Fortune Article

Apple’s CEO flies to New York City to work his magic on the media elite

Photo: Apple Inc. Cheesy Photoshop job: Philip Elmer-DeWitt

The tech blogs were abuzz this week with sightings of Steve Jobs in Manhattan — in the newsroom of the New York Times (AAPL), on the third floor of the News Corp. (NWS) tower and in an Asian fusion restaurant wearing, according to
New York
magazine, “a very funny hat — a big top hat kind of thing” and ordering food, Hollywood mogul style, off-menu.

[UPDATE: On Friday morning he showed up at the Time & Life Building to demonstrate his new tablet computer to Time Inc. (AAPL) CEO Ann Moore and a roomful of magazine editors.]

Jobs is not the first Apple (AAPL) executive to pitch the iPad on Publisher’s Row — indeed, leaks from loose-lipped media tycoons helped build buzz for the device in the weeks before its unveiling.

But the fact that Jobs himself flew to New York a week later — and that the top executives of America’s leading national newspapers and magazines turned out to meet him — may be taken as a sign of how badly both sides need each other.

Although the 140,000 or so iPhone apps — including 22,000 games — that will run day one on the iPad give it a huge advanage over all the tablet computers that preceded it, Apple needs media partners if its new device is to achieve anything like the iPod’s or the iPhone’s mass-market appeal.

As for those media partners, each is in a different boat, each sinking slowly in its own special way.

Books. “People don’t read anymore,” Jobs told AppleInsider the New York Times when Amazon (AMZN) launched its Kindle reader two years ago. “Forty percent of the people in the U.S. read one book or less last year.” Jobs was arguing that the whole dedicated e-book reader concept was “flawed at the top,” but the fact that Apple is building its own iBookstore proves that he thinks even a business that small is worth pursuing. The publishers, for their part, are already using the iPad as leverage to get Amazon to switch from the $9.99 price point they hated to an “agency” arrangement where the publishers set their own price and Amazon takes 30% off the top.
TV and Movies. Hollywood is not in as bad shape as the book industry; they haven’t been hit yet with the widespread DVD piracy that nearly killed the music CD business, and they’re still raking it in at the box office. So although some studios have been willing to put their content on Apple’s iTunes store and Apple TV, they have balked at Jobs’ offer to repackage their shows and sell them to iPad owners as a “best of TV” subscription service for $30 a month.
Newspapers and Magazines. Which brings us to the reason Jobs was in New York this week. Print publishers are desperate for new venues and new business models; not only has the Internet generation lost the habit of reading printed newspapers and magazines, but the Web is siphoning off the advertising dollars that made the Murdochs, Sulzbergers and Luces rich. So it was no accident that the Times flew its top new media expert to San Francisco last week to share the stage with Steve Jobs, or that Time Inc. is busy making tablet-ready versions of its leading magazines, starting with Sports Illustrated. But there are some tricky details to work out — like pricing, discounts, cross-promotion, revenue sharing and who gets access to subscribers’ names and credit card numbers.

Which side needs the other more remains to be seen. The publishers — like Steve Jobs — are no strangers to hard bargaining, but we suspect they’ll cut some kind of deal before the iPad ships this spring. Given their past record for keeping Apple’s secrets, we’ll probably hear the details well before then.

Enter Steve Jobs, with top hat and iPad