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Apple CFO talks Apple TV, digital video

updated 01:40 am EST, Wed March 7, 2007

Apple CFO talks Apple TV

Apple CFO Peter Oppenheimer today spoke at the Morgan Stanley Technology Conference in San Francisco, discussing the Apple TV and its role in the future of digital video. Oppenheimer said that DRM-free media would be benefit customers and promised more video content to help build Apple's ecosystem. We have a portion of the transcript with his answers to some questions about Apple TV, the company's set-top box that will ship later this month.

Q: How is Apple's approach with Apple TV product different from others, including Comcast in San Diego which has tried to hook television with the internet, but has failed. Why is Apple's strategy different?

A: Over the past several years Apple has made significant improvements in how customers have managed and enjoy their digital lifestyles, including the iLife suite of software. We develop and technologically integrate into products into our products, such as AirPort Express, AirTunes and Bonjour.

Now with Apple TV we believe we are providing a new and better for people to seamlessly and wirelessly enjoy their digital lifestyles. The Apple TV interface is simple, yet elegant. And the picture quality is excellent. I think Steve said it really well, when he described it, that Apple TV is the DVD of the 21st century.

Q: So if part of that solution is the content--clearly Apple does a great job with the hardware and peripherals--but the content is important. How many movies and TV shows does Apple have on iTunes today and where do you think that goes over the next 12 months?

A: We are very pleased to have recently added Paramount and Lion's Gate and as a result we have over 400 movies on the iTunes store today--up from 75 in September. And if I can think back to when we first launched iTunes, we started with 200,000 songs in our catalog and today we have over 4 million.

And when we launched with the fifth-generation iPod in October 2005, we started with five TV shows and today we have over 350. As of the end of last quarter, we downloaded more than 50 million TV shows. We are confident that we'll add more studios over time.

And as we discussed with Apple TV, we think will provide people with a great seamless way to enjoy their content either from their Mac or PC to their big screen TV.

Q: So you have you done any work to figure out where the point of indifference is in terms of how much content you have to have in your system to create this indifference between traditional cable network boxes and Apple solutions?

A: Well our sales through iTunes are growing at very strong levels; we are very happy with it. You got some indication of that in the December quarter. We think we are giving customers a great experience and we will continue to bring more video over time to the store.

Q: Since we're talking about iTunes: Steve was vocal over the last couple of months on the idea of abolishing DRM. From a CFO's perspective, what would that do to the financial model if Apple didn't have to pay DRM license fees.

A: Steve recently wrote his thoughts on this topic, summarizing how we got to where we are in the industry with DRM. The fact is that DRM is required by the Big Four labels in order for us to protect their content from being illegally downloaded. We believe that consumers would be best served in a market place where any player can play music purchased from any store. And any store can sell music that would be playable on any player. We think that this is the best results for consumers and Apple would embrace it whole-heartedly.

In terms of the financial impact, that remains to be seen. But we have sold over 2 billion songs, 50 million TV shows, 1.3 million movies; we provided a great experience to customers: and we think we have the best solution out there. We're going to continue to invest in the iPod and in iTunes and we stand ready to compete.

Q: Talking about Apple TV and iPhone, can you help us understand the go-to-market strategy of Apple as you introduce these entirely new product segments. Is it a situation in which you roll-out broadly across the distribution investments you've made or is it a targeted rollout over time?

Beginning with Apple TV: we plan begin to ship it this month to all the resellers who want to carry it. I personally believe that Apple TV is a kind of product in which the features really need to be seen to be appreciated. We certainly will do that in our stores and our channel partners will as well.

by MacNN Staff





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