Steve Jobs on iTunes for Windows: the next generation music store

We're here this morning to talk about music, so let's get started. First thing we want to cover is the iPod. The iPod's amazing. These new third generation iPods, you know, they're as thin as two CD jewel cases back to back. Amazing. And they have a dock, which makes it even more convenient to charge them and sync them with your Mac. They're fantastic products. And, you know, we started off with 1,000 songs in your pocket. Now we're up to 10,000 songs in your pocket on the new 40 gig iPods.

We got three models, 10, 20, and 40 gig, starting at $299. An amazing product. Now we sold our millionth iPod the end of last June. And last quarter, we just reported yesterday, we sold 336,000 iPods in one quarter. That is two and a half iPods sold every minute, 24 hours a day, seven days a week last quarter. So that puts us at 1.4 million iPods sold to date. And we're really, really proud of that. Now, what is iPod's market share? Well, the latest data is for July and August. And so the percent, the market share that iPod has of all MP3 players, even these flash-based ones that sell for $50, right, of all MP3 players sold in July and August, iPod's unit market share is 31%.

It is number one. Its revenue market share is 56%. Over half the dollars are going to iPod. And so it is number one. It is the number one MP3 player in the world in both units and revenues. So that's iPod. Now today, we're going to make it even better. We've got some new features to announce for dockable iPods. What's a dockable iPod? A dockable iPod is an iPod that slips in the dock. It's got a connector on the bottom. And as you'll see, these new features need that connector. So the first new feature, it's the most request, the most heavily requested new feature we've ever had on an iPod, which is voice recording. New iPods are going to do voice, or the dockable iPods are going to do voice recording.

And they're going to do it because of an accessory developed by Belkin and some new software developed by Apple. The accessory is a $49 microphone and speaker that pops right into the top of your iPod like this. And the new software we've written does voice recording. Very very easy. You can do your voice recording. It stores them like this. It automatically syncs them into a new version of iTunes that we're going to talk about in a minute when you dock your iPod. It just works seamlessly. And you can record up to 670 hours on the 40 gigabyte iPod, a little less on the other two. So that's almost four weeks of voice recording. We think that's going to keep everybody pretty happy. The second new feature for these dockable iPods is photo storage. We've gotten tons of requests for this as well. People have said, I've got my digital camera, I've got my iPod, the iPod's got this giant hard disk in it, my digital camera's got this teeny weeny flash card, and when it's full why can't I put it into the hard disk of my iPod and then go on taking pictures?

Well that's what we're going to let you do. Again a Belkin accessory, $99, accepts almost all the flash cards, plugs into the connector on the bottom of the dockable iPods, and lets you upload your cards right into your iPod, imports all your photos, gives you rolls like this, and when you dock your iPod what happens? It syncs them right in to iPhoto, right where you want them. So photo storage, up to 20,000 photos that you can store on your iPod. And there's a few other features, but we don't have time to go into them today. These are the biggest two. It's a software update, iPod version 2.1. It's for dockable iPods, and it's available today. It's a free update at Apple.com, so if you have a dockable iPod go get it, and you can do even more with your iPod.

Now you might have seen that we're running some ads for iPod this quarter. We're running them in print, we're running them in outdoor, and we've gotten just a great reaction to them, and last week we even started running them on television. And I would love to show you those TV ads now if you haven't seen them. So let me show you the first one that's running currently. Let's roll it. Thank you to all our partners at Shyad for coming up with these great ads.

We love them, and the response has been terrific. Now we have a new one that's going to start running tonight that I would like to premiere for you all right now. So it's a little more rock and roll. Let's go ahead and roll it. So one, two, three, take my hand and come with me because you look so fine that I really want to make you mine. You look so fine that I really want to make you mine. Four, five, six, come on and get your kicks. Now you don't need the money when you look good, that's just the way that you look. So four, five, six, come on and get your kicks. Now you don't need the money when you look good, that's just the way you look. So it's the BlakiP's & the Jets.

We're really proud to be using their music. So, thank you very much for these great ads. So, that's iPod. Next, I'd like to talk about iTunes. Now, iTunes was a landmark when we introduced it on April 28th, right here this year. And it was a landmark for a lot of reasons, but one of the biggest reasons was it said, you know, we're going to fight illegal downloading by competing with it. We're not going to just, you know, we're not going to sue it, we're not going to pretend it doesn't exist, we're going to compete with it. And this is the underbelly of illegal downloading. Really unreliable downloads, really lousy encoding, no previews, no album art. And it's really bad karma. And so we're going to compete with this.

And that's what we did with iTunes. We replaced unreliable downloads with fast, reliable downloads. Really poor encoding with pristine, perfect encoding for every song. No previews, you can spend 15 minutes downloading a song and get the wrong one, with free, 30-second, high-quality previews of every song in the store, great album, cover art, and it is good karma. You are supporting artists, you are not stealing. And this was maybe the biggest breakthrough of all of iTunes. And we started with 200,000 tracks, 200,000 great tracks, landmark personal use rights, unlimited CD burning, 10 burns per playlist, unlimited burns per track. Again, 30 seconds, super high-quality, full-quality previews of every song in the store.

One-click downloads. We have one-click shopping just like Amazon does. Apple and Amazon are the only two guys that do. We extended that to download. You hit a button, you download the song, your credit card is charged for both songs and albums. Fantastic searching for artists, song names, album names, and browsing. And you can put your music on up to three Macs, and you put it on a limited number of iPods, and that's past, present, and future models. We built the music store right in to a great jukebox. So you don't have to have one application to buy your music and then drag it over into your jukebox somehow. It's all one thing. And all of it was 99 cents a song with no subscription fees because people have told us over and over and over again they don't want to rent their music.

