D5 Conference 30 May 2007

Steve Jobs interviewed by Walt Mossberg at the All Thing D conference, D5, in 2007.

Video Transcript

Note: for some videos, timestamps on the transcripts might be off by a few minutes due to theĀ original videos having been edited for YouTube (typically, sections with music playing may have been removed).

Walt Mossberg: Ladies and gentlemen, Steve Jobs.

Steve Jobs (SJ): I like the music, thank you.

Walt Mossberg: Yeah, I picked that out. That's where they let me do that. They let me pick the music. Well, thanks again for coming to D.

SJ: Sure, howdy.

Walt Mossberg: Thank you in advance for the joint session with Bill Gates we're going to do tonight. We're not going to talk about that now, but thank you for doing that.

Let me ask you a question that may seem odd. You you've changed the name of Apple this year, and, you certainly have this enormous business that I think ten years ago, people wouldn't have expect you to have in music. So what businesses is Apple in?

SJ: Apple's in two businesses today, and a hobby. And we're about to add a third business. So we'll very shortly be in three businesses and a hobby.

Walt Mossberg: A hobby?

SJ: A hobby. And the businesses are, one our Mac business, which we love and is growing really well. The second is our music business. And each of those two are about $10 billion businesses for us. And the third business we're about to get in is the phone business, handsets.

Walt Mossberg: You have a phone? You're about to have a phone?

SJ: We're about to have a phone.

Walt Mossberg: I had no idea.

SJ: Okay. I'll send you one.

Walt Mossberg: Thanks.

SJ: And then the hobby is Apple TV. And, it's, it's the reason I call it a hobby is because a lot of people have tried and failed to, you know, make that a business. Everybody from, you know, TiVo to Microsoft, you know, everybody's tried and it's a hard problem. And so we're trying, and it's a business that's, you know, hundreds of thousands of units a year, but hasn't really crested, you know, to be millions of units per year. And I think if we work on it and improve things over the next year, 18 months, we can crack that.

Walt Mossberg: I want to come back to that because this where you have something to show related to Apple TV today. In a couple of your, in your first couple of appearances here, I asked you, you know, you've gotten good, critical, reviews on the Macs that you did after you came back to the company. And, you introduced the iMac and the new laptops and so forth, but you really your share, the needle didn't seem to move on your share. From what I can tell something is happening with share there, or at least with sales. So talk about the Mac business and where you think it is.

SJ: Well, we, you know, we all use Macs at Apple. We love the Mac. And so we're steadily trying to improve things as everybody in our industry is. And we think we make the best notebooks in the world, we think we make the best desktops in the world. And, our share on notebooks is ahead of the industry. We're about two thirds notebooks, one-third desktops, and the industry's about 40% or so notebooks. And we've always been a little ahead there, and I could see a time when notebooks are even going to be, you know, 80-90% of what we sell.

We're also always improving our operating system. Generally, we have a release every 18 months or so. And, we had a really big release, about 18 months ago, that we didn't get much credit for, but it was actually, Mac OS X Tiger, which is our current release, on Intel.

Walt Mossberg: Yeah.

SJ: Because we switched the whole product line to Intel processors. And that's, for anyone that's ever tried to do anything like that, that's a huge thing to do. And we did it really well, I think, I mean, it was very seamless for the customers. And, so that worked very well. And the growth that we've seen, over the last several quarters, really, since we got through that Intel transition, has been about three times the market growth rate. So we've been picking up market share for the last, you know.

Walt Mossberg: In other words, the overall PC growth rate is X and Mac growth is 3X.

SJ: Yes.

Walt Mossberg: Is that worldwide or US?

SJ: That's worldwide.

Walt Mossberg: And in the US?

SJ: If you look at the, if you parse out the US numbers, it's even more than that, it approaches 5X.

Walt Mossberg: And your market share is what, around 6 or something, or am I wrong?

SJ: If you measure it worldwide, it's like 3. If you measure it in the US, depending on who you listen to, it's 5 to 6. If you look at US retail for notebooks, it's 12. You know, so it depends on how you tweed the numbers together. There aren't really great numbers out there. As an example, if you look at US retail, you know, we have double digit market share, but it doesn't include our web store, but nor does it include Dell's web store. So since Dell doesn't give us their numbers, we can't really calculate, you know, what the consumer market share might be versus the enterprise market share.

Walt Mossberg: This is gonna sound like a funny question, but there are people, but when you changed your name to Apple Inc, and you announced that you were doing the iPhone, in addition, of course, to the iPod and the Apple TV. There are people who said, well, this is your gradual exit out of the computer business, the personal computer business. Or do you remain committed to the personal computer business?

SJ: Yeah, totally. Totally. I mean, as an example, if you come to our worldwide developer conference, which is a week from this coming Monday, we'll have the largest attendance we've ever had there. And we're rolling out the next generation of our operating system, Leopard, which we'll ship in October. No, it's massive investments we're making in that business. We love it.

Walt Mossberg: Okay. We haven't seen a big change in the iPod, if we put iPhone aside, and you did identify it as a separate business, I know there's an iPod in the iPhone, but - for awhile. Are you planning some big new iPod model or iPod platform or change?

SJ: So a while means since last September?

Walt Mossberg: Since last September, right.

SJ: This is a fast moving business.

Walt Mossberg: Right.

SJ: Yeah. We generally don't talk about..

Walt Mossberg: In September, you didn't do a whole - it wasn't like you introduced the nano last September, or something like that.

SJ: A new Nano.

Walt Mossberg: A new Nano, I understand, but I mean, not a whole new model of the iPod.

SJ: Okay.

Walt Mossberg: Okay. So...

SJ: It sure felt like that, with all the work that went into it, but I'll concede to that.

Walt Mossberg: I wasn't taking your feelings into account, right, so...

SJ: As we look forward to all I can - all I should really say is that, we're working on the best iPods that we've ever worked on. And they're awesome. And I can't wait till they're done!

Walt Mossberg: Okay. All right. Moving right along. What phone are you carrying? Do you have a phone with you?

