own history. The Apple 2 was a hit. The Apple 3 was a miss. Lisa was a miss. The Macintosh was a hit. Silicon Valley is a hits business. It's no less of a hits business than I see in the film business. At least Pixar's second film doesn't have to be backwards compatible with its first. So that's my answer.
Life is a hits business as best as I can tell.
The Herring: Do you think there's going to be more competition in this field in the coming years, and whom do you see as your primary competitors?
Jobs: I think everyone is going to try to get into this field. But there are some significant barriers to entry.
The first one is the creative hurdle. Disney invented the feature film market in 1937 with their release of Snow White. Ever since then, every major studio has tried to get into the 2D animated feature film busi-ness, (but] in almost 60 years, only Disney has succeeded in making a blockbuster animated feature film. The rest of them have all failed, including Spiel-berg-twice.
The second thing they need to overcome is tech-nology. Pixar did not go out and buy the technology to do what it does; it literally had to invent the wheel over the last 10 years. To our knowledge, more Ph.D.s worked on this film than any other film in history.
We have 10 years of proprietary software systems that you cannot buy anything close to in the mar-ketplace. You have to build them yourself. Although Disney has the creativity, they do not have the tech-nology, and it is not available for license or use or sale from Pixar to anybody, including Disney:
The third one is blending. We have spent 10 years merging two cultures together. It sounds really easy, like you put a technical person here and a creative person there, and they go out to lunch, and some-how, it all works. It's not. It's really tough. And it took us 10 years to figure out how to do this. No one else has even started.
Add up those hurdles, and it's hard for us to understand who is going to succeed. Most of the folks now are trying to copy Disney.
The Herring: Do you have any scoop on Dream Works?
Jobs: Dream Works is trying to build a major studio.
And if you look at what they're doing, they're creating live-action pictures, animated features, a music company, and television content. They're doing a lot of stuff. We wish them well, because the more studios out there, the more studios we have to work with eventually if we want to have a studio distribute our product for us. But in terms of animated films, they're trying to copy Disney. They're using 2D) cell animation exactly like they did at Disney. Their first film is about Moses! [Laughs] They'll probably be successful at it because they're smart guys.
The Herring: We talked to Jeffrey Katzenberg (see Hard wired. p. 120), and he seems to view CGI in the same manner as the work of a director— in other words, as one style of filmmaking, not necessarily as a new medium.
Jobs: You know, I have tremendous respect for jef-frey, but jeffrey has never appreciated technology. He never understood and never appreciated it, and that's fine: there's room for all sorts of different people in the world. But we just respectfully disagree with him on this issue. Obviously, we do. We're doing 3D, and they're copying 2D.
The Herring: Who is going to manage Pixar going forward? Are you in the process of hiring a CEO?
Jobs: No. We have a pretty good management team. The three of us at the top are Lawrence Levy, who is the executive vice president and CFO; Ed Catmull, who is the executive vice president and chief technology officer; and myself, who is the CEO. We have an office of the president, and we run the company on a day-to-day basis. I think it's a pretty good We're doing real well working together, and we enjoy each other's company.
The Herring: How are you going to divide your time between NeXT and Pixar?
Jobs: Well, you know, that is an issue. Right now I'm spending about half of my time at Pixar—probably more.
The Herring: Are you considering folding NeXT into Pixar?
Jobs: No. I did consider that in the early days, but they're two very different companies with very different missions. In an era where larger companies are trying to regain clarity and purpose about their mission, I didn't think it was wise to take two groups that had real purpose and clarity and muddle it up by throwing them together. I kept them separate, and I'm very happy about that decision. I think it's the right decision, and I would do it again. It's my problem to manage it, but the way to solve it is not to hurt the companies.
The Herring: Did you ever have any second thoughts about Pixar? Did you ever consider selling it?
Jobs: I think there were a few moments where if someone had come along and offered to write me a check of sufficient size. I would have really seriously considered it. [Laughs) And thank God they didn't in those weak moments.
The Herring: You're now sitting in control of two companies. Is there poetic justice here?
Jobs: It would be really great if there was, but I don't think that way. Town a lot of Pixar and NeXT for two reasons. In the case of Pixar, I've been the venture capitalist. As a matter of fact. I've been five venture capitalists [laughs]. If you look at Pixar on a fully diluted basis, I own a little over 60%. VCs own that percent of a lot of companies. So think of me in that role, and my ownership makes sense. In terms of NeXT, I haven't been the primary financier, but 1 have been the second-largest. So that's one reason for both companies.
The second reason is I've seen a lot of bad things happen to some very good companies. They were traded like baseball cards, sometimes by venture capitalists, sometimes by others. I wanted to make sure that I controlled enough of the stock that 1 could make sure that these companies were taken care of through tough times. Does that make me any less sad about some of the events that happened earlier in my life? No, it doesn't at all, and it doesn't feel like sweet revenge or anything else. But I think "96 is going to be a great year.
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