Callaway Digital Arts Founder Nicholas Callaway
Building the Publishing Company of the Future
MARCH 13, 2012

AUTHOR’S NOTE: Since this interview was conducted, Nicholas Callaway left Callaway Digital Arts to found lifestyle-app company Happy. What looked like a departure was actually the splitting of Callaway Digital Arts in two; the company had produced lifestyle apps and some of the employees that worked on those projects came with Callaway to Happy.

Nicholas Callaway is on a mission to build the publishing company of the future.

Callaway, 58, is the founder and chief content officer of Callaway Digital Arts, a New York and San Francisco-based app development and publishing company. Founded in late 2010 with $6 million of series A funding from tech start-up venture-capital firm Kleiner Perkins Caufield Byers, Callaway Digital Arts has grown from about ten employees at the end of 2010 to nearly 50 today.

The company, best known for its best-selling Sesame Street and Miss Spider apps, intends to accelerate its growth in 2012 and is currently sourcing another round of funding with Kleiner Perkins leading the effort.

The goal is to build a publishing company today that in 2017 will be typical for the industry: A “technology company that works in content” merged with a “content company infused with technology.”

Prior to Callaway Digital Arts, Callaway spent 30 years in publishing as the founder and CEO of Callaway Arts & Entertainment, a publishing company that more closely resembles the 1997 paradigm rather than the 2017 paradigm that Callaway hopes to invent. Today, Callaway Arts & Entertainment still exists, but mostly as a holding company for intellectual property developed over 30 years in the business.

Before launching his publishing company in 1980, Callaway spent four years in Paris working at an art gallery. He has a bachelor’s of arts from Harvard University.

We spoke with him about being discovered by Steve Jobs, why he’s not souring on prospects for apps and building the publishing company of the future from the inside out.

You ran a book publishing company for about 30 years and then launched a new entity focused on apps. Why?

Callaway Digital Arts was formed because I foresaw the era in which the primary medium for entertainment and learning would be mobile and tablet devices. We were getting ready by building intellectual property across multiple platforms.

We produced our first app with Callaway Arts & Entertainment, based on the Miss Spider property: Miss Spider’s Tea Party. That’s what got the attention of Steve Jobs and Apple. On Steve Jobs’s recommendation, we entered discussions with Kliener Perkins. We then ported our Miss Spider app to the new company.

You’re a purely digital publisher. Digital revenues soared across the board for book publishing in 2011. What was your growth like in 2011? What do you anticipate for 2012?

We have been in existence for a year-and-a-half. We have been continually growing. 2011 was a year of explosive growth, certainly, both in number of apps and downloads. We don’t share any financial information.

Speaking of growth, did Callaway hire in 2011? Will it be hiring in 2012?

By the end of 2010, we had about ten people. By the end of 2011, about 40, 47 now. We are in the midst of our series B round of financing. That will be a very significant growth phase, when we go from start-up to “digital major.”

I can’t tell you where we’ll be a year from now. We expect a successful series B and that will give us the fuel for growth.

You’ve told me that you consider Callaway Digital Arts to be as much of a technology company as a publishing company. What’s the makeup of your staff in terms of technology folks?

Out of our 47, we have 15 engineers, so we are a state-of-the-art technology company as well as an IP [intellectual property] creation company and the two are inextricably linked.

I see our artists and our technologists as equally creative. Our job is to foster and to build that creativity, whether that’s in a line of code or in UI [user-interface] design. Our entire mission and my job specifically is to weave together those creative talents in a seamless whole.

Content creators do not generally have the sensibility or expertise to be technologists. We have specifically created an operational approach that puts all of those technology and content talents together, side-by-side in a studio, so they are optimizing and creating together. That means artists, writers, videographers, sound designers, composers, UI designers, UX [user-experience] designers, engineers are all working shoulder to shoulder.

It may at times be remote across New York and San Francisco, but we’re trying to have that physical proximity, that studio approach.

As with many open technology positions, you must be looking for a very specific type of talent.

