The Significance Behind Steve Jobs Theater

On paper, Steve Jobs Theater doesn’t make complete sense. The price tag would lead many to question the rationale in building a massive underground theater for unveiling products. It’s difficult to envision any other company wanting to undertake such a project. However, after I attended Apple’s inaugural event at Steve Jobs Theater, Apple’s motivation behind the building became crystal clear. Steve Jobs Theater is an Apple product, and a closer look at the building uncovers a side to Apple that few have seen before.

Initial Visit

Steve Jobs Theater is located in Cupertino and positioned in the southeast corner of Apple's new $5 billion Apple Park headquarters. The 167,000-square-foot building consists of a 921-seat underground theater and accompanying product demo room. Apple plans on utilizing Steve Jobs Theater for product unveilings and the periodic corporate event. Apple hired Norman Foster and his firm Foster + Partners as the project's architect although Apple Chief Design Officer Jony Ive and other Apple designers played a pivotal role.  

Steve Jobs Theater. Photo credit: Apple

Steve Jobs Theater. Photo credit: Apple

Most visitors arriving at Steve Jobs Theater for the first time will be impressed by its seclusion and allure. Unlike the 2.8-million-square-foot ring building, Steve Jobs Theater cannot be seen from nearby streets surrounding Apple Park. Instead, visitors must walk along a path that winds its way through a series of carefully landscaped hills. It soon becomes clear that this short walk is actually part of the broader experience Apple was trying to achieve.

The path empties out into a basin containing Steve Jobs Theater’s lobby. The 22-foot curved panes of glass create a strong first impression. To the right is an unobstructed view of the giant, circular ring building. The entire experience is reminiscent of Disney World as it becomes clear that someone has created this specific experience to be consumed at this particular location. The lobby, the only part of Steve Jobs Theater that is above ground, is massive, intriguing, and even magical. It doesn’t take long to notice the lack of walls or support structure. This leads to the inevitable question of how the 155-foot roof is being held up. (Spoiler: the glass supports the carbon fiber roof.) Additional questions are raised regarding how plumbing for the water sprinklers and electricity for the lights and speakers are piped to the roof. As it turns out, a little magic is indeed at work. As reported by Lance Ulanoff over at Mashable, all of the necessary plumbing and wiring is found in 20 of the narrow gaps between the large panes of glass. 

 
Steve Jobs Theater floor plans.

Steve Jobs Theater floor plans.

 

The other item that stood out about Steve Jobs Theater was the two sets of stairs on either side of the lobby that are used by visitors to walk down to the theater. The intriguing use of Castagna stone and handrails hand-carved into the stone walls reminded me of a mix between an Egyptian structure and something from space. Photos and videos don't do them justice. 

(My complete review of Apple's inaugural event at Steve Jobs Theater is available for Above Avalon members here.)

Not Perfect

Steve Jobs Theater is far from perfect. A strong argument can be made that Apple outgrew the theater before it even opened. Apple's prior two iPhone launches took place in a venue that fit 50% more people, which allowed Apple to invite many more Apple employees than they did to the inaugural event at Steve Jobs Theater.

Despite the building's large footprint, the exhibit space felt incredibly cramped. While Apple may like the visual of hundreds of people bumping into each other to get their hands on the latest products, it's not exactly the best experience to go through. My suspicion is that the exhibit space needs a few modifications to reflect the new era of reporters wanting to live stream. 

 
The Steve Jobs Theater exhibit space was still packed after an hour of hands-on time. 

The Steve Jobs Theater exhibit space was still packed after an hour of hands-on time. 

 

In addition, there were a number of odd design decisions found at Steve Jobs Theater. These range from the awkward paper towel dispensers in the restroom to uneven temperature control in the lobby and doors that are unusually difficult to open. There was also a decent probability of getting a little wet from water dripping off the carbon fiber roof in the morning. However, the building's accomplishments end up vastly outweighing these minor oddities.