SJ: Yeah. Yeah.

Walt Mossberg: You want to show it? You want to wave it around?

SJ: Just a little thing here. Best iPod we've ever made, by the way.

Walt Mossberg: That's the best iPod?

SJ: The best iPod we've ever made. Best phone we've ever made too.

Walt Mossberg: Yeah, that's great. Are you still on track to ship that? When?

SJ: Late June. [00:07:28]Walt Mossberg: Late June. That means like the very last day of June or what does that mean?

SJ: Yeah. No, I would say in the latter part of June.

Walt Mossberg: The latter part of June. Okay. And it'll be available in volume or?

SJ: I sure hope so.

Walt Mossberg: Yeah. Well, you and other companies have sometimes shipped products and the volume wasn't there right at the beginning. So I'm asking.

SJ: I think we'll ship a lot of them. Will it be enough? You know, I don't know. I hope not.

Walt Mossberg: Okay. And, do you expect to sell most of these in your own stores or through Cingular? Or do you?

SJ: We're going to be selling these in our own stores and through Cingular, which is now the new AT&T.

Walt Mossberg: Yeah. Thanks. Just like the old AT&T.

SJ: And they've got...

Walt Mossberg: You're a lot nicer to cell phone companies than you were last time you were on the stage.

SJ: You know, it's really interesting.

Walt Mossberg: I'm OK, you know, I don't know what they've done.

SJ: We've gotten to know some of the players and, we haven't sold a phone yet, but Cingular has been really great with us, I have to say.

Walt Mossberg: By leaving you alone, basically?

SJ: No, actually not by leaving us alone. They did a deal with us. We did a pretty different kind of deal than they'd ever done before. And it bent a lot of their - bent or broke a lot of their rules. They'd never done anything like this. And they did it with us without ever seeing the phone. We wouldn't show it to them. And

Walt Mossberg: So that's what's called due diligence?

SJ: You know what it was? It's like, and we kind of did this in return, cause we don't know much about how they work either. If you talk to great venture capitalists, they'll tell you that they invest in people, not ideas. Even if the ideas are great, they're really investing in the people. And I think Cingular invested in us. They took a gamble on us. And, likewise, we took a gamble on them. And so I will never forget that.

Walt Mossberg: Why do you think they did it? Do you think they did it because they wanted to associate your brand with theirs? You have a hot brand, they're relaunching their company.

SJ: I think they did it for two reasons. The first reason they did it was because music on phones hasn't been so successful so far, and they really wanted to do something good with music on phones, and they knew, with the iPod built into the phone, we could do that.

The second reason though, I think is even more profound. And that is that they have spent, they, along with everyone else in the business, have spent and are spending a fortune to build these 3G networks.

Walt Mossberg: Right.

SJ: And so far, there ain't a lot to do with them. You know, people have not voted with their pocketbooks to sign up for video on their phones. Hasn't really worked. So they've got a lot of bandwidth, but these phones are not capable of taking advantage of it, because their internet experience is so poor. You've used the internet or you've tried to use the internet on your phone and it's terrible. They have lousy browser and you don't get the internet, you get the baby internet, or the mobile internet, or something bizarre. And what people want is the real internet on their phone. And they believe that we could deliver that, and we are going to deliver that. And so we're going to be able to take advantage of some of the investments they're making in this bandwidth, I think in an entirely new way. We'll see.

Walt Mossberg: And because it's obviously, I mean, your own goals that you set for sales of the iPhone were not gigantic and enormous. To me, you said, I think, in 2008, you wanted to sell 10 million. Am I right about that? That's good. I'm not saying it's bad. But I mean, a billion dollar, a billion unit market, that's 1%, right?

SJ: Yeah.

Walt Mossberg: So they couldn't have signed the deal with you because they wanted a high volume product, per se.

SJ: Well, again, a billion units is the worldwide number. The US number is obviously a lot less than that, so, since we'll be selling primarily in the US, and to some extent in Europe by then, it's a little bit bigger than 1%. But we're newcomers. People have forgotten more than we know about this.

Walt Mossberg: Okay. All right.

Any features of the iPhone that you haven't announced that you would like to share with us here today?

SJ: Nope. Sorry.

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?

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.

Walt Mossberg: Okay.

SJ: And as we've said before, I think over half the songs we offer on iTunes will be offered in what we call iTunes Plus, which is our DRM free, higher-quality audio versions, by the end of this calendar year.

Walt Mossberg: And this is all in the same store, it's all integrated.

SJ: Same store, yeah.

Walt Mossberg: So it doesn't - we know one of the things about your store has been, it's been pretty simple. Doesn't this, isn't this going to add complexity?

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.

Walt Mossberg: And that there's just some automatic sincing process? It just...?

SJ: Yeah, well we know what we've sold. So we just download new versions and substitute them. Yeah.

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.

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.

SJ: Well, again, if you look at the total number of iPods we've sold, and you look at the total number of songs we've sold on iTunes, it's less than 25 per iPod. So, and the average iPod user has hundreds of songs on their iPod. So they're clearly not getting the majority of their songs from iTunes. It turns out they're not even getting even a medium-sized minority from iTunes. And so this whole notion that somehow we have a lock-in that iTunes is locking people in to buying iPods, is ridiculous. And since iPods can take any, you know, anything, take any MP3 from anywhere and play it, right? The notion that if you buy an iPod, you get locked into iTunes is equally ridiculous. You can get MP3s from anywhere. Matter of fact, most people do. They rip their CDs or they get music in other ways.

Walt Mossberg: In other ways.

SJ: And the vast majority of their music, they get in other ways. So, the way we've always felt is, if we have the best music player, we're going to sell iPods. If we have the best music store, we will continue to pioneer people buying music. And, we work really hard on both of them, but we've never felt that one was significantly helping the other. We felt that we had a great solution here and people were using ...

Walt Mossberg: Well, your business, or this part of your business is really the iPod. I mean, I know that you, I think you make a little money, or at least you don't lose any money on the iTunes Store, but the business is the iPod, not the...