Just to make that perfectly clear, music's not like a video. Your favorite movie you may watch 10 times in your life, your favorite song you're going to listen to 1,000 times in your life. If it costs you 10 bucks a month or over $100 a year for a subscription fee to rent that song, that means for me to listen to my favorite song in 10 years, I've paid over $1,000 in subscription fees to listen to my favorite song 10 years from now, and that just doesn't fly with customers. They don't want subscriptions. And so what's the result of all of this, all of this innovation? We've sold over 13 million legally downloaded songs in less than six months on the iTunes Music Store. This has been the birth of legal downloading.

And let me just show you how we've done in the past few weeks. This last five weeks, we're up at over 600,000 songs a week. That's over a 30 million song a year annualized run rate. So things are going very well. And remember, this is Mac only. Let's take a look at the whole industry. Nielsen, their sound scan service, gathers data from everybody, including legal downloads. And what is iTunes Market Share? We have it from last week. iTunes Market Share was 70% of all legal downloads last week. And remember, this is just on the Mac. So 70%, this was a real landmark April 28, and it's worked brilliantly.

Now, today we're going to take it further because we are introducing the second generation of iTunes. We're going to build on this great foundation, which has started the revolution, and add some new incredible features to iTunes today. The first one is more music. We started off with 200,000 tracks on April 28. Today we are announcing that we're going to have 400,000 quality tracks by the end of this month. We're already well over 300,000 on the site. They're all in the pipeline. By the end of this month, we'll have 400,000 quality tracks. This number could have easily been much higher if we wanted to let in every song. But we realized that record companies, the music companies, do a great service. They edit. Did you know that if you and I record a song for $40, we can pay a few of the services to get it on their site through some intermediaries?

We can be on Rhapsody. We can be on all these other guys for $40. Well, we don't want to let that stuff on our site. And so we've had to edit it. And these are 400,000 quality songs. They're from all the big five right there. But we've also signed up over 200 independent labels. This is 20 of them right here. I'm sure you'll be familiar with a few of them. We've got 200 independent labels with their music on the site and coming onto the site by the end of this month. So 400,000 quality songs on iTunes. And that's the first thing we've done. The second thing, this is going to be big, audiobooks. We are putting audiobooks right alongside the music, spoken word content.

We've done a deal with the biggest company in audiobooks, audible.com. We really like these guys. And it's a multi-year exclusive deal. So this is the only place you're going to find this stuff. And we are announcing that today we have over 5,000 books on iTunes. That's over 20,000 hours of spoken content right alongside the music. And it's not just books. It's things like public radio, some of our favorite shows off public radio, Terry Gross's Fresh Air, This American Life, Click and Clack on Car Talk. This is great stuff. It's all in high fidelity. And there are, of course, free previews of all of this content. This is what the genre page looks like for audiobooks.

And it's going to be really hot. Let me show you a few of the book pages. The Da Vinci Code, this was a very popular book this year. Tom Clancy, always great. Hillary Clinton's Living History. This is one of my favorites. If you've never listened to this, you should go buy this immediately. This is Charlotte's Web, read by the author E.B. White. And you will be in tears. It is a great, great piece of work. So you can also browse for audiobooks. We built it right into the browse system. So in the browse system, you select audiobooks and genre. And in category, it gives you all the categories of books. We selected fiction, biography and memoir, classics, comedy, fiction, history, mystery, nonfiction, periodicals.

There's lots of stuff there. And the minute you select one like fiction, boom, all the fiction authors pop up in the next panel. And we've selected Tom Clancy. The minute you select an author, boom, all their books pop up right down here. It's so great to find stuff. And one-click shopping. Buy book, starts downloading, you've bought it. It's that easy. These audiobooks also have perfect round tripping with the iPod. So you start to listen to the book on your Mac, you stop, you sync it with your iPod, you take your iPod, you start to listen to it again. It picks up right where you left off on your Mac on your iPod. You listen to it for a while on your iPod, you go back and sync your iPod, you go back to your Mac, you start to listen to it, it picks up right where you left off on your iPod. You go back and forth, round trip all day long, and it remembers where you left off on the last device.

Nothing else in the world does this. It's really great. We think audiobooks are going to be a fantastic addition to the store, and I would strongly encourage you to check them out. That's 5,000 audiobooks. Next is a feature, probably the most requested feature we've had on the store, gift certificates. People want to send music as a gift. It's a wonderful gift, and they want to do it quickly and easily. So we've got the best gift certificate scheme on the planet for iTunes. iTunes gift certificates, here's how it works. You just hit a button. I'm going to send one to Phil. You hit a button on the home page of the store, and boom, right in the store, you get a little form to fill out. I'm going to send it to Phil. I fill in his email address. I fill in a personal message, and I get to select an amount from $10 to $200 in increments of $10 to send to Phil.

I'm going to send $50, and boom. And I push Continue there. It confirms my purchase. Phil had a great party last night. The food was great. Here's a little gift to help him out with the next one. It says that it sent it. Now, how does Phil get this? How does he redeem it? Phil gets an email. Phil gets an email. That's what it looks like, and it's got a Redeem Now button on the bottom of it. You hit the Redeem Now button. It pulls up iTunes, and it puts a new field right there next to his account with his credit in it of $50. He can use this to buy songs, albums, audio books, anything on the store. And that's how easy it is, the iTunes gift certificate. We think this is going to be a very, very popular feature. Now, the next feature builds upon the infrastructure we build for gift certificates.