Observations

Much of the discussion regarding Steve Jobs Theater up to now has been superficial. Most people agree that the building is impressive and fits within Apple's broader design focus. However, upon closer examination, Steve Jobs Theater provides a fascinating look at today's Apple. A number of items stood out to me. 

An Apple Product. Apple is no longer a company that just ships consumer hardware powered by differentiated software. The unveiling of Steve Jobs Theater is the latest sign of this reality. The theater is an Apple product, in the same vein as Apple's redesigned Retail stores. Apple approached Steve Jobs Theater and the broader Apple Park headquarters in the same way that it would any other product. Significant time and resources were spent on modeling and prototyping before construction. An identical process occurs for Apple products that eventually end up on our desks, in our pockets, and on our wrists. 

One of the most significant takeaways from Steve Jobs Theater is that Apple is no longer a company content in just focusing on making well-designed electronics. Apple is moving into bigger and bolder initiatives. Jony Ive has hinted in various interviews about his never-ending drive to make technology more personal and create tools for people. While this goal will inevitably lead Apple further into wearables, including glasses, there is a very high likelihood that Apple will focus on bigger tools like self-driving cars. These bigger tools will require Apple to move much further into construction and architecture. Apple reportedly owns and leases a collection of heavy manufacturing facilities close to Apple Park that includes some of the last remaining open space in the San Jose vicinity. (A listing and map of these Apple buildings are available for Above Avalon members here). The day when Apple designers build their very own state-of-the-art transportation R&D center minutes away from Apple Park is no longer a fantasy. All of this puts the PR photos with Tim Cook and Jony wearing Apple hardhats into a new light. 

 
Tim Cook and Jony Ive at Apple Park. Photo credit: The Telegraph

Tim Cook and Jony Ive at Apple Park. Photo credit: The Telegraph

 

We have arrived at a weird point in time. Silicon Valley giants are gaining unfathomable amounts of power yet remaining remarkable aloof when it comes to manufacturing and construction. Apple is the notable exception. Apple is the company most eager to step outside its comfort zone and experiment in construction and architecture realms. Apple sees the gap between architecture and design starting to shrink. According to Jony, architecture is "a sort of product design; you can talk about it in terms of scale and function and materials, material types. I think the delineation is a much, much softer set of boundaries that mark our expertise."

Experience. There's a reason why Steve Jobs Theater and the overall Apple Park campus is reminiscent of Disney World. Both locations provide an unmatched experience to the visitor. When walking around the grounds surrounding Steve Jobs Theater, it truly felt as if the building is meant to represent Earth while the large circular ring building off in the distance is the Sun. 

Steve Jobs Theater symbolizes how Apple is doubling down on extending the Apple experience beyond just iPhones in our pockets and Apple Watches on our wrists. As Apple's Retail store strategy shows, the idea of using architecture and physical spaces to explain the Apple story isn't new. However, Apple has taken the idea further to include its headquarters and even the theater at which it plans to unveil many of its future products.  

Focus. It's easy to look at Steve Jobs Theater and forget the amount of work and resources that went into the building. Jony and Apple's Industrial Design team reportedly worked alongside Foster + Partners on nearly every aspect of the theater and the entire Apple Park campus. Apple management likes to use every opportunity to reiterate its goal of remaining focused and saying no to a lot of great ideas. The company's product line demonstrates such focus. Accordingly, there is logic in considering how much attention went into Apple Park over the past few years and where that attention is now being placed. This brings us to the most crucial takeaway regarding Steve Jobs Theater: Jony Ive.

Jony Ive

In May 2015, Jony was promoted to Chief Design Officer. The transition kicked off a debate regarding the underlying motivation behind the move. Many argued that the promotion marked the beginning of the end for Jony's time at Apple. Some observers argued Apple is setting the stage for Jony's eventual retirement by shifting day-to-day responsibilities to Richard Howarth and Alan Dye. The degree to which Jony then took a less visible presence in subsequent months (which was clearly telegraphed by Apple in announcing his promotion) added oxygen to the fire.