SJ: Well, there's, there's three pieces to it. There's the iPod, there's iTunes the jukebox, which runs on PCs or Macs and is free, right? And you don't even have to use it with an iPod if you don't want to, and as a matter of fact, many people don't. And then there's the online store in the cloud. Right?

Walt Mossberg: Right. But the iPod is the biggest part. I mean, iTunes the client is free. The store doesn't make all that much money, cause most of whatever I pay for song goes to the label.

SJ: We give to the music companies, that's right.

Walt Mossberg: So, you know, your big business is the iPod. And the question is, do you jeopardize that when DRM goes away by, breaking the, kind of the hold or the tie between the store and the device?

SJ: Well, again, if people are getting, you know, the vast majority of music for their iPods from places other than the iTunes Store, I think the iPod's winning cause it's the best music player. It's the preferred music player. And our philosophy is, we better make the best music players if we want to keep winning. So we work real hard at it and hopefully we will continue to do that.

Walt Mossberg: Is the iPhone a wireless iPod or is it a phone that has an iPod in it? I know that sounds weird, but I mean, what's the...

SJ: It's three things.

Walt Mossberg: How do you think about that?

SJ: It's three things. It's the best iPod we've ever made. It's an incredibly great cell phone. People are probably overlooking that part of the thing. You know, all cell phones are the same. But we've really revolutionized how you use a cell phone. If it was nothing but a cell phone it'd be really successful. And then the third thing is, it's the internet in your pocket for the first time.

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.

Walt Mossberg: How much debate was there? I don't even know if you have any debate at Apple. I don't know.

SJ: Lots.

Walt Mossberg: Really?

SJ: Yeah.

Walt Mossberg: But I always imagined that it's like the UN security council and you have a veto, right?

SJ: No, it doesn't work that way. If you want to, if you want to hire and keep really bright people, then you can't tell them what to do.

Walt Mossberg: Okay.

SJ: Very often. Right?

Walt Mossberg: Okay.

SJ: Like once, once a year, maybe twice you get to do that.

Walt Mossberg: You can just overrule.

SJ: You have a silver bullet now and then, but, basically you don't do that. And so at Apple, it's about ideas. And we argue about ideas constantly.

Walt Mossberg: So how much argument or debate was there about the decision not to have a physical keyboard on the iPhone?

SJ: None.

Walt Mossberg: None?

SJ: None, no.

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.

SJ: Yeah,

Walt Mossberg: Really?

SJ: Yeah.

Walt Mossberg: Why? Why not?

SJ: For a few reasons. One, once you actually use a touch display like this, it's like a...

Hi there.

Walt Mossberg: That's our official photographer.

SJ: I see. Hi official photographer.

Walt Mossberg: He's taken your picture picture before, you know.

SJ: It sounds like a machine gun.

Walt Mossberg: All right. Well that could be your next hobby product, you know, a quiet camera.

SJ: Once you use this magical display, there's no going back. It's unbelievable. And, so there there's a few advantages. Number one, we actually think we've got a better keyboard. And it takes a few days of getting used to it, you know, like it does with any small keyboard. But, I'll bet you dinner that after using it for a week, when you do get your hands on one, you will think it's really great. Really great. Because we can...

Walt Mossberg: That's a pretty gutsy bet. Because most of these onscreen, all of these onscreen keyboards I've tried, and I have not thought were as good as a physical keyboard. But yours is better?

SJ: Yeah, we think so. Again, you get, it takes a week to - basically you have to learn how to trust it. Once you learn how to trust it, you fly. Yeah.

Walt Mossberg: Okay. All right.

SJ: And the other nice thing about it of course, is that we can use that physical space for other things when you don't need a keyboard. Right.

Walt Mossberg: Right. You've got the big screen.

SJ: And you can keep changing the user interface as you come up with new ideas, new applications. We were talking with the folks at Cingular one time and they said, well, we have to have a button for this. And we said, Oh, don't worry about that. We'll add it after we ship. And they hadn't seen the phone yet, they didn't know anything about it. And they looked at us like, huh? We said, don't worry about it. So yes, it provides incredible flexibility to create great user interfaces for different applications. And, you know, you don't take up half the space of this thing with a physical keyboard. But in addition to that, once you learn how to trust the keyboard, it's a better keyboard.

Walt Mossberg: How much time do you think you have before people kind of copy at least the overall form factor? I mean, there are some things around the LG Prada and some other phones that sort of look like this. And I ask that because you were forced, or you made a decision, because of the FCC process, to announce this thing much earlier than usually announced products at Apple. And was there a cost to that? I mean, are people going to be able to move faster?

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?

Walt Mossberg: Yep.

SJ: If you really look at the iPod, it's software. It's a software product in beautiful hardware. It's software in the device, it's as we said, software on the PC or the Mac, and it's software in the cloud, with the store. It's software wrapped in a beautiful package. And the Japanese consumer electronics companies couldn't make the leap to create that kind of software. And that's why Apple enjoys the success it does with the iPod.

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.

Walt Mossberg: All right. But I have to stop you there. Does the iPhone... it doesn't really have the entire Mac OS X operating system, which is gigabytes and gigabytes on the computer, it doesn't really have the entire Safari browser, which, I don't know how much space it takes up, but more than you've got on the phone, right? I mean.

SJ: So the answer is yes, it does. And the entire Mac operating system is, when you get it on a disc, is gigabytes. A lot of it's data. You take out the data.

Walt Mossberg: What do you mean by data? Foreign languages?

SJ: We don't need every desktop pattern that we ship. We don't need every sound file that we ship. If you take out the data, the operating system is actually not that huge. And if you look at Safari, Safari is not that huge. Now it's got real OS X, real Safari, real desktop email, et cetera, et cetera, et cetera. And we own those apps. So we could take Safari, and take all of that work that we put into it, and put a very different user interface on it, to work with the multi-touch screen. And if you don't own a browser, that's pretty hard to do. You know, so it's an amazing amount of software.

