On Apple's Success and Direction

Walt Mossberg interviews Steve Jobs at the Carlsbad Four Seasons this week on the D stage.

Walt asks Steve, "What business is Apple in today?" Steve says that Apple is in three businesses - the Mac business, the music business and more recently: phones. The fourth is not a business but something he calls a hobby, which is Apple TV. We receive a sneak preview, which includes a relationship they just announced with YouTube.

Steve says, "I can see a time where notebooks are 80-90% of what we sell. We generally have a release every 18 months ago, so are constantly innovating. The growth since the Intel transition has been about 3 times the overall PC growth rate worldwide. If you parse out the U.S. numbers, it approaches 5x."

He adds, "if we have the best music store, we'll continue to pioneer people to buy music. We feel that we have a great solution here - the iPod and the music store." On the music side, its really about the iPod though isn't it asks Walt.

Says Steve, "There are really three pieces to it -- we have iTunes, the juke box, which you don't even have to use with the iPod, the iPod, and the online store in the cloud. The iPod wins because its the best music player. If we want to keep winning, we have to keep making the best music player."

What about on the iPhone? He says, "we have revolutionized the way people use a cell phone. It is essentially the Internet in your pocket for the first time and its also going to be the best iPod we ever created. It's all three of these things and they play off each other."

Apple made an interesting decision to not add a keyboard to the upcoming iPhone, which apparently they didn't debate over internally. While most people think they prefer a keyboard as an input mechanism, Steve claims that once we use this magical display, we won't want to go back. He jokes with Walt, "I'll bet you dinner, that you'll think its really great. Once you learn how to trust it, you fly. We can then use the rest of that physical space for other things."

He ends with 'the why' Apple has been so successful in this business. He notes that it is largely because the Japanese consumer electronics companies cannot do software as well as it needs to be done. He says, "the iPod is essentially software wrapped in a beautiful package. The Japanese consumer electronics companies couldn't make the leap with software. If you look at handsets, the situation is very similar. They have the hardware down, but not the software."

Below is Steve showing us a demo of Apple TV, which includes the new UI of an integrated YouTube menu (announced this week), where people can select and view by most favorited, most listened to, etc. Steve talks about their choices and strategic direction with it, "we decided that we wanted to be a DVD player for the Internet."

As for its success, who knows. "I never thought we'd ship 100 million iPods in the beginning," -- look at where they are now and the momentum continues. Walt asks Steve whether he thinks video on portable devices is viable, 'will people want them?' He says that video was a main reason people bought iPod video and adds, "I think video on portable devices is here to stay."