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[00:11:42] Walt Mossberg: Well, you brought, something, new in your hobby business as you put it, show. Or actually before we get to that, let's just mention, you put out a press release this morning. I don't know, everybody has been sitting here, paying rapt attention to the speakers. But you put out a press release this morning announcing two things. I guess the bigger one was that you've begun to sell these non copy-protected songs on the iTunes Store, from EMI. Is it only EMI or?
[00:12:13] SJ: Right now it's just the EMI, but there's, zillions of independents that are also jumping on this bandwagon. So as fast as we can now get their stuff encoded, you'll see more and more on there.
[00:12:46] SJ: Well, we worked really hard at that. What we do is, the first time you go to buy one of these iTunes Plus songs, it asks you, it says, Hey, would you like us to only offer you iTunes Plus where it's available? And most people will say yes, if they like iTunes Plus. And so it just substitutes the iTunes Plus song in, just one song, one price, $1.29, and whenever they're available, you get those. So it's pretty simple. Right? And then we have another cool thing, which is we're offering people a special offer to upgrade every song that they've ever bought from iTunes to an iTunes Plus version if it's available, for 30 cents a song or, 30% of the current album price, whichever is, you know.
[00:13:37] Walt Mossberg: Any, other movement on the record labels coming?[00:13:42]SJ: All we're, you know, we're working with them. It's, as you know, the music company shipped 90% of their music DRM free today. Because all CDs are DRM free, right? And that's how all the music's distributed. So we've gone to them and said, look, you're shipping 90% of your music DRM free, customers are willing to pay a little bit more to get their downloaded music DRM free to, and why don't we do this? Plus the solves all the interoperability problems and things like that. And, we were successful in persuading EMI, and hopefully over the rest of this year, we'll be successful in persuading, most or all of the rest of the labels.
[00:14:22] Walt Mossberg: Some people have said, you know, you wrote this open letter about this. A lot of your rivals were already lobbying the record labels for a long time, partly because they thought it was a way to, you know, break your hold on the market or reduce your share, because of this idea that there was lock-in. In other words, I buy a bunch of, songs protected by your DRM. They're on my iPod, even if they're only a minority of the songs on the iPod, it makes me much more reluctant to buy a different device, even if something about that device is attractive to me, because I can't play these songs on there. Well, you're just kind of getting ahead of the train that was already moving when you wrote that letter.
[00:18:09] And if it was any one of those three, it would be successful. If it was just the internet in your pocket, you know, it would be what the Sony Mylo aspired to be. If it was just the best iPod we've ever made, we'd sell a lot of them with that. And if it was just a phone, we'd do pretty well with that too. But it's all three of them. And, you know, they play off each other.
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[00:19:26] Walt Mossberg: So there's this whole world of millions of people, and, you know, if you look at RIM sales are growing, people who are absolutely addicted to these devices with physical keyboards, and you guys just, you had no one in Cupertino who thought that was a good idea.
[00:22:09] SJ: You know, if you zoom out of the whole thing and you say, why does the iPod exist? Why is Apple successful in this business? What would the answer be? It would be because the Japanese consumer electronics companies, who were the preeminent hardware makers of consumer electronics until recently, couldn't do software work as well as needed to be done. Right?
[00:23:08] If you look at handsets, it looks very similar. The handset manufacturers, have got their hardware down, but they haven't been able to make the leap to software. And, you know, just like, you know, with PlaysForSure and stuff, you know, Microsoft has some software that they can go license, but it's on a fairly small number of phones, and it's of a certain caliber. And, so if you really look at an iPhone, it's software wrapped in really wonderful hardware. And so people, the usual suspects will try to copy the hardware. And it will take them some time and maybe they will, and maybe they won't, be able to copy the hardware. But the software is at least five years ahead of anything we've seen out there. And it's really hard to do it. We, you know, we spent years working on this, but remember that we started with an operating system that we've been working on for, well over a decade when we started. And we started with a browser, Safari, which is what's an iPhone, which is regarded by many as the best browser in the world.
[00:26:31] Walt Mossberg: They have a new effort where the XBox sort of serves that function. And there are, you know, millions of XBoxes out there. This is what Apple TV, I think, is about, why isn't it? Why do you describe it as a hobby? Why isn't it something that is just, it's $299, I mean, when I tested it, it was very easy to set up, you can bring it into a house that has absolutely no other Apple products in it. It could be an all Windows household, as long as you have iTunes on those machines, your photos and your, all that stuff will show up on your TV. Why isn't it like, dead simple to imagine people wanting to buy that in large numbers?
[00:27:14] SJ: You know, I think what everybody's tried, and the place where we've come from too, is coming from the personal computer market, you first think about getting content from your PC in your living room, on your widescreen TV. And I'm not so sure that's really what most consumers want. I mean, yeah, it's great to show your photos, it's great to play your music that you have on your PC wirelessly, and get that all on there. But we tend to think of that as the entree. And the more we think about this, the more we think that might just be the peas on the side, you know? And that the entree really might be things that you get directly from the internet.
[00:28:07] SJ: So I've got an Apple TV over here. And where's the remote? Here's the remote. So your screens are here. Okay. How many of you have seen this by the way? An Apple TV. Oh, not so many. Okay. Well, let me, I'm just not going to take too much time here, but let me take a little bit of time. This is the photo screensaver here, just takes all your photos and puts them up on your nice TV. And so this is what it looks like when you go into it and you can go into movies here if you want. And we show, we actually do stream a few things off the internet directly to this Apple TV box here, without going through your PC. And we of course, hookup with an ethernet cable, or we hook up wirelessly