Walt Mossberg: So, theoretically. There's a business decision and a technical issue here. On the technical side, theoretically, could a Mac OS X app run on an iPhone, if you thought that was a good idea?

SJ: Well, we don't think that's a good idea.

Walt Mossberg: Yeah.

SJ: And obviously, we don't want to have a mouse on our phone, and we don't to have pull down menus and things like that. So, we think there's a very different user interface for the phone.

Walt Mossberg: Okay. Talk to me, let's - I want to get up and do this demo in a second, but to lead up to that, one of the big kind of Holy Grails has been - one has been, have a great pocket internet device. And you're working on that. One has been to connect the internet, or the content on your computers and the internet, to your TV. And we talked to, I talked a little to Les Moonves about that. Obviously Microsoft has, as you pointed out, made some previous efforts.

SJ: Sure.

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?

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.

Walt Mossberg: But interestingly, when you introduced the Apple TV, it was only the peas that you were talking about.

SJ: That's right. We're learning!

Walt Mossberg: So today, are you going to talk about the...?

SJ: I want to do, I brought something to show you if you'd like.

Walt Mossberg: OK, let's let's do it.

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 with 802.11n networking. And one of the things we stream directly is theatrical trailers, we stream these from apple.com. So you can go in here and, you know, just take a look at a trailer. Like there's one that I happen to love, which is for a little movie that's coming out at the end of June, called Ratatouille. Here we go. And, this has turned out really well.

Trailer: Paris, France home of the finest restaurants in the way to chefs in the world. All my life...

Walt Mossberg: And this is streaming live.

SJ: Yeah.

Trailer: You may think that's a strange dream for a rat, but I've always believed that with hard work and a little luck, it was a matter of time for I'm discovered. RAT! You know, what would happen if anyone knew we had a rat in our kitchen. Go, take it away from you.

SJ: Anyway.

Walt Mossberg: And by the way, the connection, I mean, you have a line back here that's ultra fast, much faster than anybody's house or anything?

SJ: No, this works just fine off cable modems and stuff.

Walt Mossberg: Okay. All right.

SJ: And, works even fine off even better one hundred megabit per second fiber optic networks that I hear some people have.

Walt Mossberg: I wouldn't know about that. Yeah. Okay.

SJ: And, you know, you can buy movies off iTunes as well. So we can go back here and I can just, you know, there's the Sixth Sense right here, this was just bought off iTunes, and you can just see what the quality is.

Movie: Grandma says hi. She says she's sorry for taking the bumblebee penitent. She just likes it a lot. What? Grandma comes to visit me sometimes.

SJ: So you can see the quality there. It's pretty good.

Walt Mossberg: The device can do high def output, but you're not selling high def.

SJ: We aren't selling Hi Def at this point, just because of the trade-offs between download time and quality. But I think in the future, that might change.

Walt Mossberg: Okay.

SJ: Yeah.

Walt Mossberg: All right.

SJ: And the other thing you can do is, we sell a lot of TV shows. We've, you know, we're gonna sell our hundred millionth TV show, I think, probably this year, so it's fun. And, let's see, where's a good one. The Office has some good ones here, was looking at one. This one's fun.

Movie: First off, Michael, this is a salary negotiation. All matters regarding our personal relationship have to be set aside. Are we clear? Right now, we can offer you a 6% raise. 6% after all we've been through. I got you JD earrings, you play it like this. You give me a good raise or no more sex. Just preparing for the deposition.

SJ: So, you get the idea. And, so, we've got movies and TV shows. And, again, the movies that you buy are stored on your PC, the TV shows you buy are stored on your PC, and you can stream them wirelessly, or you can download them to the hard drive inside Apple TV. So if you have a notebook and your content, you know, close the lid and your content walks off, you still have some stuff to watch on the hard drive of Apple TV. And you've got all of your music and you've got your podcasts and your photos. Photos are great, cause photos of course are in High Def. And, you can look at all your photos and just again, stream them over. Boom, boom, boom. So here you have photo slideshows like this.

Walt Mossberg: And the device just does this automatically. Or do you have to, arrange these things and pick the music and, you know, do a lot of work on the computer?

SJ: You can pick the music on the computer and it just plays it whenever you play it on here. That's very easy to do.

Walt Mossberg: But this is all peas. This is all. This is not the main entree you've decided. This is getting stuff off your computer is not what you think may be the main deal here.

SJ: We'll see over time. We'll see over time. I think it's really cool, but I'm not so sure that, I'm not so sure it is. We'll see.

So, what we're going to do today is just introduce something, what we introduced this morning was, something really cool. And that is people want to watch a lot of video. A lot of people haven't bought a lot of movies. Haven't bought a lot of TV shows. And, one of the most incredible things that's happened over the last few years is YouTube, right?

Walt Mossberg: Yeah, we have the YouTube founders here.

SJ: Yeah. Original generated content.

Walt Mossberg: Right.

SJ: And, wouldn't it be great, if you could see YouTube in your living room? You could see YouTube on your TV? I mean, we can see YouTube on our computers right now, but we can't see it in our living room. So we've had a real great opportunity to work with the YouTube folks. And, we just put YouTube right in the main menu there.

Walt Mossberg: And that's an actual feature now of Apple TV?

SJ: Yeah. We're announcing it today. And we're going to give it as a free upgrade, free software download upgrade, mid June.

Walt Mossberg: Okay.

SJ: So it's coming in just a few weeks. Normally I would have waited to announce it, but Hey.

Walt Mossberg: It's D.

SJ: Yeah, it's D, so. And so, we can just go into YouTube now, just like we can go to movies or TV shows and, you can see, you know, the parade of videos here. And we have tried to implement most of their features here, and we have featured, most viewed, most recent, top rated, you can search. And so, you know, let's go into most viewed here and again, we can, you know, see a parade of images. And so let's go inside and... oh, there's a cool one here actually. Or is it? You might've seen some of these, but they're pretty amazing. So here's one.

Walt Mossberg: It's like they just saw cold fusion or something and they can't.

SJ: I don't actually know how they do this?

Walt Mossberg: I don't either.