It's called allowance. What is allowance? There are so many parents we've heard from that want to wean their kids off of illegally downloading music off the net, but they don't want to give them their credit card. So what are they to do? Well, we've solved this. And here's what we've done. Allowance. What you'd like to do is give them an allowance. So we're going to let you do that. Again, you hit a button on the home page. You get the form. You fill in who you want to give it to. Again, from $10 to $200 in increments of $10. So we're going to have a $30 a month allowance. Let's say I have a daughter named Mary. I can type a little message in there. Now, I have to create an account for her. I can do it from right here without entering a credit card, just a name and a password.

I've created an account for my daughter Mary. She doesn't have a credit card. And this is going to transfer $30 a month into Mary's account on the first of every month. And you buy, and that's it. It's all set up. And she gets an email telling her what's going on. And in her iTunes, on the first of every month, she's going to get $30. No credit card. So that is allowance. And last, celebrity playlists. We've gone to some of the best artists and said, look, what do you recommend that people listen to? Not your own music, but music you love, music that you were inspired by, music that taught you things.

What is your playlist that you want to share with the world? And we've gotten some great ones. Here's one from Sting. And here's the songs that helped form him and that he really loves. Here's one from Dave Brubeck. Dave Brubeck's playlist. And you can go on and buy the whole playlist, or you can buy any song just by the regular way, buy song. Here's Herbie Hancock's playlist. Here's Michael Stipe's playlist. And there's lots more. This is a wonderful, wonderful thing. And we'll be adding a lot more of these over time. And we think you will really enjoy celebrity playlists. So these are just some of the new features of the second generation of iTunes. We haven't got time to go through all of them today. But they build on this incredible foundation that we built with iTunes starting on April 28.

And they add all these wonderful new features. And this is the new home page, refined, even better, of the iTunes second generation. But there is one more feature. And this feature, a lot of people thought we would never add until this happened. So I'm here to report to you today that this has happened. Today, we are announcing that the second generation iTunes doesn't just run on the Mac, but it runs on Windows, too.

Exactly the same thing on Mac and on Windows. This is not some baby version of iTunes or the music store. It's the whole thing. iTunes for Windows is probably the best Windows app ever written. Thank you. When we set our mind to something, we go all out, and you will see that when you experience it.

It runs on Windows XP and Windows 2000, and it is fantastic. But before we even get to the music store, I want to focus on just one thing first. iTunes for Windows is the best jukebox ever on Windows, even if you never used the music store. It's unbelievable. It is a fantastic jukebox. iTunes has always been heralded as the best jukebox out there, and now it's available to Windows owners, Windows users. So let's compare it with the two most popular jukeboxes on Windows, Microsoft's and MusicMatch. Well, first of all, people want to encode in MP3, not some proprietary encoding. Well, Microsoft's jukebox doesn't even let you do that. MusicMatch's does, but they cripple it because they slow it way down so it can't encode it anywhere near the drive speed.

Why do they do that? Because they want to sell you a $20 upgrade. That's why. So you pay them the $20, then you can encode as fast as your drive will go. iTunes, full-speed encoding, built-in, pristine MP3 encoding, one of the best encoders in the industry. Well, the next thing you want to do is burn CDs. How does that work? Well, Microsoft will let you burn audio CDs, but no MP3 CDs. MusicMatch will let you burn MP3 CDs, but again, they cripple it, so it runs at a fraction of your drive speed, so you pay them the $20. iTunes, full-speed, perfect CD burning, audio CDs, MP3 CDs, and DVDs if you want to back up your music on DVDs. None of the others let you do that. Next thing, you might want to work with the most popular and best MP3 player on the market, the iPod.

Microsoft won't let you do that. MusicMatch will let you put the music you rip off your own CDs on the iPod, but no online music, not even their own. iTunes works seamlessly with the iPod. It's designed to work perfectly with the iPod, so obviously that's a yes. Music sharing is another one. I want to share my music among different computers in my house. My own music on as many computers as I want, my online music on up to three computers that are authorized. Microsoft, no way. MusicMatch, no way. iTunes, yes. Rendezvous music sharing is built right into the Windows version of iTunes, so you can share your music among your Windows PCs and your Macs, back and forth. All works seamlessly. And the upgrade cost to fix a few of these problems, $10 to buy an MP3 encoder alone for the Microsoft jukebox, $20 to uncripple the MusicMatch jukebox. All of this is built in and free in the iTunes jukebox.

Here's an example. This is what MusicMatch does. They actually let you do a few burns at full speed, and then they tell you they're going to slow you down. At the end of the trial, burning will still be possible, but at a reduced speed. In addition, you'll no longer have access to all the great burning features below. Upgrade now to jukebox plus. This is the game that's being played, and we're not playing it. It's all built in. It's all free. Now, another thing about the iTunes jukebox. Our Windows iPod customers have been really telling us loud and clear that the number one thing they want is iTunes. They do not want to use the jukebox we used, that we gave them to use on Windows. They want iTunes on Windows. Finally, our iPod customers on Windows are going to get to have the jukebox they want.

So, best jukebox on Windows before we even get to the music store. It also happens to be the best music store on the planet. So, built right into the jukebox, you just hit on music store, and boom, you are there. The same exact store that is on the Mac. We don't have a Mac store and a Windows store. We have one store, and it's got the same music, the same policies, and the same prices across Windows and Mac. They are identical. And in terms of policies, remember, we are the gold standard for personal use rights. We fought to strike a balance between the rights of the content owners and the rights of the legal users.

