New Seinfeld ad draws negative reviews online

NEW YORK - No soup for Microsoft?

The software giant's new ad starring Jerry Seinfeld has drawn largely negative reviews online after premiering Thursday night during NBC's broadcast of the National Football League's season kickoff game.

The ad was the start of a highly anticipated $300 million advertising campaign that Microsoft is launching in attempt to rebuff Apple's popular TV commercials, which have portrayed Microsoft and PCs as uncool.

In the commercial — which can be found at Microsoft.com and on video sharing sites — Seinfeld is walking through a mall when he spots Microsoft Chairman Bill Gates at a "Shoe Circus" store. The comedian then helps Gates pick out a new pair of shoes while the jokes come quick: showering with clothes on, Gates being a "10," platinum credit cards for a fictional shoe store.

It's a zany ad that packs a lot of quirkiness into 90 seconds. With no direct mention of Microsoft or its operating system, Vista, the commercial concludes with the slogan: "The future, delicious."

The ad was created by Crispin Porter & Bogusky — a firm with a reputation for oddness. Many technology and advertising blogs have turned to Seinfeld's trademark comedy description — "nothing" — to describe the ad.

"Huh?" wrote Abbey Klaassen for Ad Age. "You could be forgiven for not knowing what the heck Microsoft's new TV ad ... was about."

Dan Frommer, writing for the Silicon Alley Insider, pronounced the ad "not funny" and added that the mall shoe store setting "is not going to help Microsoft look any cooler."

For the blog Techcrunch.com, Michael Arrington noted that the "tech and geek crowd is a little underwhelmed" by the ad, which he said is "a far cry from the brilliant Microsoft v. Mac ads."

Brad Brooks, vice president of Windows consumer product marketing, said in a video posted on the Windows press Web site, that the ad is a "teaser" meant to "engage customers in a conversation ... to get the conversation going again about what Windows means in people's everyday lives."

Even if the reaction was mostly negative, Microsoft's ad has clearly succeeded in getting people talking.

It's presto, change-o as new iPhone is unveiled

LOS ANGELES — Wouldn't it be cool if you could use your cellphone to monitor activities in your home, say, to zoom in for an audio/video check of the baby's room while you were at work, or even adjust the heat?

Or how about going to a theme park and checking your phone to discover if other friends are there, and arrange a meeting place?

Consumers and reviewers alike gushed about its compact, futuristic design and sensitive touch-screen. But even its biggest fans have had one persistent chief complaint: The iPhone's Internet network from partner AT&T was too slow.

So get ready for iPhone 2.0: On Monday Apple (AAPL) is widely expected to introduce a zippier version that will operate on both a faster AT&T network, and speedier networks internationally. The price also will rock: $199, according to people with knowledge of the matter, down from the current $399 and $499.

Sources declined to be cited by name or affiliation because Apple and AT&T haven't authorized anybody to speak publicly about pricing until after Monday's announcement. The $199 price is being subsidized, though USA TODAY could not confirm details.

According to sources, the new Apple device will be available in Apple and AT&T stores beginning this summer.

For consumers, the shift to 3G will be akin to going "from dial-up to broadband," says Gene Munster, an analyst at Piper Jaffray.

A new iPhone could go a long way toward fulfilling Apple CEO Steve Jobs' prediction that he'd sell 10 million iPhones in its first 18 months. So far, Apple has sold just over 5 million phones. Analysts who follow the company think a lower price and new international markets make it a sure bet that another 5 million will be snapped up this year.

Apple stopped taking orders for the iPhone in May, presumably to make way for the new model. Sales could substantially beef up Apple's bottom line, Munster says. Apple reported revenue of $24.0 billion in 2007. Munster sees sales growing to $34 billion this year, and $46.9 billion in 2009, thanks to the iPhone.

Beyond the new hardware, the biggest buzz around the iPhone this week will be the new uses being dreamed up for it. The software add-ons have the potential to turn the iPhone into the pocket computer of the future, as essential, Apple hopes, as the keys in your pocket or purse.

The iPhone economy

Apple's sold-out Worldwide Developer's Conference in San Francisco is the setting for Monday's iPhone lovefest, where software developers will convene to hear about the new iPhone. They're eager to hear CEO Jobs talk about how they can participate in what independent analyst Richard Doherty calls the "iPhone economy."

Earlier this year, instead of controlling everything that went on the iPhone, Apple released what's called an SDK — for "software developer's kit" — a road map that allows programmers to create applications for the iPhone. The first of those outside programs is expected to be released Monday, and made available on the iPhone and iPod Touch — the iPod that's just like the iPhone, except without a phone.