I've never seen this.

So. I know this is fascinating, but.

SJ: Yeah. So when you're done - when you're done, you get to see all the related videos here. I could play some of those too, if you want, but... actually there's one that's very cool.

This is very cool.

Walt Mossberg: I like the treadmill dancing guy, they're good.

SJ: Forget this guy. It's the second guy up that's really good.

It's this next guy.

You get the idea?

Walt Mossberg: Did you ever think you'd be associating the Apple brand with that quality entertainment?

SJ: It's really funny. Since we got this working, we've watched a ton of this stuff.

Walt Mossberg: All right. And does that mean Leopard is slipping again?

SJ: Yeah probably.

Walt Mossberg: Okay.

SJ: It's turned out to be really cool. And, let me just, you know, oops, let me go back in, let me show you one other thing here real quick. You can search for stuff really easily. And we've got a live search here. So let me search for "girl" and it just starts finding stuff right away.

Oops. What'd I do? Oh, well, yeah. Let me go back here and try again. I'm nervous up here, I'm hitting the wrong keys.

Walt Mossberg: Yeah. Cause you're really bad at stage presentation.

SJ: Like, you know, look at some of the stuff. I found this the other day. This is kind of cool.

For a year, this girl took a photo of herself.

Walt Mossberg: It actually is oddly interesting. I don't know why

SJ: Anyway. And I got one last one for you. That's actually amazing.

Walt Mossberg: Oh, look, that guy copied her.

SJ: Yeah. Watch this though. This - this is like the Darwin awards.

Walt Mossberg: You imagine ever getting your wife to go? Holy shit.

SJ: So, there you go.

Walt Mossberg: Only at D, YouTube on a hundred inch screen. You know, but that's the question. That's that was my next question. I mean, I don't, to be honest, I don't know what the resolution is of this video set up we have here, but, you know, I imagine you have a big screen TV. I have a big screen TV. It not being a particularly poor audience, probably all has a big screen TV. I mean, YouTube clips, sometimes they don't look great in a small window on your laptop, how are they going to look? Do you do anything to them inside the Apple TV, or?

SJ: You know, the biggest thing limiting the quality of the YouTube clips is actually the source material that YouTube gets.

Walt Mossberg: Right.

SJ: And, slowly but surely people are figuring out how to use better, you know, camcorder techniques and lighting and encode them better. But you get what you get. And what's really funny is, you know, I mean, like you, I'm a stickler for quality, but it's amazing how fun these things are to watch, even in the quality they're at.

Walt Mossberg: I'm telling you Leopard delayed, again. He's so mesmerized by these.

SJ: So - again, it's just, it's one more piece of the puzzle, but it's amazing how fun it is to watch this stuff in your living room rather than just on your computer.

Walt Mossberg: OK. So this is the first, thing or additional feature of Apple TV that goes right out to the internet and get you something other than a preview, you can actually get full videos. Why not just build in a feature that lets me go anywhere on the internet and get any video that's out there.

SJ: That's a good idea. Let's do it.

Walt Mossberg: Yeah. Are you going to do it?

SJ: I think, you know, over - in the fullness of time, I think that all these things are going to percolate, from us, from others, and there'll be all sorts of interesting things happening. And we're going to be there with our collection of interesting things.

Walt Mossberg: But you're going to have a collection of interesting things rather than me, the user with my Apple TV. Like if I, so if I have a Mac, I can go anywhere on the internet, see anything. With an Apple TV, it looks like you're doing it a little more structured way. Why? Why not put on a browser, video browser or something on there?

SJ: I think maybe you'll see stuff like that. I think a normal web browser is not necessarily what people want right in their living room. But I think you will see stuff like that. Yeah.

Walt Mossberg: Okay. And, so even with the human slingshot and the quick change?

SJ: That's my species. Serious.

Walt Mossberg: That's not going to take it from a hobby to a real business.

SJ: You know, I use the word hobby just because it's a little provocative in the sense that it's - the iPod started this way. I mean, the iPods are really great phenomenon today, and it's a big business today, but it started off a little smaller. And, it started off feeling a lot like this, so.

Walt Mossberg: Okay. And you're, but you're committed to this.

SJ: Totally, yeah.

Walt Mossberg: Television, it's really a set top box.

SJ: No, it's not a set top box, I mean, that's what screwed up...

Walt Mossberg: I don't mean it's a cable box, but it's another set top box, right?

SJ: Well, that's not how we look at it. That's what screwed us up for a few years, as we've wanted to do this for a few years, and we thought of it as a set top box replacement. And the minute you're going to replace a set top box, you get into an entire, real, gnarly set of problems, you know? Cause you have to have the cable cards, and you have to kind of go through the cable companies to get to market. And they use this very strange software called OCAP that you have to implement, so that you can implement their billing systems and all sorts of other things like that. And we would never, that just isn't something we would choose to do ourselves. And so we didn't do it. We didn't do it because we couldn't see a go to market strategy that made sense. But then one day we realized, wait a minute, there's a lot more DVD players out there than there even are set top boxes. We don't have to replace the set top box, the DVD player didn't replace the set top box. We just have to be, we want to be a DVD player for this new internet age. And that's what we can be. And so our model for Apple TV is like a DVD player for the internet.

Walt Mossberg: So when you bring an Apple TV home or an iPhone, actually, and you want to connect it to the computers in your house.

SJ: Yeah.

Walt Mossberg: And let's say they're all Windows computers.

SJ: Right.

Walt Mossberg: All you need is iTunes software. Right?

SJ: Right.

Walt Mossberg: You don't need to go into the Windows control panel and set up, you know, they have their method for setting up a network and connecting devices and all, but you just take care of that all inside iTunes.

SJ: You did it. You know what it's like.

Walt Mossberg: I know. So the question is, how many copies of iTunes are out there?

SJ: Lots.

Walt Mossberg: No, but I mean, okay. Compared to the number of iPods, is it, is it 50% more than the number of iPods, or?

SJ: Several times more.