And we think we got it right, and it's the same as it has been, and now it's on Windows. You own the music, no subscription fees. Unlimited CD burning for personal use. Burn unchanged playlists up to ten times. Unlimited number of iPods, past, present, and future models. Play your music and store it on up to three computers. And you can authorize and deauthorize computers. If you've got three computers, you're going to give one away to your school and buy a new one. You can deauthorize it before you give it away. The music will not be playable on that computer anymore, and you can authorize the new one you buy. Again, no one else does this kind of stuff. This is all standard on iTunes, on Mac, and now it is standard on iTunes on Windows. You're getting the music store that has a 70% market share.

And all of these great new features. And works seamlessly with the iPod. Now, I said you could put your music on up to three computers. You can mix and match those computers as well. You can have Macs and Windows computers all sharing the same music. It's pretty terrific. So, iTunes on Windows. Now, I'd like to do something I've never done before. I'd like to give you a demo on a PC. So, let me go ahead and launch iTunes for Windows. Here we go. And so, let me just go play a few songs. Oh.

Oh, where have you been, my blue-eyed son? And where have you been, my darling young one? Adia, I do believe I've failed you. Adia, I know I've let you down. Don't you know I tried so hard to love you in my way?

It's easy, let it go. We've also got smart playlists over here. Here's my 60s music right here. Except that's not 60s music. What's going on? And my top-rated music here as well. We've also got radio stations. All of the iTunes radio stations. Oh, gosh. What have we got here? So, we've got all of our great radio stations.

And we've got shared music. I've got a Mac sitting right here. And I can just query. And here's all of the playlists off that Mac. Again, top-rated music. Here's stuff from school, whatever it is. And this stuff streams, as you know. Whatever. So, this is all discoverable on a PC with Rendezvous all throughout the house on the local network. It's pretty cool. So, that is the Jukebox. Now, let's go to the store, the best music store in the world. Boom, there it is, on Windows. And we can go ahead and play a few songs. We can go play Hey Mama, the song we used in our commercials, number four here.

I can buy it. Boom. I just bought it. I can go to purchase music here. And there's a song I just bought. So, again, let me play another few songs just to show you the switches here. Just new releases right here. Pretty cool stuff. John Coltrane. You know, we can go here on exclusives. Rolling Stones. We got a new EP with the Rolling Stones. It's great stuff, exclusive to iTunes.

So, now we can also search for stuff. T-A-M, using iTunes, is fantastic searching. I just searched for Mr. Tambourine Man here. Now, let me show you something else. We're going to go to Bob Dylan's artist page.

And we got a lot of Bob Dylan albums. I love Bob Dylan. Fifty-two Bob Dylan albums. And we got a new thing here where we can sort. They used to be sorted alphabetically here. They used to be sorted alphabetically, now we can sort them by album name if we want to, right, alphabetically, or bestsellers, which will sort and just dynamically give you the bestsellers at the top here. Looks like Blood on the Tracks is the bestseller. Or we can sort them by release date, and we have all original release dates for everything in the store now. This is huge. And so we can sort by release date, present to past, and go through and find what we're looking for. We've also added some new things on the page. We've got some essentials down here, recommending which four essential Bob Dylan albums you've got to have. We've got biography information on all the artists now as well, so if you want to read a biography of Bob Dylan, he's done a lot, so this is a long biography.

And if you want to see who his influencers and contemporaries are, we've got that too. Here's who influenced Bob Dylan, obviously Woody Guthrie, Lead Belly, just a lot of great stuff here. Pete Seeger. And of course, a lot of followers and some of his contemporaries as well. So all this stuff has been added for every single artist, and it's really pretty great. Now I want to show you a few other things. Let's go back home. The genre pages have really blossomed, so we can go over here and we can pick, let's just pick jazz. And again, here's the genre page for jazz. Number one selling song in jazz is Louis Armstrong, of course. What a wonderful world.

And so genre pages are just fantastic. We're going to go back. Let's go back and select another one. Let's go to hip hop again, and you can see these things are, they're really hopping. There's a lot of stuff on here. And I'm going to go to classical, because I want to show you a really fun thing that we did in classical. We highlighted the different periods of music. So we have early music and renaissance, Baroque music here, classical, romantic, post-romantic, contemporary, and opera. It's really, really nice, and we can just pick something here again.

So these genre pages are really great. Now we're going to go back, and now I want to show you audiobooks. It has its own genre page, obviously, and this is what audiobooks looks like. And let me preview a few. Let me preview Hillary Clinton here for you. And again, it shows you the book, and she's reading it herself. Or mother. I was born an American in the middle of the 20th century, a fortunate time and place. I was free to make choices unavailable to past generations of women in my own country. And we can go back here, and again, anything you'd like, you can find. You name it. You know, John Adams. This is a great book. .. And splitting his own firewood. In such bitter cold of winter, the pink of his round clinged...

All right. There we go. And. But this. This is one of my favorites, and again I want to recommend this to everybody. This is one of the greats of all time. Dagger and the other. What's that, he demanded? What's Fern got? She's got a guest for breakfast at Mrs. Arable. Wash your hands and face, Avery. Let's see it, said Avery. He's setting his gun down. You call that miserable thing a pig? That's a fine specimen of a pig. It's no bigger than a white rat. Wash up and eat your breakfast, Avery, said his mother. So you get the idea. It's pretty great. Now I want to show you something else. Actually let me go back there. I can hit browse at any time and go to the browser. And again, it's selected Audiobooks Fiction E.B. White and showed me the two books that we have from E.B. White.

