Apple Analyst Meeting Conference Call

[eric67]

correct

Originally posted by FlamDrag
Furthermore, I expect that it would actually cost money for iTunes or the iPod to support .wma Unless I'm mistaken, MS owns the wma format and Apple would have to pay MS to license the format and/or codecs.

exactly, why should Apple at the moment i,plement a compatibility with WMA, except maybe is M$ agree to make it free of licencing charge....I doubt
concerning OggVorbis, I guess it can be implemented aby time, but I also do not understand some computer users.....
Apple decided to use an open audio codec, so no extra charge due to licencing,etc...so why are some people complaining about that??? I mean really I do not get it...
most of PC users complains against M$, they want open source stuff, they want to use Linux, but there are not much applications developped for Linux, complain about M$/Intel monopoly...and now because Apple decided to use an open codec, they complain because Apple does not use WMA format????
any why to use WMA format ??? AAC ratio audio quality/compression rate is better than WMA so why use WMA???
it is not because M$ try to push its format, that we have to use it...Philips decided NOT to support M$ audio and video media as a single format, so why Apple should??

 

[tychay]

Originally posted by reyesmac
If AAC is not proprietary why would you need a license to use it? Do you have to pay for the license? Is this how other free codecs have you do, like mp3? If anyone knows the answers to these questions I would appreciate it.

Sometimes it sounds like Apple is the only one out there that can play AAC songs. That just sucks if true.

This is true for a lot of open standards. The manufacturer has to pay Apple for every IEEE-1394 (FireWire) connector, there is a miniscule markup passed on to Sony & Phillips for every CD manufactured, ditty to the DVD consortium for DVDs...

All of these are open standards. Proprietary is not open is not free. Similarly you have to pay to license a MP3 codec*. Apple pays on your behalf, if you own a Mac, price is passed on to you... if you own a PC they hope you buy an iPod to cover the loss--they either pay some bulk rate based on every downloaded copy of iTunes or a flat yearly rate. You have to pay to license MPEG-4 and AAC. Again, Apple pays on your behalf, though they see some of that money come back to them (see below).

Phillips and Nokia have devices that supports AAC (not the AAC/Fairplay though to my knowledge) and so will Sony in their new pocketstation-whatever. I'm sure others will follow if they decide to license FairPlay or if a competing DRM standard comes out for AAC. In fact, I would think that such things are inevitable if Apple's dominance in the downloadable music market were to continue. Really Apple is singlehandedly marginalizing WMA which is quite impressive.

Note that AAC is not an Apple standard, it's an MPEG audio standard. The patents are owned by Dolby, not Apple. Apple's contribution was the container format for all MPEG-4 (QuickTime--a container format is like the "Ogg" in OggVorbis or OggFlac) and the Fairplay DRM which isn't part of the MPEG standard but works within the framework. MPEG-4 licensees (which include Apple for use in Quicktime) receive the benefits of each of the technologies/patents that went into MPEG-4 and pay a licensing fee which goes back to the license holders (which also includes Apple).

* IANAL! I'm not too sure the legal issues here. My guess is that free distributions of encoders such as LAME are protected under free speech but the binaries are implementations which would fall under the Fraunhoffer & Thomson patents (they invented MP3, I believe). In other words, you need to license the Fraunhoffer codec or obtain a license to distribute a working copy of your codec in most countries (really, I mean the United States here because I'm one of those ugly American types). I base this on the fact that companies like Red Hat do not bundle a LAME RPM with any free distribution of Linux in the face of obvious demand for such. (Another example is the licensing fee is ostensibly the reason that Microsoft doesn't support MP3 encoding in Windows Media Player)

Hope this clears things up,

 

[arn]

Originally posted by tychay

Similarly you have to pay to license a MP3 codec*. Apple pays on your behalf, if you own a Mac, price is passed on to you... if you own a PC they hope you buy an iPod to cover the loss--they either pay some bulk rate based on every downloaded copy of iTunes or a flat yearly rate.

I think there's a yearly cap on MP3 licensing fees.... which I forget what it is... so Apple probably doesn't pay any more for the Windows iTunes distribution than it does with just the Mac one.

arn

 

[tychay]

Originally posted by arn
I think there's a yearly cap on MP3 licensing fees.... which I forget what it is... so Apple probably doesn't pay any more for the Windows iTunes distribution than it does with just the Mac one.

Arn, are you sure about this? I know Apple negotiated a cap for MPEG-4 licensing going as far as delaying the release the new Quicktime version until such a cap was negotiated. However, I didn't know this applied to MP3 licensing.

