When Apple launched iTunes and priced songs at 99 cents, the major record labels told them to go pound sand. That's not spin — that's how Apple SVP Eddie Cue describes the early days of negotiating with an industry that was more interested in locking things down than moving forward. In a rare, wide-ranging interview, Cue pulled back the curtain on how Apple built its services empire from scratch, why the 99-cent price point was a stroke of financial engineering genius, and what's really driving Apple's aggressive push into Formula 1.
How Did Apple Convince Labels to Sell Songs for 99 Cents?
The short answer: they almost didn't. When Apple approached the major labels with the idea of selling individual songs for a flat 99 cents, the labels were building their own competing music services and had zero interest in Apple's vision. Their services were a mess — different pricing for every song, inconsistent rules, and a user experience that made no sense to consumers.
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Eddie Cue explaining the two hidden reasons behind Apple's 99-cent song pricing strategy
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But the 99-cent price point wasn't just a marketing move. Cue explains there were two deeply strategic reasons behind it that almost nobody understood at the time.
First, consistent pricing eliminates friction. When every song costs 99 cents, you never have to think about whether to buy. You preview it, you like it, you tap buy. There's no mental transaction cost. It's not enough money to hesitate over.
Second, and more surprisingly, Apple actually lost money on every 99-cent song sold. Credit card processing fees include both a percentage and a fixed fee — and on a 99-cent transaction, that fixed fee ate up roughly a quarter. The labels took the vast majority of the revenue, leaving Apple in the red on single-song purchases.
So how did Apple make it work? They batched transactions. Instead of closing the payment on every individual song, Apple kept the transaction window open for a set period — say, 8 to 24 hours — and then charged the customer once for everything they bought in that window. Suddenly, the average transaction was several dollars, not 99 cents, and the fixed credit card fee became negligible. It was a quiet piece of financial engineering that made the whole model viable.
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Cue describing the moment Apple sold 1 million songs in 6 days — far ahead of expectations
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The result? Apple set a goal with Universal Music of selling one million songs in the first six months. They sold one million songs in the first six days.
How Did Apple's Services Business Actually Start?
It started as a hobby. Cue is refreshingly blunt about this. In the early days of the internet, Apple dabbled in email, storage, and basic online tools, but nothing that constituted a real business. The turning point was music — specifically, the combination of the iPod and iTunes.
What made iPod plus iTunes so significant wasn't just that it sold well. It was the proof of concept that hardware, software, and services could be woven together into something greater than any individual piece. Cue believes Apple does this better than anyone else in the industry, and the iPod era was where that thesis was first validated at scale.
Critically, Apple didn't keep iTunes locked to Mac users. They brought it to Windows — a move Steve Jobs famously described in a keynote as hell freezing over. That decision opened Apple's ecosystem to an entirely new audience who had never touched an Apple product before. Many of today's most loyal Apple customers got their first taste through iTunes on a Windows PC, including, as the interviewer noted, himself.
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Cue on Apple's F1 multi-view feature and how iPhone cameras changed what's possible inside a race car
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What Is Apple's Real Strategy Behind F1 and the Movie?
The F1 strategy is personal for Cue, and it's more integrated than it might appear from the outside. Cue has been an F1 fan for decades — back when the sport was so under-distributed in the United States that he had to go to a library and read imported magazines just to follow it.
When Stefano Domenicali, now CEO of Formula 1, took the role, Cue met with him in London and told him directly: someday, he hoped they'd find a way to work together. That seed took years to grow.
The F1 movie starring Brad Pitt came together separately, driven by director Joseph Kosinski's vision. Cue saw it as a massive opportunity: there has never been a truly successful major racing film, and F1 as a subject had never had the technology to show audiences what it actually feels like to be inside the car. Apple's solution was to mount iPhone cameras throughout the vehicles to capture G-forces, speed, and visceral proximity in a way no broadcast camera could replicate.
When Apple screened the film for US audiences, they asked a simple question: how many of you have watched an F1 race? Almost no hands went up. After the film? Almost every hand went up.
Now Apple is broadcasting live F1 races, and the numbers back up the thesis. Ratings are significantly above historical US averages, and roughly 30% of viewers are using multi-view — watching multiple camera feeds simultaneously — a feature only Apple's platform could deliver in this way. The movie was a funnel. The races are the product. And the technology Apple wraps around both is the differentiator.
How Did Apple Launch Its Online Store in 1997?
Before apple.com sold a single product, there was enormous internal resistance. Many people inside Apple feared that launching a direct-to-consumer online store would cause their existing retail channel partners — CompUSA and local computer stores — to walk away entirely and stop carrying Apple products.
Steve Jobs pushed forward anyway. The vision was simple: let customers configure exactly what they wanted and buy it directly. Apple had the advantage of already owning apple.com, which gave them an existing traffic base. The rest was driven by the press strategy of the era — magazine covers, newspaper front pages, and earned media.
The store launched alongside the original Bondi blue iMac. By end of day one, Apple had sold one million dollars worth of product. Cue and Jobs were high-fiving in the office. In the context of a company that had been weeks from bankruptcy, it was a lifeline.
What Was Steve Jobs Really Like to Work With?
Cue pushes back on the common framing of Steve Jobs versus Tim Cook. His answer: that's the wrong question. The right question is what they have in common — and the answer is almost everything that matters.
Both worked harder than anyone else around them. Both were completely focused on two things: Apple and their family, with almost nothing else competing for their attention. And both were relentlessly focused on the products themselves — not the financial results. The financials, in Cue's view, were always a byproduct of getting the products right, never the primary goal.
That philosophy of prioritizing product over profit is something Cue says he still carries with him daily.
Why Did Apple Shift From Downloads to Subscriptions?
The shift wasn't ideological — it was infrastructural. The subscription model only becomes truly seamless when users have fast, always-available internet access. When downloading was the dominant model, users were either paying per megabyte or working around unreliable connections. Storing content on-device wasn't a preference; it was a necessity.
As ubiquitous, fast internet became the norm, the calculus changed entirely. Now, on-device storage is mostly about caching for performance, not about ensuring access. That invisible shift in connectivity is what made streaming subscriptions not just viable but obviously superior — and it's what allowed Apple TV+, Apple Music, and the rest of the services portfolio to become the growth engine that Apple's services division is today.
What Are the Most Historic Apple Keynote Moments?
Cue names two. The first is the iMac and Apple online store launch — not because of the products themselves, but because of what it represented. Apple was, in his words, going bankrupt. That keynote was the moment the company collectively exhaled. He describes going backstage with Jobs after it ended and the two of them actually embracing, knowing they had just taken a decisive step back from the edge.
The second is the iPhone launch in 2007. Cue says it's the only time he made his wife and both kids attend a keynote. He had been using a prototype iPhone for months before the announcement and knew — truly knew — he was holding the most remarkable object he had ever encountered. What he admits he underestimated was the scale of the transformation it would bring. Looking back now, he says, it's almost impossible to imagine what the world looked like before it existed.