I'm going to go in here and select comedy. We got some great stuff here. It's loading all the comedy authors and a lot of great talent here. But I'm going to go down all the way to the R's and find Robin Williams. And look at this. This is pretty great stuff here. And I'm going to... See, these are interviews that he's done with people. So I'm going to pick Billy Crystal. ...go off book and the school plays and stuff. And then when you were in college, you had an improv group. After I got out of the draft lottery in 1970, I got... What was your draft number? 354. Bingo me, 351. You and me both. It's sad if we got drafted. I had a high school teaching job. I was a teaching English... Here's George Lucas. ...Jamaican by a long shot. But if you're a Jamaican... George, George, Jamaica. Yeah. I am not walking away now.

I just don't understand this Vicks character. Everybody else I can understand, but... Came out to win some queer times. Yeah. I'm wearing a strange voice. George. So you get the idea. So now let me just show you another category that's really great. Speakers and storytellers. And I'm going to go down here and find Terry Gross. Fresh air on NPR, one of the great programs of all time. We have 767 Terry Gross programs on here. It's unbelievable. And I'm just going to just go right down here to play one that I found the other day. President Jimmy Carter. And I, again, got permission from the White House to go. Now, what did the Bosnian Serbs say to you that made you take them seriously?

I'm asking this in the context of knowing that Karadzic has basically reneged on nearly every agreement that he's made. If he demonstrated tangibly that these things were being done. Isn't this incredible? This is incredible. So, this is Audiobooks, and I think that you're going to like it very, very much. It's an incredible amount of new content right alongside the music. You can preview it. You can buy it with one click. You can play it on your iPod and enjoy it for the rest of your life. Now, I want to show you the celebrity playlists. We have some of them right here. So, we can go to Dave Brubeck's celebrity playlist right here if we want to and pick something, anything we like.

And we can go back here and we can look at them all. We can say down here we have all the celebrity playlists or most of them listed. And we can see them all right here. And we can go to, as an example, Sting's right now. And, you know, play anything we want. So, these are the songs that these folks want us to listen to. They're all there. You can buy them individually. You can buy them collectively. You can just listen to the previews and get educated as to what Sting or these other guys think that we ought to hear. And it's really a wonderful thing. So, now let me go back to the home page. And I want to send a gift certificate. I just want to show you how easy that is. I go right over here to gift certificates and I just push this button and boom.

I can redeem one here if I have a number. I didn't get it in an email, let's say. Or I can buy one just by pushing buy. And I'm going to send this one to Phil. Oops, that's my name, sorry. This is me. Steve, I want to send it to Phil. He's Phil at Apple.com. I type it again. Phil at Apple.com. And I want to send Phil, let's say, 60 bucks. Happy birthday, Phil. Enjoy, Steve. And so I say continue. And I confirm my purchase. My credit card's going to be charged $60 here. I say, okay, go ahead and do it.

And boom, it was sent. I'm done. I'm going to try another one, but no, I'm done. Now, how do I redeem a gift certificate? Let's say somebody sent me one. Well, I go into my mail. I get it in my mail. So I can go to, let's see, how does mail work? Start. Internet Explorer. Okay, one unread message. And there it is, Sina Tamaden. iTunes gift certificate. This is what it looks like even on Windows. And I can say redeem now. Right on Windows, I just hit this button. And boom, it brings up iTunes. I redeem it on this machine. I say, yep, go ahead and redeem it. And boom, look at what it just did. The gift certificate, it added $20 right up there. It showed me where it is. And I'm done right now. And I can go back here and say, you know, I'm going to go into Bare Naked Ladies.

And this is $9.99, so I'm going to buy the whole album. And watch that $20. It goes down to $10.01 up there as I buy every song off this Bare Naked Ladies album. So that is gift certificates. Allowance works basically the same way. And I can just bring this up for you. I'm not going to go through it. But, again, I can just do this, figure out how much allowance I want per month, set it up. Or in this case, I'm going to cancel it and just go back. The last thing I want to show you is some of the featured artists that we have. We've got some great new exclusive content on our featured artists. And let me just show you a few things.

We've got, on the Eagles, we've got a whole album by the Eagles. This is the very best of the Eagles. It goes on sale in a little bit. Over a week, we've got it here on iTunes first and only anywhere. It's not even out on CD yet. You can get it on iTunes today. The Best of the Eagles. It's a great, great album. Take it easy, take it easy. Don't let the sound of your own wheels drive you crazy. And we've got some great content. Where is it? Oh, it's up here.

We've got an extended EP by Sarah McLachlan. This is an audio session that was recorded last week, and it's phenomenal. Again, only on iTunes. Sarah has had a bunch of top ten hits on iTunes, often number one. She's incredible, and I would go check this out. And then, another thing that we're very, very excited about is we've got The Grateful Dead on iTunes.

This is the only place online you're going to find The Grateful Dead. This is exclusive to iTunes. We've got eight albums on today. We're going to be adding a ton more content over the next few months. We are so excited to have The Grateful Dead. And what can you say? So we could listen to that all morning, couldn't we? But this is the second generation iTunes music store and jukebox on Mac and on Windows.

It is available on both platforms today, and it is free. It is a free download starting today, literally now at iTunes.com. iTunes.com, go there, get it, you will enjoy it. We want to send you away today with two things, compliments of us, to remember today by. Number one is a poster. We think these will be collector's items soon. And second is we want you to try out the gift certificate. So everybody here, we're going to send home with a $20 gift certificate for iTunes on Mac or Windows, and we hope you go try it out.