Walt Mossberg: Several times. So this is like a hundred, I think your announced figure a iPod sales, a hundred million. You're saying this could be 300 million copies of iTunes?

SJ: Or more.

Walt Mossberg: Or more? That makes it one of the most ubiquitous pieces of software out there. Obviously not as much as say Windows or something.

SJ: Right.

Walt Mossberg: But there's a lot, there's a ton of them. And almost all of them on Windows computers.

SJ: Statistically, yes.

Walt Mossberg: Statistically? In reality, in this particular dimension, they're all on Windows computers?

SJ: Exactly. (laughs)

Walt Mossberg: Okay. So that makes you an enormous Windows software developer. How does that feel?

SJ: Oh, we've got cards and letters from lots of people that say that iTunes is their favorite app on Windows.

Walt Mossberg: But I mean, I knew you - I knew you, we, you know, I think here at D actually...

SJ: It's like giving a glass of ice water to somebody in hell.


Walt Mossberg: There's that humility. That Steve Jobs humility. Hmm. I knew that, you know, you knew that you had to put it on Windows, you hired some Windows developers, you wanted to do it right, and all of that. But the scale - doesn't the scale of it surprise you? I mean, over and above, however you feel about the success of the iPod itself. People don't pay attention to this, but this piece of software is just like on all these Windows computers. It's...

SJ: The scale of a lot of things we're doing surprises me. It's just, yeah. I mean, I never thought we'd ship a hundred million iPods, you know?

Walt Mossberg: Never.

SJ: No.

Walt Mossberg: Even when you, I mean, you're not known as a guy who lacks confidence, so you must've thought it was going to succeed, right?

SJ: Yeah, but a hundred millions, for us, it's a very big number.

Walt Mossberg: Right. The better, the bigger number for you is the 80% share, or the 75% share or whatever it is, right, I mean, that's not a kind of a share number you're used to?

SJ: I suppose, we'd rather it ship a hundred million and have a lesser share than have 80% of a 10 million unit market, but.

Walt Mossberg: Right. Do you think video on portable devices is a success, is a big deal, do people want it? And it's not only - I mean, I remember when you were, when you were here at one point, you said you didn't think people wanted to watch video on small devices. And then even after you shipped it, you made some statements that you personally weren't a hundred percent sure how many people wanted to do it.

SJ: I was definitely more skeptical than customers. And, what happened was with the iPod video, boy, they proved us - they proved us wrong. And a lot of people, you know, we'd go out and talk to our customers a lot, and do a lot of research on that. And, video has been the number one or two reason people have bought that product, and they use it a lot. So, and, you know, again, we've sold the better part of, you know, a hundred million television shows. So, it's...

Walt Mossberg: And you have any way to tell whether those are on iPods or primarily being viewed on?

SJ: We don't except by going out and asking people, and it's both. But people have watched a lot of video on those iPods and the screens are, you know, the screens are small and they're, you know, $249 and things like that. So I think video's here to stay on portable devices and I think its use will only grow.

Walt Mossberg: So, but you don't have video, I mean, the iPhone can play video, but you don't have a video service that allows people to download videos, I don't think, on the iPhone, do you?

SJ: Sure we do.

Walt Mossberg: You do?

SJ: Because it's an iPod, all those videos you've bought for your iPod play perfectly on the iPhone.

Walt Mossberg: Right. But I can't download them directly to iPhone right?

SJ: Over the air?

Walt Mossberg: Yeah. Over the air.

SJ: No.

Walt Mossberg: Why not? I mean, you know that a lot of the cell phone carriers, including AT&T, are doing this, Qualcomm has this whole new, essentially cell phone television network that they've started. I mean, this is a big deal and it's a big deal in other countries.

SJ: Yeah.

Walt Mossberg: You're bringing out this phone with this huge screen...

SJ: People have tried it with music so far and it's failed. And part of the reason that it's failed is that a phone isn't necessarily the best place for discovering or browsing through large catalogs of music to figure out what you want to buy. And then when you download it to the phone, it costs more money because the airwaves cost more than the terrestrial internet. And then, when you get it on your phone, you've got to sync it back to your PC anyway, because if you lose your phone or trade in your phone, you don't want to lose a few hundred dollars worth of music. So you can either buy it on your phone for more money in a less good environment, and sync it back to your PC, or you can buy it on your PC, much bigger screen, easier way to buy, and then sync it to your phone. And, you know, we, again, we've got a hundred million iPods we've sold, that people know how to sync to their PCs, they know how to buy music on iTunes, and it's just, you know, second nature to just sync it to the iPod.

Walt Mossberg: Yeah. You have no plans at the moment to put any version of the iTunes Store, either for music or video, on the iPhone itself. Despite the fact you have a big screen and you have this, non baby operating system, and...

SJ: We certainly have nothing to announce today.

Walt Mossberg: Oh, really? Okay. All right. Well, why don't we take some questions and then we'll, then we'll go to lunch.

Yes, sir.

Eben Pagan: Hi Steve. Eben Pagan, Hot Topic Media. I read an article that you personally still pick up the phone and call to recruit people. And I'm wondering if you have any tips on what you look for, and how you look for it, in talent.

SJ: Oh, that's a long discussion, but I will say...

Eben Pagan: Take as long as you'd like.

Walt Mossberg: It's his conference, actually.

SJ: I would say that, I think, you know, in our businesses, I mean, we don't build $4 billion semiconductor fab facilities that provide barriers to entry to competition and things like that. We're not a capital intensive industry like that. And so, all we are is our ideas, which means all we are is our people. And that's what keeps us going to work in the morning is a chance to hang around all these great bright people. So, I've always felt and still feel even more strongly that recruiting is like the heart and soul of what we do. And it's really important.

Eben Pagan: Thank you.

SJ: Yeah.

Walt Mossberg: Blake.

Blake Krikorian: Hi, Blake Krikorian from Sling. Two questions, a two part question. One, Steve, you mentioned 3G and the lack of high quality applications for 3G. Absolutely agree, but, the iPhone is a 2.5G phone right now.

SJ: Right.