Others said Jony's Chief Design Officer title is mostly ceremonial with little-to-no responsibility and compared it to Steve Jobs giving the Chief Software Technology Officer title to Avie Tevanian in 2003. Tevanian ended up leaving Apple a few years later. In reality, such a comparison is so off base it could classify as intellectual dishonestly. 

I've held a completely different view of Jony's promotion. The day after Jony's promotion was announced (via a Stephen Fry article), I wrote

"With Howarth and Dye serving as Jony's two lieutenants in terms of managing day-to-day aspects of Apple design, what would such a dynamic look like and where would Jony fit into the picture? I consider Jony's new role to be much more about leadership while Howarth and Dye handle the more corporate side of things - the actual management of teams. The amount of additional time and attention that Jony can spend on entirely new projects, while leaning on his two right hands to make sure that schedules are being met and projects are receiving all of the resources they need, goes a long way in describing Apple's strategy over the next few years.

I see an environment in which Jony's potential can be unleashed even more now than the world has already seen. Similar to how Steve Jobs was known to head down to Jony's design lab to hang out, I suspect in some ways, Jony wants to do the same - check out of the day-to-day executive grind and lose himself in research and design elements on whatever topic or subject he choses. By being positioned in more of a leadership role than a managerial role, Jony could maybe be more like Jony."  

Two years later, and with Steve Jobs Theater officially open, it is clear Jony holds the role closest to the one held by Steve Jobs. The promotion to Chief Design Officer represented sustainability for Jony. It has been reported that Apple Watch development, in addition to overtaking leadership of human interface, took its toll on Jony. The entire Apple Park project represents much of Jony's focus in recent years. Jony reportedly was the one who carried Apple Park on his shoulders. Its completion now gives Jony the freedom to focus on new initiatives and projects at Apple. 

A Design Company

"[O]ne of the ways that I believe people express their appreciation to the rest of humanity is to make something wonderful and put it out there." - Steve Jobs

It's difficult to envision any other company building something like Steve Jobs Theater. Based on the reported $14 million price of the theater seating, my estimate for the overall cost of the building exceeds $100 million. Most management teams will struggle to find how such an initiative would ever come back to boost sales or benefit the company. The fact is that Apple is unlike any other Silicon Valley firm. Steve Jobs Theater symbolizes how Apple isn't a tech company but rather a design company. Apple believes that how we experience and interact with a product is more important than a single focus on the technology powering that product. Apple is now bringing that philosophy to the way we experience architecture. As for the why behind it all, Apple's answer would probably be to make something wonderful. 

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Major Tech Trends Ahead of Apple's Big Event

With Apple about to host its largest product event in years, much of the attention continues to be focused on the details. Plenty of questions remain regarding the various changes Apple will announce across its iPhone, Apple Watch, and Apple TV lines. A closer look at the broader trends taking place in these product segments go a long way in adding much-needed context to Apple’s inaugural event at Steve Jobs Theater.

Smartphones

On the surface, the smartphone battle seems to be largely settled. Predictions calling for iPhone’s demise at the hands of Google and Android have subsided although some are now eager to replace Google with WeChat as Apple’s arch nemesis.

Behind this facade of relative calm, the smartphone market continues to evolve at a rapid pace. Three major trends are unfolding regarding how consumers view smartphones:

  1. Larger screens continue to gain momentum.
  2. Form factor size is hitting a ceiling.
  3. The pricing gap is widening.

With an increasing amount of content consumed on smartphones, consumers and manufacturers alike continue to get behind larger screens. Once deemed excessive and niche, large smartphones with 5-inch to 6-inch screens are seeing growing sales momentum. This large screen smartphone trend has materialized across the industry, indiscriminate of geography and even price.