I think you'll find it's wonderful. So that is iTunes, the second generation. Now, we are clearly the market leader here. We are creating this online music market. iPod has the number one market share of any MP3 player, and our music store has 70% market share, and that's before we've gotten on Windows. Now as the market leader, we set some goals. We set a goal when we started off on April 28th of a million songs. We want to sell a million songs in the first six months.

We did it in the first week. So we set a new goal for the first six months. Fine. Like all good marketers, 10 million songs in the first six months. That's what we wanted to do. We did it in the first four months. Well, today we are going to raise the bar again, a quantum leap. We want to sell a hundred million songs, and we want to do it in the first year. Not the first year starting today, but the first year from when we launched iTunes. So we want to sell a hundred million songs by April 28th, 2004. That's a really high bar. How in the heck are we going to do it? Well, we got a few ideas.

First of all, our Mac customers are going to purchase about 30 million songs the first year. We're almost halfway there. We're running at an over 30 million song a year rate right now. We're pretty confident of this. The next thing we're doing, though, is we're taking it to Windows. This is a very large market. We've got the best product out there by far. This is going to help a lot. But what if that's not enough? What else should we do? Well, we got another thing we're going to do. We're going to make it really easy for 25 million online users to use iTunes, to discover music, to get to iTunes, to buy it really easily, and to buy it as, you know, easiest way possible.

We're going to make it really easy for 25 million online users. And to do that, today we are announcing a partnership with AOL. AOL has 25 million U.S. subscribers, and this is an exclusive partnership between AOL and Apple for iTunes. Later this quarter, we're going to do two great things. Number one, AOL has AOL Music. It's one of the most popular music destination sites on the web. It's a great place to discover new music. It's excellent. It's excellent. And they get tons of traffic there, because it's a great site. Well, here's what we're going to do. We figured out a way to make an iTunes button, and they're going to put iTunes buttons next to every song and album on this AOL Music site.

And when you click one of them, let's say you click the one for Black Eyed Peas right up there, it's going to launch iTunes and take you right to that song and select it, where you can preview it for free, or you can buy it, or you can buy the whole album. One click, and you're in iTunes with that song selected. The second thing we're going to do is we are going to make it really easy for AOL subscribers to buy music on the iTunes Music Store. They're not even going to have to put in their credit card. What they're going to be able to do is when they sign up for iTunes, they can pick AOL and put in their AOL ID and password, and they are an iTunes customer without even entering their credit card. 25 million subscribers with 25 million credit cards already entered in AOL will be able to buy music on the iTunes Music Store.

So, it is my great pleasure now to introduce the CEO of AOL, John Miller, a person I've gotten to know a lot over the last several months and have enjoyed working with very much. John? Thank you. Great to be here. Whenever I'm up here in the Valley, I like to get back to first principles about the Internet, and I think the most important thing to remember that's probably been forgotten through the boom and then the bust, is that everything they said about the Internet I think is true. All those promises about how it was going to affect business or change the world and affect people's lives, except one.

It doesn't happen overnight. It takes people and businesses to make it real over time with real business models, and music is clearly, clearly one of the areas most affected by the Internet. Some of the promises are true already. It connects artists and their fans. It allows more musicians, more artists to be heard. It connects and provides new ways of distribution, but some of that was a problem, wasn't it? It looked like a Gordian Knot, but as Samuel Clemens said, great opportunities are usually disguised as impossible problems. Steve Jobs and Apple untied the Gordian Knot of a la carte downloading and opened up a new world for music fans everywhere, and what we're doing now is we're taking AOL's number one music destination on the Internet.

Over 16 million users every month come to AOL Music with great, great, great activities like sessions at AOL, First Listen, Broadband Rocks, all of which have served to make the experience of discovering and listening to music on the Internet the best anywhere. And now we're combining that with iTunes, the second generation as you've heard today. It will be an unmatched offering. It will drive legitimate music, legitimate enjoyment on the Internet. It unties the Gordian Knot and puts it together for users everywhere. It's terrific for us to be part of it. Thanks Steve. I thank Apple for bringing us together to do this. It's a great service for our audience, for our users, and it's a great day for the Internet.

Thank you very much, and thank you Steve. Thank you, John. We're very, very excited about this. Working with AOL, we're going to make it really easy for their 25 million subscribers to use iTunes and find the music they want. So, going to Windows, 25 million AOL users, making it really easy for them. What if that still doesn't get us to 100 million songs? What are we going to do? Well, we're going to do a third thing. We're going to give away 100 million songs. You heard me right. We're going to give away 100 million songs.

And to do this, we are partnering with Pepsi. It's really cool. So, here's what's going to happen. Pepsi is going to make 300 million bottles of Pepsi, Diet Pepsi, and Sierra Mist with special yellow bottle caps. One in three is a winner, which means there's going to be 100 million winning bottles out there. And the winners all get a free 99-cent song on iTunes, on their Mac or PC. And all of this is going to happen. We're going to give away these 100 million songs within a 60-day period. Okay? So, let me review this again. Let me review this again.

Pepsi is going to make a lot of bottles with yellow caps. Okay? 300 million of them. One in three is a winner. When you get a winner, the cap, all the caps look like this on the outside, but the winning caps look like this on the inside. And what you do, what do you do with that winning cap? Do you have to take it back to the store? No. You go to iTunes, and you type in this number into iTunes, and you get your song. It's really great. So on every bottle, there's directions right here. If you find a code under the cap, go to iTunes.com and download iTunes to your PC or Mac, enter your code into iTunes, and download your favorite song.

