Steve Jobs does not want 15%.
Apple founder Steve Jobs was a legendarily tough nut to crack in negotiations, in part because of his temper and in part because he tended to want all or nothing.
This, after all, was the man who vowed to Dropbox CEO Drew Houston that he would kill Dropbox when Houston declined to sell his company to Apple. Jobs also walked away from a medical app partnership even though he believed it would be a great idea because he felt it would distract him from the main mission of making great desktop devices.
But Heidi Roizen, a professor of entrepreneurship at Stanford who also reportedly dated Jobs at one point, saw a different side to Jobs when she was negotiating with him over the license to a word-processing product for Next, the computer company Job created when he was forced out of Apple in 1985.
Turns out that if you had some inside info, Jobs could be a pushover. At the time, Roizen was running a publishing company for software company T/Maker, which had made WriteNow, word processing program for the Next machine. Jobs wanted to do a deal for the application, Roizen says:
On the appointed day, after waiting in the lobby for 45 minutes (this, I would come to learn, was par for the course for meetings with Steve), I was called up to Steve’s cubicle. I remember to this day how completely nervous I felt. But I had my contract in hand and I knew my numbers cold.
Shortly into my pitch, Steve took the contract from me and scanned down to the key term, the royalty rate. I had pitched 15%, our standard. Steve pointed at it and said,
“15%? That is ridiculous. I want 50%.”
I was stunned. There was no way I could run my business giving him 50% of my product revenues.
Sounds like a typical Jobs moment: he saw something he didn't like and blew up like a brat.
But it turns out the grandstanding was just that. Jobs had earlier promised that he would pay developers 50% of revenues, and did not want to be seen accepting less. A colleague within Next told Roizen to come up with some creative accounting that would allow her to pay Next 15% of net revenues, not gross revenues:
To do so, I reduced the nut to split by first deducting the cost of packaging, of technical support, the salaries for some developers on my side of the business to implement fixes, and when I still couldn’t get the math to pencil out, I added a $6 per unit ‘handling fee’ thanks to some inspiration from an infomercial on the Home Shopping Network. My new “Hollywood net” number read 50%, but fully-loaded it was pretty close to the 15% of gross I needed to make the deal work. Magic!
After that, Jobs said yes.
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