I remember reading that MP3 has a per unit royalty fee for any encoder much like MPEG-2, Sorensen, etc. Apple would have negotiated it as a royalty for every Mac sold that supports iTunes (OS 8+) instead of every copy (since you'd be double counting every OS upgrader). In the Windows world it either have to be for every installation of the latest QuickTime or download of the latest iTunes for Windows (which amounts the the same number).

They may have managed to get a flat yearly rate or some cap put on the number. Please tell me if you've heard differently.

 

[Analog Kid]

Originally posted by Stella
Looking at those q /a above, SJ is incredibily arrogant.

Comparing iTMS to microsoft is soo wrong. Apple could see market share drop quickly - the music store arena is going to be very crowded soon with every man and his dog jumping on the boat - even Walmart now!
Apple cannot expect to sustain such a high market share.

Apple should be working towards making iPods work with other music stores - it will do iPods good - make them more attractive - iTMS is there to sell iPods - so make other music stores the same - from Apples view.

What did SJ mean by
"And we're not concerned about engineering".

I assume its apple saying "We've got the iPod right"??

I agree - if Apple can't make profit from music stores - how can companies who rely on the Music Store alone? Record companies have to be paid still, doesn't leave much left for the business...

A lot is going to the record companies, and the credit card companies are loving this-- they take a piece of each transaction. I'm not surprised that there isn't much left for Apple either-- and probably not much left for anyone else to build a business on.

As far as the MS comment, what I think he's saying is that everyone looks at WMA as a standard because they have huge market share-- if it comes with Windows it's a standard. In this case, he's saying that AAC/Fairplay is equally legitimate-- it has the largest market share of legally downloaded music and of players both.

I don't see any reason to cede the game to MS yet. This is a brand new market that I'm sure even Apple doesn't understand fully. It's still growing (very rapidly) and it's very dynamic.

Keep the number of variables small at this point. They can always add WMA support later if they want to, but once they've let the cat out of the bag it would be extremely painful to "unsupport" it later.

It will be very interesting to see how Apple tries to hold onto the music market. iTMS can probably stand largely as it is as long as it grows in pace with the competition. It's the fact that users are locked into a hardware/store combination that's going to be stressful. I think Apple is going to have to broaden their hardware offerings significantly to make this work-- they'll need an iPod for everyone. Not just drive size but feature set and prices. There is no entry level iPod right now, and there's no "pro" iPod.

They need a matrix of products similar to their product matrix for computers-- say three different feature sets and three different drive sizes. One line below the current offering, and one above. Something in the $100 range to start, even if it's just a flash player.

Now I'm rambling...

 

[paulc]

iApps

I'd like to point out that for all the folks hoping/wishing for updates to these series of apps, if you have not bought 10.3, better be content with the versions you are currently using because unless you pay the yearly upgrade fee for the OS, you're NOT going to get any updates.

If you haven't bought 10.3, you're stuck with the current Safari 1.0. iChat update for 10.2 owners IS available for an extra $30. Guaranteed that any iPhoto 3.0 is ONLY going to work, be for 10.3.

We need to start figuring that owning a Mac and wanting to get bug fixes for Apple's software is going to involve a yearly fee of 130 dollars. It's funny that for the past year or so, our favorite evil empire keeps getting raked over the coals for the possibility of them "renting" software... meaning there may be a yearly fee to be able to use that software. Apple has gone and done the exact same thing. And it seems to me that way too many Mac users are meekly accepting this.

 

[tcmcam]

"Renting Software" from Apple

Actually, I have no problem paying $130 a year to "rent" my software.

I believe in supporting software companies. R&D does cost money after all.

If you buy a Mac, you get it for free, R&D is paid for by the hardware profit. What makes me laugh are Mac owners that bought a Mac 4 years ago and still expect free enhancements or "still support OS 9". P-L-E-A-S-E !!

Apple writes good software they should get paid a nominal fee for it.

I have no problem paying Adobe, Microsoft, shareware authors for GOOD software.

What is more laughable is people that expect all software to be free. That is a crazy belief given our market-driven economy.

proud 10.3 Panther owner

 

[CmdrLaForge]

Remember analyst call

Hi,

when discussing here pls don't forget that this was a meeting with stock analysts. Steve definitley wants the stocks go up. So the Microsoft statement should be seen in that context.

 

[rjstanford]

Re: Anyone else see a potential problem?

Originally posted by coolsoldier
I see a possibility that the first online music store that folds could kill the entire market for online music stores...The ones that drop out of the market leave thousands of former customers with songs that they are unable to play

Well, if I were in Apple's position, and the record companies were still being friendly, I'd buy out the lists of authorized music, and (after clearing any legal details with the RIAA's lawyers) resend those purchased songs.