Isn't this simple? It's great. Now, when is this going to kick off? It's going to kick off on the Super Bowl on February 1st, 2004. Pepsi is going to be running a large advertising campaign. And remember, this is only a little over three months from now. So it's very, very exciting. And it's going to run for 60 days, all of February and all of March. Right? 100 million bottle caps, 100 million free songs. We are so proud to be partnering with Pepsi on this. And it's my pleasure now to introduce you to Dawn Hudson, the president of Pepsi-Cola North America. She couldn't be here today, but she made a video for us, and I'd love to run the video now.

Hi, I'm Dawn Hudson, president of Pepsi-Cola North America. And we are absolutely thrilled to be working with Apple. You know, Apple's really revolutionized the way you and I think about and buy music. First, with the iPod, this great device allows you to download music and so easily carry it anywhere you go. I own one myself. And now, with the iTunes Music Store. And while it's been available on Apple computers, now it's available on Windows. So many, many Americans will be able to go online, choose their favorite song, and download it. Now, we think this is such a big idea that we worked with Apple to create a big promotion. What we think is going to be the biggest ever music promotion.

And here's how it will work. Starting in February, you'd buy a Pepsi, a Diet Pepsi, or a Sierra Mist. And you'd twist off the cap. And you'd go to iTunes, and you'd load this number onto the iTunes site. And one in three consumers will win a free downloaded song. Now, we're going to give away 100 million songs. Yes, 100 million. Between February and March. Now, we think that's such a big promotion, the biggest again in the music business, we think, that we're going to announce it on the Super Bowl. So tune in on February 1st, listen for the announcement, and then we hope you'll run out and take advantage of free music from iTunes. And of course, buy Pepsi, Diet Pepsi, or Sierra Mist to get into the promotion. So thank you very much, Steve.

We are very excited about our collaboration and really can't wait to get started. Woo! So even by Pepsi standards, this is a historic promotion. And we think it's going to make everybody really happy. It's clearly going to make music lovers happy. And we think it's going to make soft drink lovers happy. But it's also going to make the labels really happy. They're getting paid. And it's going to make artists really happy because they're getting paid. And this is encouraging, in a major way, the legal downloading of music. And it's going to make Pepsi very happy. And we think it's going to make us very happy with iTunes as well.

So this is a everybody wins promotion. And we're very excited about it. So 100 million songs the first year. This is our goal by April 28th of next year. We're going to Windows. We're going to make it really easy for 25 million online users to buy their music off iTunes with an exclusive partnership with AOL. And we're going to give away 100 million songs with Pepsi. By the way, I want to thank Jimmy Iovine from UMG for bringing Pepsi and Apple together on this. It was his brainchild. And it's a really good one. So we think we got a really good shot at selling 100 million legal downloads the first year.

And we're really raising the bar because that's what market leaders do. So lastly today, I'd like to talk about artists. Things start and end with the music, with us. We've got a bunch of exclusive content on the store, as I was talking about earlier, by a bunch of artists. This is just a few of them. I wanted to highlight a few of the things we've got though. REM has got Vancouver rehearsal tapes recorded May 10th, 2003. This is seven tracks on the store. These are fantastic. The only place you're going to find them online is the iTunes Music Store. We got a remix by Black Eyed Peas on the store that's fantastic. Go check it out.

We've got a whole album, as I mentioned, by The Eagles, the very best of The Eagles. The only place you can find it in the world is the iTunes Music Store. The Grateful Dead, eight albums and growing. The only place you're going to find it online is on iTunes. Coldplay. Coldplay's done phenomenally well on the store. We got a great new exclusive track starting today. We got an exclusive EP from The Rolling Stones with three great tracks. And Sarah McLachlan, a live acoustic EP with five tracks that's fantastic. Now some of the artists wanted to actually say a few words today, but they couldn't be here because they're out touring. And so to bridge space and time, we're going to use iChat.

And let's see who we can find. Got to use a Mac for that. So first we're going to go to Dublin. I hope. Hey. Can you hear me?

Yes. Hi. Oh, no. Hey, thank you for joining us today. I'm really, really happy to be here, Steve. Very excited about this hookup with Windows. It's like the Pope of software there meeting up with the Dalai Lama of integration. We're hoping that Windows users love it as much as Mac users do, and we think they're going to. So this is going to make your music available to tons more people. Now you guys already have 15 albums on the music store, and you've been in the top ten a lot. And stuck in a moment, the exclusive track that you gave us, is the eighth best-selling song on the store since launch.

It's incredible. That's very good news. All in all, I'd like to teach the world to iTunes. Sorry, wrong company. It is a very, very cool thing for musicians and for music, what you're doing. And I want you to know, Steve, that we really appreciate it. And this is new territory, and actually making Apple a crossroads for all kinds of... of artistic endeavours, you've been paramount in leading that, and so that's why I'm here to kiss the corporate ass. I don't kiss every corporate ass, but you have a nice one.

Thank you very much. How do you like Dalai Lama of integration? Well, take care. Okay. Next, we're going to go to Los Angeles. Hey, Dr. Dre. How you doing? I'm great. Hey, I'm sorry I couldn't be there, but I'm here in the studio working on my new record, you know, but I want to congratulate you on iTunes.

Oh, that's great. Listen, when can we get it on the store? When it's possible. Also, I'd like to say congratulations on the iPod, too. No more carrying big duffel bags full of CDs. You know, Dr. Dre, we've got, of course, your albums on the store, but you also produce Eminem and 50 Cent, and they've done super well, and I had a question for you. Can iTunes somehow help these new bands break their acts? Oh, definitely, definitely. I know a lot of kids like going online to buy their new music and what have you, so iTunes is a way for them to get their new music in a legal way. Well, you've helped some of the biggest stars break into the music business, like Snoop Dogg and Eminem and 50 Cent, and along with your own music, we just love having this stuff on the store, so thank you very much.