While there is still evidence that a portion of the market is OK with smaller screens as seen by continued 4-inch iPhone SE sales, this segment is more likely to contract than expand over time. 

The newest and most intriguing development in the smartphone space is found with the relationship between screen size and form factor. Historically, smartphone screen size faced a ceiling in terms of its relationship to form factor. Mobility is greatly reduced if a smartphone is so large that it is unable to fit comfortably in pockets, purses, and pouches. The trend of removing front-facing bezel and dedicated home buttons is eliminating this form factor limitation. Smartphone manufacturers are able to ship larger screens without increasing form factors.

The OLED iPhone is rumored to include a 5.8-screen, which is larger than the 5.5-inch iPhone Plus screen, in roughly the same form factor as an iPhone 7. This will have a major impact on how consumers think about smartphone size preference. It is inevitable that all iPhones will eventually contain the same design language - no home buttons and little to no front bezel. Large swathes of the iPhone user base will likely want to upgrade to these new iPhone models over time. It is the type of multi-year upgrade cycle that PC makers hoped would occur in the laptop space but never materialized. 

As manufacturers increasingly bet on camera and screen innovation to stand out from the competition, smartphone pricing has been on the rise. While smartphone prices are increasing at the high-end, as seen with the $750 Samsung Galaxy S8 and $950 Galaxy Note 8, there continues to be a significant portion of the smartphone market desiring price accessibility. The key for smartphone manufacturers will be balancing higher-priced smartphone SKUs packed with the latest technology with increasingly lower-priced SKUs still offering a premium experience. 

Wearables

The wearables market has had a rocky start. Some of the initial wearables players have retreated out of the space while others have taken a more cautious view. Only a handful of companies are seeing wearables sales success. It is fair to say everyone, including Apple, has seen their fair share of strategy changes over the years. 

Three major trends are unfolding in the wearables space: 

  1. Sales momentum is flowing to smartwatches.
  2. Fashion and luxury continue to gain importance.
  3. The wearables battle is slowly expanding beyond the wrist.

Dedicated fitness trackers have lost momentum while Apple Watch continues to outperform sales expectations. Fitness and health tracking is moving from being a product to a feature. Nowhere is this seen more than in a comparison of Fitbit and Apple Watch sales over the past year. 

Exhibit 1: Fitbit vs. Apple Watch Unit Sales

Screen Shot 2017-09-07 at 1.55.12 PM.png

Meanwhile, Fitbit’s new Ionic smartwatch is a "bet the company" type of move in an attempt to capitalize on this new wearables landscape. Garmin has seen similar trends with sales momentum flowing from dedicated fitness and health trackers to its smartwatch offerings. We are only seeing the initial fallout from this development.

One of the items Apple got correct out of the gate with Apple Watch was interchangeable watch bands. This dynamic is now viewed as natural and almost inevitable when discussing smartwatches. Going forward, technology companies will continue to face pressure in the wearables space given how consumers are demanding luxury and fashion options.

As the battle for the wrist evolves, the ear is shaping up to be the second major wearables battleground. Apple, Samsung, Fitbit, and a slew of smaller hardware companies and start-ups will have wireless or cordless headphone offerings in the market for the upcoming holiday season. Apple is the clear leader in the space with its W1 chip-equipped AirPods and Beats. More importantly, given the company's sales success with Apple Watch, Apple has the most formidable wearables platform. We are moving to a point at which the wearables narrative will evolve. No longer will it only be about wrist devices. Rather, it will also include platforms consisting of hardware and software solutions for different parts of the body. 

Television

After years of unknown, we are starting to get a glimpse of TV's future. The large cable bundle's days are numbered. Netflix, Amazon, Facebook, Google (YouTube), and Apple are the new power brokers in the TV space. There is a long list of others including Disney (ESPN), HBO, and Hulu that would like to join that coveted list of influencers. Netflix and Amazon are the newest TV networks with massive budgets for funding scripted video content. YouTube and Facebook continue to reign supreme when it comes to offering ad-supported video content. Apple owns the most lucrative platform that involves consumers accessing paid video subscriptions. 