In Fairplay'd AAC, of course.

That way, people could still listen to them on CD, or on their computers. But if they wanted to carry them around, they'd either have to rerip (messy) or, you guessed it, buy an iPod. Heck, for the customers with tons of purchased songs, it would make sense to offer free iPods -- assuming that iTunes was even slightly profitable -- and discounted ones to the other customers (making a slight profit from those who would otherwise stick with their current choices).

Which, when you think about it, would work well, since iTunes only exists to sell more iPods in the first place.

-Richard

 

[JohnStrass]

Originally posted by sethypoo
Whoa, who said iMovie was "slow"? It's a great application! I've made some very, very nice movies on it.

However, iPhoto does need updating. I have a friend who is a professional photographer (digital), who uses iPhoto to organize his photos and Abobe Photoshop to edit. He'd love to use an Apple (i.e., iPhoto) application to organize and edit.

Otherwise, the iLife applications are great for what they are meant to do. Not everyone is a professional user.

I'm no pro user , but iPhoto is a reall slug. A typical vacation for me results in about 600 photos. I need to look at them closely to trash the onese that are not good, so I take a lot of extras using different settings. On my iMac/800/1Gig RAM it is unusable. Maybe this makes me am one of those "prosumers", but thats why I bought my iMac 18 months ago.
As for iMovie, working with many clips and one hour of video is also VERY taxing. I dont care if it takes a few hours to drop it into iDVD, but just to work around it is very slow.
Your friend really needs to shell out $$$ for Pro apps; maybe Apple will make iPpps "lite" and "pro" versions at some point.

The iApps are really iCandy to bring in more converts.

 

[MorganX]

Originally posted by Stella
Looking at those q /a above, SJ is incredibily arrogant.

iPod is great, but after this interview, I believe it will not remain #1. I give it a year at the top unless there is a change in attitude. Steve actually thinks he can hypnotize people.

"Cheap" flash players that hold seven songs. What a joke. Flash players are actually more expensive on a per-megabyte basis. There really are no "cheap" portable mp3 players. Only a small percentage of the potential market have one. iTMS could maintain it's current sales and by the time this market reaches it's potential be at the bottom of the totem pole.

HTC the #1 maker of PDAs, PocketPCs, and Smartphones will see a 63% jump in sales this year. There's a big picture here and Steve has blinders on. Give an egomaniac a little true, actually well-deserved success and he just loses all touch with reality. I really do hope he isn't living for the moment.

His performance is unworthy of the technical merits of iPod+iTunes+iTMS. He should carry himself with as much class as his product.

I think soon Jobs will feel like Admiral Yamamoto.

 

[jocknerd]

Steve, you prefer open standards in iTMS?

Then where in the hell is Ogg Vorbis? I understand why you won't put WMA in there, but why no Ogg Vorbis? It's open. It's free. Are you afraid that Ogg Vorbis would be used more than AAC which you probably paid a bundle for the licensing?

 

[jxyama]

for iPhoto problems - go to versiontracker and get iphoto library manager. split your photo library up and iphoto works very well. if you take so many photos (at a very high res, i assume), you are a border line pro... however, i agree it has rooms for improvements. for one, iphoto would work better if it didn't try to cache all the pictures in the library into memory...

aac vs. ogg. as someone mentioned, aac was developed by a consortium of corporations and they recover R&D $$$ together by licensing. it's "open" in the sense anyone is entitled to using the license as long as the fee is paid. wma is not good because ONE corporation controls is licensing terms.

apple is part of the AAC consortium, why would they go to ogg? what's the incentive? to appeal to the minority computer-audiophiles? if those can be shown to be a viable market "worthy of support" in the eye of market analysts, i'm sure ogg will take off. but until then, i don't think apple is interested in doing basically a charity to appeal to the very small minority to whom aac codec is "trash" compared to the superior sound of ogg vorbis...

 

[xtekdiver]

Re: iApps

Originally posted by paulc
I'd like to point out that for all the folks hoping/wishing for updates to these series of apps, if you have not bought 10.3, better be content with the versions you are currently using because unless you pay the yearly upgrade fee for the OS, you're NOT going to get any updates.

If you haven't bought 10.3, you're stuck with the current Safari 1.0. iChat update for 10.2 owners IS available for an extra $30. Guaranteed that any iPhoto 3.0 is ONLY going to work, be for 10.3.

