Online Extra: Steve Jobs: "It Feels Good"

Apple's chief talks about its rapid rise to the top of the digital music biz, Pixar, and what tunes he's listening to today

These days, the roller coaster that's Steve Jobs's career seems stuck on up. Pixar Animation Studio (PIXR ), where he's CEO, is riding high, thanks to its latest release, Finding Nemo. The film recently passed $800 million in worldwide box-office receipts, making it the top-grossing film of 2003 and the top animated hit of all time. Pixar's shares have more than doubled in the past two years, to $68.

Then there's Apple Computer (AAPL ), the company Jobs co-founded in 1976, was fired from in 1985, and returned to in 1997. Sure, Apple's share of the worldwide PC market slipped to an all-time low of 1.9% in 2003's fourth quarter. But it has a megahit with the iPod music player and accompanying iTunes online music store. Apple sold 730,000 iPods in the fourth quarter and is on pace to sell 100 million songs since iTunes opened for business last April.

That has helped drive Apple's stock from $13 to $22 since last April. Just counting his 6.2% stake in Apple and his 55% holding in Pixar, Jobs is worth nearly $2.5 billion. BusinessWeek's Peter Burrows spoke with Jobs on Jan. 15 to discuss Apple's music success and where it might lead. Edited excerpts of their conversation follow:

Q: Many companies struggled for years to figure out a way to sell music successfully online, where millions of people have been swapping songs for free. What is it about Apple that enabled it to figure this out?


First of all, Apple is the most creative technology company out there -- just like Pixar is the most technologically adept creative company. It's interesting, isn't it? Also, almost all recording artists use Macs and they have iPods, and now most of the music-industry people have iPods as well. There's a trust in the music community that Apple will do something right -- that it won't cut corners -- and that it cares about the creative process and about the music.

Also, our solution encompasses operating system software, server software, application software, and hardware. Apple is the only company in the world that has all of that under one roof. We can invent a complete a solution that works -- and take responsibility for it.

Q: Apple has long been known for having a very loyal installed base, but it has had trouble attracting customers to the Mac. What do you know about who is buying your music products?


As best we can tell, it's very broad. The age range is from 8 to 80. We sell more iPods [to owners of] Windows PCs than we do for the Mac, and it has been that way for a long while.

Q: Should we look for more products from Apple for people who don't want to own a Mac?


You know us, we never talk about future products.

Q: Who do you consider your top competition in the online music business?


Presently, the thing that's determining our rate of success isn't any competitor, because our market share is dramatically larger than our competitors'. It's purely this transition to this new world of digital music. That's what's determining our growth. We've had some strong competitors over the past two years, and we've managed to come out on top.

Q: What about Microsoft (MSFT )?


Microsoft doesn't make music players, and the last time I looked they don't have a music store, though they say they're going to.

Q: But they've got many partners in both hardware and on the services side using Microsoft technologies, such as Windows media format and digital rights management software [which Apple doesn't support].


Yeah, and the people using their technologies have yet to be successful.

Q: Still, many companies are lining up in support of various standards. Aren't you concerned that this could play out like the PC market, in which Apple had a superior product, according to many people, and a market share lead?


Whoever enters this market now, is going to enter a market that's not in its infancy. And they'll enter a market against a competitor that has a 70% market share -- and surprisingly, that competitor's name will not be Microsoft. It will be Apple. Now, I understand that there's no guarantee we'll stay on top, but that's the situation.

Q: So you don't believe the history of the Mac and PC is useful in looking at the music business?


It's ancient history.

Q: But you must think about it. There must be lessons to be drawn.


[Pausing] Sorry, I don't think of it that way. I just don't. I got back to Apple six-and-a-half years ago. The hand was dealt [by then]. And we've done a really great job of building great products for the best 25 million customers any company ever had. Hopefully, more customers will decide they want the world's best computers, too.

Q: Hewlett-Packard (HPQ ) just announced that it would resell the iPod and load iTunes on its home PCs starting this summer. That's a major change of course for Apple. Why? Have you approached other PC makers about doing similar deals?


HP looked at the choices they had, and they thought what we were doing was the best in the industry, and they expressed an interest in working with us. The more we discussed it, the better it sounded. Look, we don't make our own printers. We use HP's printers. They're better at making printers than we are. HP decided that we're better at making portable music players and online music stores, and there is no shame in any of that. I think it's pretty smart.

Q: The iPod is Apple's first non-Mac hit in years. What's the significance of that to you?


It's very exciting to be able to apply Apple's innovation, engineering excellence, and marketing skill in a market where we don't have that 5% market-share ceiling to see what we can do. And it feels good.

Q: Can you imagine a merger between Apple and Pixar someday, or any way in which they might work together to create a larger whole?


They're really different companies, with really different styles, in really different businesses.

Q: So what kind of music are you listening to these days?


I'm trying to force myself to listen to more of the current stuff. I had never listened to hip-hop and had somehow developed a pretty harsh image of it. Now I'm not saying I like all of it, but I found some people that have something to say and are saying it, more than anyone since Dylan in the 1960s. And Dylan is my all-time favorite. I met him once. It was one of the high points of my life.

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