Jobs: The Consequences
How his illness and exit as Apple CEO will impact Hollywood, from Disney's Iger and Lasseter to iTunes and UltraViolet.
At a Disney board meeting in 2007, CEO Robert Iger discussed a proposal for the company to add ships to its popular fleet by striking a licensing deal with an established cruise line. Steve Jobs objected, according to people familiar with the meeting, arguing that Disney should own its ships rather than outsource its brand on the high seas. The charismatic new board member was persuasive and, despite a $2 billion price tag, Disney ultimately added the Dream and, soon, the Fantasy to its fleet of owned-and-operated cruise ships.
That Jobs caused Disney to turn on a dime at such a hefty cost is a testament to his influence, which stretches far beyond Apple, the company he founded in 1976, to encompass Disney, Pixar and the entire entertainment sphere. Jobs is so omnipresent in Hollywood that when he resigned his Apple CEO spot on Aug. 24 because of health problems associated with pancreatic cancer, the move reverberated throughout the industry. Insiders now wonder whether Jobs will continue his board duties at Disney and how his condition will impact his status as showbiz's top digital power broker. The ramifications of his next moves on Hollywood likely will be significant.
Disney and Pixar
For three of the past four fiscal years, Jobs has been absent from more than 75 percent of Disney board meetings. The company declined to discuss the matter, but Jobs' condition was important enough for shareholder advisory firm Glass Lewis & Co. to recommend in March that he not be re-elected to Disney's board.
"I have to assume that he hasn't put much energy into Disney," a former insider tells The Hollywood Reporter.
Yet shareholders re-elected their most famous director, probably because they understood his value to the company as counselor and sounding board for Iger and other top executives on key issues. Jobs assumed that role when he was CEO of Pixar, even before joining Disney's board.
In 2006, Iger, CEO of Disney for just a year, wanted to arrange a new distribution deal with Pixar, which, beginning with 1995's Toy Story, had revolutionized the animation business. With Jobs steering negotiations for Pixar, Disney ended up paying $7.4 billion in stock to purchase the company outright. Jobs "was able to call all the shots," says the insider, selling Pixar at its peak price and gaining by far the largest individual stake in Disney. Meanwhile, Disney also won, able to promote the big score by landing Pixar.
The transaction gave Jobs what is now a 7.3 percent stake in Disney and his seat on the 13-member board, which also includes Iger and former CEOs Orin Smith of Starbucks and John Pepper of Procter & Gamble. In addition to steering the cruise ship initiative, sources say Jobs soon helped persuade Iger to buy back many of the 335 North American Disney Stores that the company had sold just four years earlier. Jobs helped spearhead a redesign of those outlets using some of the same people who designed Apple Stores, and a prototype debuted a year ago in Montebello, Calif.
With Jobs, Iger has a trusted adviser. Says the insider, "Bureaucracy was trumped if Steve communicated to Bob an opinion."
Still, another person with close ties to Disney says Jobs is careful not to overstep his authority at the company. "I never saw him being the least bit intrusive. It was always the cheerleader, never 'do this' or 'do that.' "
Would Disney act differently without Jobs? "Losing a sounding board of that level -- that's a loss," says a source who knows Iger and Jobs. However, "in terms of real day-to-day influence on what Disney does, I don't think so."
Still, without Jobs, animation guru John Lasseter would lose an ally at a critical time -- coming off the relatively disappointing performance of Cars 2. "The bureaucracy doesn't like how much Pixar films cost," says an insider. "But no one will mess with Lasseter while Jobs is around."
Outside of Disney, the most obvious example of Jobs' influence over media distribution is the creation in 2003 of the iTunes Music Store, which wouldn't have garnered the support of the record labels without Jobs.
"The shift came about above all because of the sheer willpower of Steve," former RIAA head Hilary Rosen told the authors of iCon Steve Jobs: The Greatest Second Act in the History of Business. "His sheer charisma and his intensity absolutely made a difference."
Jobs' vision has permeated every facet of Apple, taking its stock past $400 from less than $100 at the beginning of 2009. So while Apple's share price has held fairly steady since the Aug. 24 announcement that Tim Cook has taken over as CEO, it would be unfair to expect Cook to match Jobs' influence as online music services such as Spotify and Pandora emerge to take on iTunes.
