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Tuesday, March 06, 2007, 07:10 pm PT (10:10 pm ET)

Apple CFO talks Apple TV, iPhone, Leopard and retail [transcript]

Speaking at the Morgan Stanley Technology Conference in San Francisco on Tuesday, Apple chief financial officer Peter Oppenheimer fielded questions on the company's upcoming launch of Apple TV and iPhone, while also talking at length about Mac OS X 10.5 Leopard and strategies in the retail segment. A full transcript the near 40 minute session follows.

Note to website editors: This transcript is AppleInsider's proprietary work. Please do not plagiarize our material. Thanks.

Questions from Morgan Stanley Systems and PC hardware analyst Katy Huberty

Q: As a starting point, start with Apple TV. The potential to change the way customers gather and purchase their video content. And we've seen some cable providers — and the most recent I've read about is Time Warner in San Diego — and those trials to hook PCs and the Internet to the TV to distribute video just haven't worked. So why is Apple's strategy different?
A: Over the past several years Apple has made significant improvements in how customers manage and enjoy their digital lifestyle, including the iLife suite of software. We develop technology as we integrate into our products, such as AirPort Express, AirTunes and Bonjour. And now with Apple TV, we believe we are providing a new and better way for people to seamlessly and wireless enjoy their digital lifestyles. The Apple TV interface is simple, yet elegant, and the picture quality is excellent. I think Steve [Jobs] said it really well when he said Apple TV, as he described it, is the DVD of the 21st century.

Q: So part of that solution is the content. Clearly Apple does a great job with the hardware and the peripherals and what have you, 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 Lionsgate. And as a results, we have over 400 movies and 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. When we launched with the fifth-generation iPod in October of 2005, um TV shows, we started with five. And today we have over 350. And as the end of last quarter, we downloaded more than 50 million TV shows. And we're confident that we'll add more studios over time. And as we discussed with Apple TV, we'll provide customers with a great seamless way to enjoy this content that they have on iTunes either from their Mac or PC to their big screen TV.

Q: So, 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 cable boxes and Apple solutions.
A: Well, our sales through iTunes are growing at very strong levels. We're very happy with it. We got some indication of that in the December quarter. We think we're 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 [inaudible]. What would that do to the financial model if Apple didn't have to pay the DRM licensing 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 DRM is required by the big four labels in order for us to protect [inaudible] from being illegally downloaded. We believe that consumers would be best served in a marketplace where any player can play music purchased from any store, and any store could sell music that would be playable on any player. We think this is the best result for consumers and Apple would embrace it wholeheartedly. In terms of the financial impact, that remains to be seen. We've sold over 2 billion songs, 50 million TV shows, 1.3 million movies. We've 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.