We need to start figuring that owning a Mac and wanting to get bug fixes for Apple's software is going to involve a yearly fee of 130 dollars. It's funny that for the past year or so, our favorite evil empire keeps getting raked over the coals for the possibility of them "renting" software... meaning there may be a yearly fee to be able to use that software. Apple has gone and done the exact same thing. And it seems to me that way too many Mac users are meekly accepting this.

A yearly update fee? You make a good observation, but it is like looking at the glass as half full or half empty. If this was some Microsoft crap windows dressing I might be a bit peeved to pony up over a hundred bucks for the privlige of being screwed, but this is Apple; I actually was glad to stand in line and "pay" for my new OS. I am so happy with this OS and the Mac experiance, that I will gladly pay another $129 next year and the year after that if that is the time table. It is worth it! Especially if my $129 bucks keeps Apple investing and inventing new technology that adds to my quality of life. Think about it.

 

[Rincewind42]

Re: Apple's DRM is NOT open!

Originally posted by tcmcam
Yes, AAC is an open standard. And there are several Windows-based AAC players now (as well as good encoders, Nero for example).

But are you sure that Fairplay (Apple's DRM) is OPEN?? That's not what I understand. Right now, Apple has refused to let 3rd parties use their DRM. So only iPod's (or iTunes) can play iTMS songs.

Fairplay is a product by VeriDisc that Apple licensed for iTMS. In theory anyone could license it for their product and play AAC files from iTMS. In practice they would probably at least have to get some more information from Apple about how they are using it, and if they are a music device probably get support from iTunes. There would be more to say about VeriDisc, but their website seems to be woefully out of date. However this information does put at odds my statement that it was Open . Win some, lose some...

 

[manu chao]

Originally posted by paulc
If you haven't bought 10.3, you're stuck with the current Safari 1.0. iChat update for 10.2 owners IS available for an extra $30.

That's life, if I remember correctly you had to pay for Acrobat 6, without buying the upgrade you are stuck with Acrobat 5.

We need to start figuring that owning a Mac and wanting to get bug fixes for Apple's software is going to involve a yearly fee of 130 dollars.

Was Win98, Win ME, W2k and Win XP free of charge? Or OS 8 or 9?
Since software needs maintenance like a car does this service has to be paid for. You can get an extended warranty for your car, but you can also get something similar for OS X.

 

[rjstanford]

Re: Steve, you prefer open standards in iTMS?

Originally posted by jocknerd
Then where in the hell is Ogg Vorbis? I understand why you won't put WMA in there, but why no Ogg Vorbis? It's open. It's free. Are you afraid that Ogg Vorbis would be used more than AAC which you probably paid a bundle for the licensing?

Actually, its far from free. There's a space burden for the decoder, an R&D burden, a testing burden, an increased support burden... none of which would matter if it had wide support. But it doesn't. I'm not saying that it shouldn't (or that it should, for that matter), but it doesn't. Financially, its not worth it for Apple to move in this direction at the moment.

If a large enough number of people would buy iPod+OGG who would not otherwise buy an iPod, they'll probably add it. Until that point ... why should the bother? Remember, as a public for-profit company, Apple has a legal responsibility to their stockholders to do whatever they can to maximize company value (and, accordingly, long-term profitablility).

For example, using AAC allowed them to use a "right-sized" DRM approach with FairPlay that gave them a lock-in from their music store to the iPod. Almost certainly that was money well spent (R&D, support, and licensing combined), on which they saw an ROI in the form of increased iPod sales, more than they would have done by adding OGG decoding (R&D and support).

-Richard

 

[arn]

Originally posted by tychay
Arn, are you sure about this? I know Apple negotiated a cap for MPEG-4 licensing going as far as delaying the release the new Quicktime version until such a cap was negotiated. However, I didn't know this applied to MP3 licensing.

http://www.mp3licensing.com/royalty/index.html

There does appear to be a cap for the MP3 Decoder => $60,000

But they don't mention a cap for the encoder. However from the faq

Q. I have developed my own software encoder to run MPEG Layer-3. Do I need a license?

........
For these "patent only" licenses we have also granted licenses for unlimited sales based on a fixed royalty per year.

In this statement though, they don't charge license fees for freely distributable software decoders

To clarify, since the beginning of our mp3 licensing program in 1995, Thomson has never charged a per unit royalty for freely distributed software decoders. For commercially sold decoders -- primarily hardware mp3 players -- the per-unit royalty has always been in place since the beginning of the program. Therefore, there is no change in our licensing policy and we continue to believe that the royalty fees of .75 cents per mp3 player (on average selling over $200 dollars) has no measurable impact on the consumer experience.