Major themes unfolding in the space include: 

  1. Price is playing a major role in the streaming set top box market.
  2. Momentum is found with smaller screens.
  3. New content players are holding optionality.

Roku is the current streaming video box leader with approximately 40% market share in the U.S. Amazon, Google, and Apple hold second, third, and fourth place, respectively. The market is unfolding largely based on price. Roku has been able to position itself as the cheapest way for people to access Netflix and YouTube on a large television screen. The company is going so far as to give away its Roku OS to TV manufacturers for free. Meanwhile, with Apple TV priced nearly five times higher than Roku, Apple's streaming TV box is bringing in nearly 6x more gross profit than Roku earns from its players.

While much attention continues to be placed on large screen televisions, such focus ends up being grossly misleading. Apple is actually selling more than 250M "TVs" per year called iPhones and iPads. These smaller screens are responsible for delivering an increasing amount of video content to consumers. 

In a battle for our time and attention, content creators with formidable content budgets are winning. There is a brain drain underway in Hollywood as talent in front and behind the camera is moving to the new players in town. There are still genuine questions as to just how sustainable some of these streaming video business models are as independent entities. However, there is no question that a company like Netflix has earned itself optionality from providing a superior entertainment experience to more than 100M people. 

Home

The smart home ended up being the surprise tech topic of 2016. Much of this was due to sheer fascination in Amazon's Alexa digital voice assistant and accompanying Echo speakers. The narrative has shifted in 2017 as mindshare is now splintered due to additional companies entering the scene. Apple is expected to discuss HomePod in detail at its upcoming product event. Major themes in the smart home space include: 

  1. Voice is being positioned as an early user interface.
  2. Companies are basing their home strategy around core competencies. 
  3. It is still early to declare definitive leaders and laggards.

As the number of smart items for the home available for sale increases, questions have swirled as to the best way to control these devices. Voice continues to grab much of the attention although the automation capabilities found in Apple's HomeKit hold much intrigue. At the same time, we are seeing pretty dramatic differences in strategy for the home based on a company's core competency. While Google and Facebook will look to monetize the data obtained via microphones and cameras through advertising, Amazon is looking for Alexa to serve as a better shopping assistant in order to drive Prime memberships. The preceding strategies include giving away hardware at or below cost. Meanwhile, Apple's strategy to sell the best-sounding speaker people have ever owned gives the company a good shot at becoming the most profitable device in the smart home space.  

Even though Amazon has garnered much good press in the space, it is simply too early to declare winners and losers in the smart home. The way that Apple and pretty much every large consumer-facing technology company are running forward with stationary speakers and screens for the home brings back flashbacks to the early wearables rush. Many companies will end up being disappointed. At the same time, the attention given to stationary devices has taken the spotlight off the importance of mobile devices in our home. The smartphone remains the most valuable computer in our home and we should not underestimate it when contemplating the smart home's future. Of course, a home won't likely truly be a smart home until Silicon Valley firms begin building their own housing, but that topic is for another day. 

Apple's Big Event

Apple's upcoming event at Steve Jobs Theater has the ingredients to be the largest Apple product event since the Apple Watch unveiling at the Flint Center in 2014. Apple will unveil at least three new iPhones in addition to new Apple Watches and a refreshed Apple TV. In some areas, Apple's goal will be to improve upon existing themes unfolding in the smartphone and streaming video arenas. In other areas such as smartwatches, Apple will likely take a true leadership role in pushing the market forward. 

I will be attending Apple's inaugural event at Steve Jobs Theater. My full thoughts and observations on the event will be sent exclusively to Above Avalon members. To receive this analysis and perspective, visit the membership page. Members also receive my analysis and perspective on Apple throughout the week via exclusive daily emails (2-3 stories a day, 10-12 stories a week).