I see a profound shift in the sensibility and the talent set of the next generation. I was just talking about this with [Steve Jobs biographer] Walter Isaacson: The creator of the future is someone who is both trained and has a sensibility that cuts across many disciplines that used to be not only distinct from each other but also antithetical from each other.

MIT’s media lab is a good example. It is inherently a cross-disciplinary and hybrid type of talent. We are looking for engineers who are looking beyond their lines of code to what they are coding for.

We have a number of engineers who are designers. Our digital animation is all tech-driven. Our designers are a new kind of designer. I call it “grand” design. The designer of today and tomorrow is a graphic designer, a UI designer. This is a new medium. Everything about how we are entertained has to be transformed.

Callaway Digital arts is the studio where that new medium is being created and it requires a fundamentally different kind of creator.

How do you find these people?

John Dorr, the senior partner at Kleiner Perkins, said to me a few months ago, “the first thing you should do when you wake up is not look at your email, but think about your human resources and recruiting.”

We have a core of extraordinarily talented people. We encourage our people to constantly network and bring us people. We provide an incentive for our employees to do so. I believe in building from the inside-out. We do work with recruiting firms. We are about to hire our head of HR [human resources] and recruiting. We are about to go into an intensive growth phase. We need a dedicated effort.

We have established relationships in the key institutions of learning within this medium. Last summer we had eight interns and one of them is joining us from Harvard when she graduates this year. We have several interns from Carnegie Mellon.

In terms of entry-level talent, we are the go-to company. We get people who are turning down Facebook, Google and Disney, because they have an opportunity to have an enormous impact on the direction of the future of this company and that is greatly appealing to many people. The growth potential is great. We have an industry-leading equity participation and everyone in this company does participate.

You both develop new content and work with publishers on bringing their existing IP to the app world. Which will you be doing more of going forward?

Generally, our partners are not necessarily book publishing companies, per se, they may be media companies like Sesame Street that are also cross-platform.

We have a dual strategy: one is to partner with great IP creators and brands such as Thomas the Tank Engine, which is owned by HIT Entertainment, and Sesame; simultaneously and equally, we are gathering together talented creators for the next generation and creating original, wholly owned IP and we see that as one of our greatest opportunities.

We’re working with Paul Budnitz, founder of the Kid Robot brand, and we’re creating an entire series of apps with authors and writers under his aegis. And we’re working with Graydon Carter [editor-in-chief of Vanity Fair] who has written and illustrated an original story for his daughter called Bella’s Umbrella.

At the DBW conference in January, our survey conducted by Forrester revealed that publishers are “souring” on apps as a money-maker. How do you feel about this?

I’m not surprised. We’re in an interesting new cycle. The first wave said, “We’ve gotta get into the app business.” Traditional publishers didn’t know how. They called their app developer, they threw the app in to the app store and it didn’t work. And then they said, “well, that cost a lot of money and didn’t work.”

So a shakeout is happening because they’re scared of the fully interactive, immersive app because that takes the most expertise to realize; ebooks are the low-hanging fruit. It’s in the app store that we can pioneer in this new medium.

The e-book experience is still fundamentally now porting the print-book experience to a digital display. What publishers need to learn how to do is create in a new way.

Publishers are working so hard to defend an existing platform that they can’t devote the time, resources and creativity to pioneer in a new medium. That’s why book publishers are not leading the way in apps. They’re going to have to change profoundly to do so or they will have to buy the companies that are dedicated to the digital experience.

You met Steve Jobs and had some limited contact with him. What did he think about ebooks and digital reading?

I know that his last mission, specifically, was to transform the textbook. Just as with all the other industries that he zeroed in on like a laser—the PC industry, the computer animation industry, the music industry—he saw textbooks as a hopelessly antiquated business that drives book publishing and with his magical devices he could transform it.

What are you reading and on what platform?

I just finished reading the Steve Jobs biography [Steve Jobs by Walter Isaacson, Simon & Schuster] on my iPad. I’ve read it many times.