Which explains why there are so many freely available decoders... but not very many freely available encoders. (except for itunes)

arn

 

[mhar4]

Check out The Register for a solid critique of Jobs's comments

http://www.theregister.co.uk/content/6/33850.html

 

[Snowy_River]

Originally posted by mhar4
Check out The Register for a solid critique of Jobs's comments

http://www.theregister.co.uk/content/6/33850.html

I'm sorry, but that article is a far cry from what I'd consider to be a 'solid critique.' The article is laced with the author's opinion of where things should go, and anything else is wrong. That Apple is making no money (or very little) on iTMS doesn't mean that Apple is a slave to the RIAA. Indeed, Apple's play to the indies, I think, will tend to increase their prominence in the long run, thus taking some of the wind out of the sales of the RIAA. I, for one, am not that big a fan of taxes being the solution to everything. It rather smacks of communism. Please. Spare me....

 

[greenstork]

Re: "Renting Software" from Apple

Originally posted by tcmcam
Actually, I have no problem paying $130 a year to "rent" my software.

I believe in supporting software companies. R&D does cost money after all.

If you buy a Mac, you get it for free, R&D is paid for by the hardware profit. What makes me laugh are Mac owners that bought a Mac 4 years ago and still expect free enhancements or "still support OS 9". P-L-E-A-S-E !!

Apple writes good software they should get paid a nominal fee for it.

I have no problem paying Adobe, Microsoft, shareware authors for GOOD software.

What is more laughable is people that expect all software to be free. That is a crazy belief given our market-driven economy.

proud 10.3 Panther owner

While I do agree with almost all of your points, we disgree on one big one. Apple should always continue to provide security updates for legacy software. I work at a nonprofit that can't afford to upgrade our first gen iMacs so we can't use Jaguar or Panther. I'm sure many schools are in the same predicament. So while I don't expect iApp upgrades, I do expect legacy security patches.

 

[greenstork]

Re: Steve, you prefer open standards in iTMS?

Originally posted by jocknerd
Then where in the hell is Ogg Vorbis? I understand why you won't put WMA in there, but why no Ogg Vorbis? It's open. It's free. Are you afraid that Ogg Vorbis would be used more than AAC which you probably paid a bundle for the licensing?

Apple does not support Ogg Vorbis because it's all about their DRM.

 

[Snowy_River]

Re: Re: "Renting Software" from Apple

Originally posted by greenstork
While I do agree with almost all of your points, we disgree on one big one. Apple should always continue to provide security updates for legacy software. I work at a nonprofit that can't afford to upgrade our first gen iMacs so we can't use Jaguar or Panther. I'm sure many schools are in the same predicament. So while I don't expect iApp upgrades, I do expect legacy security patches.

And hasn't Apple publicly stated that it is planning on continuing to provide security patches to its legacy OSes for as long as it is possible/practical?

 

[Snowy_River]

Re: iApps

Originally posted by paulc
...It's funny that for the past year or so, our favorite evil empire keeps getting raked over the coals for the possibility of them "renting" software... meaning there may be a yearly fee to be able to use that software. Apple has gone and done the exact same thing. And it seems to me that way too many Mac users are meekly accepting this.

No. There's a really big difference. From what I've read, if you didn't pay your yearly rental fee to MS, your computer would stop working. Period. On the other hand, Apple is simply providing an annual update. If you don't pay for it, you can continue to use the previous version. Your computer will keep working, just like it did before. So, no, this is not a rental scheme. It is simply an update/upgrade cycle.

 

[GregA]

Originally posted by mhar4
Check out The Register for a solid critique of Jobs's comments
http://www.theregister.co.uk/content/6/33850.html

Wow, I'm amazed at that article.

Originally posted by Snowy_River
I'm sorry, but that article is a far cry from what I'd consider to be a 'solid critique.' The article is laced with the author's opinion of where things should go, and anything else is wrong. That Apple is making no money (or very little) on iTMS doesn't mean that Apple is a slave to the RIAA. Indeed, Apple's play to the indies, I think, will tend to increase their prominence in the long run, thus taking some of the wind out of the sales of the RIAA. I, for one, am not that big a fan of taxes being the solution to everything. It rather smacks of communism. Please. Spare me....

The article almost implies Steve Jobs has the power to setup a worldwide music tax system, and perform a sweeping change to every artist's contract.

Steve cut a deal. I agree with you Snowy_River that he opens the door for indies (or ANY new artist) to distribute in a new way. I have no idea if the existing big 5 are good or bad. But if even just one record company starts up, gives artists a deal they prefer, and (like the big 5) sells through multiple online music stores - a small company can have America-wide distribution very quickly (I was going to say world wide... glad I caught myself! Then again maybe new record companies could work with world wide music rights)