Blake Krikorian: So can you comment on that?

SJ: Sure. Well, it's actually a really interesting thing. It's a 2.5G phone plus wifi. And it automatically switches to wifi whenever it finds wifi. And it just switches to the fastest network automatically, and you don't even have to think about it. And you know, I'm in this industry and we were the first people to ever ship Wi-Fi in a notebook computer and, you know, have the first cheap wifi base stations out there, and stuff. So we're really into it. Shipped the first g, shipped the first n. And so, we're really, you know, we're around wifi all the time. The iPhone has a feature that when you're - when you're in a place, if you choose to join a network, it remembers that. If you're in the same place, it'll just automatically join that network if it's the fastest one. But when you're in a place where you've never joined a network and it finds it, it will just alert you to that, and say, do you want to join one of these things? And so, you know, I live in Palo Alto, so there's a fair amount of wifi, I would figure, but it's everywhere. You walk ten blocks, and you're going to encounter 50 wifi networks. You know, I mean, some of them are people's personal ones that you can just, you know, take a ride on. Others are in - others are in stores of one form or another, it's everywhere. And I had, there's like ten times more wifi out there than even I thought there was, and I live in this industry every day. So, wifi is of course way faster than any 3G and, Edge turns out to be pretty fast too actually, cause it's a point to point connection. I've been really surprised at how good Edge is.

Blake Krikorian: And then the second question is, you talked about the internet in your pocket, and so I would assume that, you know, the whole beauty of the internet is its diversity and its totality. So how is it going to be an internet in your pocket when it's over one of these orifices? Or through one of these orifices?

SJ: Orifices?

Blake Krikorian: Or will it be... yeah, there was a guy who mentioned last year about these orifices. You remember? How's that going to happen? I mean, the open internet, does that mean it's full-blown internet functionality over the Cingular network?

SJ: Yes.

Blake Krikorian: Cool.

SJ: That's what it means.

Blake Krikorian: Great. Thanks.

Walt Mossberg: Yeah. Over here.

Brian Quinn: Hi, Brian Quinn from Dow Jones Online. I want to talk about one of Walt's favorite topics, which is advertising. And Apple's been - done some of the most memorable advertising in history, from the commercial that was voted the best of all time, 1984, to the Think Different campaign, to the iPod silhouette campaign, and the campaign that's advertising that's on now, which I think is just wonderful, the Mac versus PC. The question I ask you though, is more about media choice and, when you think of Mac, well, you can say arguably, the far superior operating system, but for the most part, Apple has really never advertised Mac on the internet. And, those of us who sell on advertising think of, what a great opportunity, because 95% of the people that would see your Mac advertising are using the inferior product. And I'm just curious about, if you see that as an opportunity that you've missed, or it's just not top of mind? But advertising the Mac to people using an inferior product, would seem to be a good opportunity.

SJ: Well, without getting into that, I can say that our Mac versus PC campaign, we do advertise on the internet quite a bit. But, but not on those porn sites that you're talking about. (laughs)

Walt Mossberg: Over here.

Brian Dear: Brian Dear from Eventful. Steve, all indications so far, and I - are that the iPhone is like you say, you know, a beautiful piece of software wrapped in a beautiful piece of hardware. And the fact that it's running on OS X, is a fantastic development. I think I would speak for many developers, perhaps thousands of independent developers who would love to write apps for that platform, cause I believe it's going to be a tremendous platform for the future. But the indications are so far that it's closed. And I was wondering if you could comment on that, and do you see it opening up for developers in the future?

SJ: Sure. It's a good question. This is a very important trade off between security and openness, right. And what we want is we want both. We want to have our cake and eat it too. And, so we're working through a way, we've got some pretty good ideas that we're working through. And I think, sometime later this year, we will find a way to do that, because that is our intent.

Walt Mossberg: Find a way to open it up, so that third party developers...

SJ: Find a way to let third parties write apps and still preserve the security.

Walt Mossberg: But at the start, until you get that in place...

SJ: Until we find that way, we can't compromise the security of the phone. This is something...

Walt Mossberg: Is this a network issue? Is this an AT&T issue? I mean, what, when you say the security of the phone?

SJ: You know, I won't mention names, but I've used, you know, we've all used a lot of smartphones that crash more than once a day. And the more there were third party apps you put on them, the more they crash. And we don't, you know, we're going to, nobody's perfect, but we'd sure like our phone not to crash, once a day or more. And so, we would like to solve this problem, I think we're going down some really good avenues to do it, if you could just be a little more patient with us, I think everybody can get what they want.

Brian Dear: Thank you.

SJ: Yep.

Walt Mossberg: Over here.

Jim Balcom: Jim Balcom with PolyFuel. Steve, I must be one of the weirdos, thank you very much for this video iPod, my kids and I watch all kinds of TV shows, even sharing with the one little screen, one earphone into each of our years. Thanks very much. We're one of the weirdos that does that.

SJ: Thank you.

Jim Balcom: We work with a lot of the Asian consumer electronics companies that you say don't do software particularly well. And we're working to try and help enable them to run extended run times on their portable devices so that they can get these devices to deal with live TV. And one of the things that they complain about is that limited battery run time is one of the things that's limiting their ability to do that or people to buy that. What's your view on that?

SJ: Well, I think when you're talking about a portable device, whether it be a notebook or an iPod or a phone, it's all about power. It's all about battery life. And so, fortunately we've been fighting that fight for a long, long time with our notebooks, right? With our Macs. And so, we've got a lot of technology for managing power. I think Macs are pretty well known for managing power quite a bit, you know, kind of the best of breed in the PC industry. And, we've applied a lot of that and learned a lot more from iPods. And so, we were able to bring all of that, all those things we'd learned together, in the phone. And, I'd say you've hit upon one of the key problems in portable devices, is just power. Yeah.

Walt Mossberg: Jane?

Jane: Steve, first of all thank you also, I'm a 20 year plus Mac addict and still hooked. I wanted to ask you a question two years ago, when you were here. You'd had a really rough time, and I asked you how you were? Apple is healthy and you had been through all kinds of hell. Two years later, two and a half years later, how are you now?