Still, Cook is a force, which is why he served as temporary CEO three times during Jobs' health-related absences and why Apple dealt him a $383 million stock bonus to retain his services for the next nine years.
And observers say it's no coincidence that Cook's first big move as CEO was to promote Eddy Cue, the executive in charge of the iTunes Store, to senior vp Internet software and services. Cue has served as Jobs' point man with the studios and record labels, so the move is seen as a sign that Cook is shoring up his relative inexperience in content deals and intends to stay the course with Hollywood.
"Promoting Cue sends a message to both Apple's media partners and competitors that even without Jobs at the top, Apple's disruption of media industries and sharing of profits with its partners will continue," Wired wrote.
There's also every indication that Cook and Cue, like Jobs, are forward-thinking risk-takers in the research and development department.
Jobs' lessened duties could also impact UltraViolet, the digital rights management system called key to Hollywood's transition online. UltraViolet will roll out soon backed by 70 companies, including Microsoft, Comcast, Sony, Netflix and most studios. Conspicuously absent are Apple and Disney, which could partner on their own DRM system.
That's no small matter, because UltraViolet is heralded by some as a home-video savior in an age of plummeting DVD sales. The technology will allow consumers to safely create digital lockers for storing their movies on an Internet service provider's server -- the "cloud" -- giving them access to content on myriad devices.
"Apple and Disney are the two big holdouts, so we will see if there is any shift by Disney in the future," says Wedbush Securities analyst Scott Sutherland, who believes the Disney-Apple ties could weaken without Jobs as a conduit.
Meanwhile, Apple is gearing up for the public debut of its iCloud, a service that stores music and other media for playing on iPads, iPods and iPhones. Missing are movies and TV shows, and Jobs reportedly has been taking the lead in remedying that situation through studio negotiations. The status of those talks is unclear.
"For Hollywood, Steve has been enormously tough in negotiations," says David Wertheimer, CEO of the Entertainment Technology Center at USC. "Having Steve out of the [picture] may work to the industry's advantage."
Where Jobs' instincts might be missed most, though, is in the development of Apple TV, a little-used but exceptionally convenient device for putting iTunes content -- along with video from Netflix, YouTube, etc. -- on TV screens.
"Apple TV has been through several iterations, and for it to really explode, it needs to figure out TV," says Jimmy Schaeffler, a senior analyst at the Carmel Group. "Jobs is a friggin' genius. Without him, it will be much harder to figure out."
Jobs will now serve as chairman of the Apple board, a new position, signaling his intention to remain a figurehead and mentor. But given his declining health, the leadership and drive that has helped redefine Hollywood for the digital age certainly will be diminished.
Says Schaeffler, "For some people -- especially Apple techie types -- if Steve Jobs were a religious figure, he'd be up for beatification quicker than Pope John Paul II."
-- Kim Masters and Carolyn Giardina contributed to this report.
STEVE JOBS AND HOLLYWOOD: From tech innovator to showbiz power broker
- 1955: Jobs is born to an unwed mother in San Francisco and adopted by Clara and Paul Jobs.
- 1976-80: From his garage, Jobs and fellow college dropout Steve Wozniak found Apple on April 1, 1976. The company goes public in 1980; Jobs, 25, is a millionaire.
- 1984: Apple introduces the Mac by way of a 60-second Super Bowl commercial directed by Ridley Scott.
- 1986: Jobs buys the computer graphics division of Lucasfilm for $10 million and renames it Pixar.
- 1995: Pixar releases its first feature film, Toy Story, the top movie of the year. Pixar's initial public offering comes a few weeks later.
- 2000: Jobs, already CEO of Pixar, is made the permanent CEO of Apple
- 2001: Apple introduces the iPod.
- 2003: Pixar releases Finding Nemo, its most popular title to that point and now the fourth-highest-grossing animated feature film ever.
- 2004: Jobs tells employees that he has a cancerous tumor in his pancreas. The tumor is removed in July.
- 2006: Disney buys Pixar for $7.4 billion, making Jobs the largest stakeholder in Disney; Apple introduces Apple TV, a set-top box that moves iTunes content to TV sets.
- 2010: Apple begins taking preorders for the iPad.
- 2011: Jobs resigns as Apple CEO, becomes chairman of the board.