Thank you. Thanks for having me. OK, take care. And now, now, bits willing, we're going to go London. Hey! How are you? Great to see you guys. You've got, like, Dublin, you've got going. Listen, what was he, the Dalai Lama? Bonnie said, I'm the Archbishop of Canterbury, and I'm confused. Hey, you know, Mick, we got 16 Rolling Stones albums on the music store, and we got this exclusive EP launching today, and we couldn't be happier. Thank you, thank you, thank you.

No, we're very happy to do it. You know, we wanted to do this right from the beginning. I remember you came to the show in San Francisco, and you showed me all the software and how it's going to work, and I was really pleased, and actually, when I saw it for real life how it worked so easily, I was even happier. So, you know, I'm great, and it's great to be involved in this. Well, you know, Mick, I've got a question for you. You've seen the music industry change from records to tapes to CDs and now to digital downloads and iPods, and your songs have been hits in all of these formats. You know, what do you think of all this? Well, I'm sad I missed the wax cylinder session.

No, I thought, you know, this is great because finally, I mean, it took so long for this format to come along that we're going to actually make sense and work, you know, all this. What could have been a wonderful start was all a lot of bad feeling with Napster and people chasing each other, and it was like a lot of bad feeling over something which could have been wonderful at inception, but now hopefully it's going to go forward into something that everyone can understand and be happy with. Yep. We're going to try our hardest, and thank you for helping us. Okay. Pleasure. Take care. Bye. Bye-bye. Thank you, Bono.

Thank you, Dr. Dre, and thank you, Mick Jagger, and thank you, iChat AV. You know, for us, it all starts with the music and it all ends with the music. We got a bunch of guys at Apple working their hearts out to make this stuff, and I would like them all to stand up, the ones that are here and the ones that aren't here. Please stand up, too. Come on. Stand up, guys. Thank you. Now, as I said, for us, it all starts with the music and it all ends with the music, and we'd like to share something very, very special with you today.

We are so lucky. It is my pleasure to introduce Sarah McLachlan, three-time Grammy Award winner. Thank you. Thank you very much. My pleasure. Thanks. Heaven bent to take my hand and lead me through the fire Be the long-awaited answer to a long and painful fight Truth be told, I've tried my best, but somewhere along the way I got caught up in all the words to offer But the cost was so much more than I could bear Though I've tried falling, I have sunk so low I've messed up better, I should know So don't come around here and tell me I don't deserve you We all begin with good intent When love was raw and young We believed that we could change ourselves The past can be undone

And though we carry on our back The burden of time always reveals In the lonely light of the morning In the wound that would not heal It's the bitter taste of losing everything that I've held so dear I've fallen, I have sunk so low I've messed up better, I should know So don't come around here and tell me I don't deserve you Oh Heaven bent to take my hand I've nowhere left to turn I'm lost in those I thought were friends To everyone I know Oh, they turn their heads embarrassed Pretend that they don't see It's one misstep, one slip before you know it And it doesn't seem a way to be redeemed Though I've tried falling, I have sunk so low I've messed up better, I should know

So don't come around here and tell me I don't deserve you Oh I've messed up better, I should know So don't come around here and tell me I don't deserve you Oh Oh Thank you.

Well, I would just also like to add my voice and say that I'm incredibly happy and proud of Steve and what he's achieved with his iTunes and the iPod and all the technology. It's incredible. And I'm not much of a geek. I mean, I get my email and I go on eBay once in a while. But it's pretty incredible. And just to watch this whole presentation and to see how easy it all is and how it all applies and how it all works together, it boggles my mind. And so it's just amazing. And I want to thank you for making it so easy for everybody, because I think it's going to be a huge innovation. And I'll shut up now. You spend all your time waiting for that second chance, for a break that would make it okay.

There's always some reason to feel not good enough And it's hard at the end of the day I need some distraction Oh, a beautiful release Memories seep from my veins Let me be empty Or in weightless air Maybe I'll find some peace tonight In the arms of the angel Fly away from here From this dark, cold hotel And the endlessness that you fear You are pulled from the wreckage Of your silent reverie Here in the arms of the angel May you find Some comfort here

You're so tired of the straight line Oh, and everywhere you turn There's vultures and thieves at your back The stone keeps on twisting You keep on building the lines That you make up for all that you lack Don't make no difference Escape them one last time It's easier to believe In this sweet madness Oh, this glorious sadness That brings me to my knees In the arms of the angel Fly away from here From this dark, cold hotel And the endlessness that you fear Oh, you are pulled from the wreckage Of your silent reverie Here in the arms of the angel

May you find Some comfort here You're in the arms of your angel May you find Some comfort Here Thank you.

We are very lucky. And the last thing I wanted to say today was thank you. We love doing what we do. And we work really hard at it because we love it. And I want to thank Eddie, Jeff, Peter, Patrice, Robert, all the great folks at Apple who've been working so hard to bring this to everybody today. We love what we do so much. And I also want to thank the families, the spouses, the boyfriends, the girlfriends, the partners that let us do this thing we love so much because without their support we couldn't do it. So thank you very much today.

Please go out and try this stuff out for yourself. Pick up your poster, your $20 gift certificate. And we hope you love the second generation iTunes as much as we do. Thank you very much. Thank you. Thank you. Thank you.

Thank you.