SJ: Oh, thank you. Uh, I'm still vertical! I'm feeling great, thank you.

Jane: You look great.

SJ: Thanks.

Walt Mossberg: Okay. Thanks.

Dave Jaworski: Dave Jaworski, with PassAlong networks, and we have about 2 million songs in MP3 format today that we use to power FYE, Sam Goody, and other brands. And, when we have the EMI catalog, it will be MP3. You talk about interoperability and how DRM free opens that up, but your DRM free is AAC. So if I have a Sony reader that has, that plays MP3 files, I can play any song I buy in MP3 format, or that I rip from CDs. If I have my Garmin GPS, it will play MP3 files. But if I buy DRM free from iTunes, I have to go through a transcoding process and the consumer doesn't really understand transcoding or else they have to rip it and burn it, in which case they're no better off than they were with buying a DRM file and they lose all the metadata, the artist's name, the track name. Why not make Apple's DRM free mean MP3, and get rid of the confusion that is being created for the consumer?

SJ: Well the answer, first of all, let me point out a few things. Let me point out a few things. Number one, of course all the MP3s that you guys sell will play just fine on iPods. And number two, the reason we chose AAC in the first place is, for a given data rate, it's significantly superior to MP3 in its audio quality. So it's a much better encoder. And we don't own it. We license it. Anyone can go license it, and as a matter of fact, a bunch of people have. Microsoft has, most of the players out there have gone and licensed AAC and they do play AAC. So, I'm sure you can name a list of people that don't, but they can easily go out and license it and they'll play it. But most of the big players out there now do play AAC. Cause it a. It is a superior codec and b. they want to be able to play stuff that iTunes people rip their CDs in iTunes, and they, most of them choose to rip it into AAC, they want to be able to play that stuff. And they can today. Anyone can go license AAC, it is a totally open standard.

Walt Mossberg: They're not licensing it from you.

SJ: They're not licensing it from us.

Walt Mossberg: Some industry body or somebody.

SJ: Absolutely. Yeah. So it's just like MP3, by the way, MP3 isn't free. We go license it from an industry body. AAC is actually much simpler to license than MP3 is. So we're not trying to keep anybody out, we're just trying to use a superior technology, which results in much better audio quality at any given data rate. And, others seem to agree with us because they seem to be putting AAC into their products more and more. And so, you know, you could encode all your stuff in AAC if you want it to as well, it'd be really easy. But even if you don't, all the iPods still play MP3.

Walt Mossberg: Over here.

Jonathan Kaplan: Jonathan Kaplan from Pure Digital Technologies. Always great to have you on stage, it's enjoyable to listen to you, Steve.

SJ: Thanks.

Jonathan Kaplan: My question is really around capture. I'm the CEO of a young company that makes capture devices, and traditionally Apple has stayed out of the capture part of both still and video. And with the iPhone, now there is a camera on there, so capturing still will happen. And I'm just curious how worried I need to be about you deciding that you want to get into the capture space, given that the on-ramp to the YouTubes of the world tend to be big devices that are difficult to connect with terrible software.

SJ: Well, I mean, we do also build video cameras in the most of our computers now. And...

Jonathan Kaplan: You can't take those with you so.

SJ: What's that?

Jonathan Kaplan: You don't take those really. It's not a very portable way to capture video, move your Mac around.

SJ: Oh, MacBooks are pretty, pretty tiny, but...

Jonathan Kaplan: The woman on the Slingshot, could hold her MacBook while she's flying through the air.

SJ: Phil Schiller held a MacBook as he jumped off. Yeah, but. Yeah. We, you know, we are not planning on getting into the camcorder market, if that's what you're asking.

Jonathan Kaplan: That's a great answer. Love that.

Walt Mossberg: We actually have time for one more question. I'm sorry. Right over here.

Scot Heiferman: Thank you. Steve, thanks for being here. I'm Scott Heiferman from Meetup. You shook my world. You have been a hero of mine when I heard, when I was 12 years old, you know, that you challenged John Sculley to change the world. You seem obsessed with, I was going to ask a silly question, like, do you read the Fake Steve Jobs blog? But the real question here that is meaningful to me, is, you're obsessed with Hollywood and entertainment and all these, you know, these movie trailers and stuff? But, is that a relevant, or what, what, what really changes the world moving forward?

SJ: I have read a few of the Fake Steve Jobs things recently, and I thought they were pretty funny. And I get asked a lot if I know who it is, and I don't. But, but it is pretty funny.

Scot Heiferman: I don't write it.

SJ: Maybe it's Walt.

Walt Mossberg: It's me, right.

SJ: And, I am interested in storytelling. I got involved with Pixar a long time ago, and, I'm one of the cheerleaders at Disney still. And I love a lot of stuff that they do. So I love storytelling. But what we do at Apple is, we try to make tools for people, in the end. And, tools to enjoy entertainment, tools to communicate, tools to create, whether it's Macs or phones or iPods. And, what we find is, is that, you know, in this age we're living in, these computer based tools can always surprise you on the upside, you know? We didn't design Apple TV thinking about YouTube, but here it is. We didn't design iTunes thinking about education, but one of the things we announced this morning was called iTunes U, where there's like, you know, I think it's 17 universities, and there's hundreds in the pipe, are putting their courseware on iTunes to where their students and even anybody can access it. And these are there, what they're doing is, they're taping lectures, either audio or videotaping lectures by their best professors, and they're putting them on their servers, so their students don't have to sit there and take notes and not pay attention to the lecture. They can just listen to the lecture, and then go get a copy of it, and put it on their iPad and take notes later. And alumni can get at it, and, you know, kids that don't even go to the university can get at it. And, you know, it's MIT and Stanford and Berkeley and all these great universities, and this is iTunes, and it's free! And so, you know, who would have thought? And so that's why I love what we do. Because we make these tools and they're constantly surprising us in new ways, what we can do with them. So.

Walt Mossberg: Thank you, Steve.