"Opening the pot of gold to developers is as important as the iPhone itself," Doherty says.

Once Apple approves a piece of software from an independent developer, it provides distribution — via a new "App" store on the iPhone and iPod Touch — and takes a 30% cut of revenue. "This means that anyone, whether you're 14 years old or 40, if you're a large company with 300 employees or a guy in a garage, has access to Apple's customers," Doherty says. "You don't have to make a presentation to a series of different handset manufacturers or wireless carriers. This is unheard of in software."

Access to the iPhone App store means that "we have a way to reach millions of consumers," says Darren Vengroff, the co-founder of Pelago, which developed Whrrl, a social network application.

Whrrl takes the online review phenomenon and marries it to the iPhone. The idea is that if you're searching for a restaurant, with a few clicks you can see which ones your friends — who are also Whrrl members — recommend. Whrrl is currently available for two BlackBerry phones and the Nokia N95.

The iPhone App store will "get so much traffic," adds Paul Dawes, CEO of iControl Networks, another iPhone developer. "It's not random traffic, but consumers who are actively looking for our types of applications."

The iControl application is the aforementioned home-monitoring system, or as Dawes calls it, "next-generation home security." With iControl, a device is plugged into your home network and connects to security panels, webcams and home-automation devices, allowing the homeowner control away from home. You can keep up with the action while at work on your desktop, or with the iPhone out in the field.

The iControl monitoring system is sold via home-security companies and a monthly subscription, but the iPhone application will be available for free.

Video game company Sega, best known for the old Sonic the Hedgehog video game, wowed attendees at a March meeting for developers when it showed off the Super Monkey Ball game for the iPhone.

There's no joystick controller for the iPhone to move the characters from left to right, so developer Ethan Einhorn came up with a novel idea: Just move the phone up or down, left or right, and the characters respond to the movement.

"What's great for a company like ours is that Apple has already defined the iPhone as a place to acquire and enjoy entertainment," Sega's Einhorn says. "Video games are the next natural step."

Earlier this year, legendary Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers (which had a role in funding Google, Amazon and AOL) started what it calls the "iFund," a $100 million pot looking to invest in iPhone application start-ups.

Kleiner Perkins invested in both iControl and Pelago, and is actively looking at 50 other start-ups, partner Matt Murphy says.

"We received about 2,000 proposals so far, and that's more than a factor of 20 of what we would have received from the general mobile sector," Murphy says. "What Apple has done is brought a lot of entrepreneurs off the sidelines. They feel 'open mobile' is here."

Historically, if you had an idea you wanted to sell to the mobile industry, you had to pay a visit to Sprint, T-Mobile, AT&T and Verizon. All have huge customer bases, but their phones work on different wireless systems. This requires a programmer to construct the program in different ways.

Apple isn't the only company pushing open mobile. To great fanfare earlier this year, Google introduced "Android," which it describes as a new wireless operating system that can be used with multiple carriers.

Google has been shy about releasing much Android information, but says we'll see phones in the second half of the year.

Unlike Apple, which produces its phone and has AT&T as the wireless network customers have to work with in the USA, Google is reaching out to many. Wireless manufacturers HTC, LG, Motorola and Samsung are all participating in Google's "Open Handset Alliance," along with carriers Sprint, T-Mobile and Japan's NTT DoCoMo.

A home run?

When the iPhone was released last year, eager consumers waited on line for days to get a crack at buying one of the first ones. A year later, Apple says it's sold over 5 million iPhones.

That pales in comparison with competitors. Windows Mobile, which provides software for phones from HTC, Samsung, Palm and others, says it will sell 20 million phones this year.

About 1 billion cellphones are sold every year. No. 1 manufacturer Nokia, for instance, sells more cellphones in a week than Apple has shipped to date. According to researcher Gartner, Nokia sold 435 million cellphones in 2007. Munster says the "real verdict" on the iPhone's success hasn't been reached. "The numbers are too small to call a home run."

Charles Golvin, an analyst at market tracker Forrester Research, says iPhone's impact has been felt by the entire wireless industry, which has been trying in vain for several years to sell lucrative add-on data plans.

"They have done a very poor job marketing these services," he says. "What Apple and the iPhone did was really communicate in a very simple way what the data plan could do for you. It's the Internet, but on your phone."

With a data plan, consumers pay an additional monthly charge — usually $15 to $25 — for access to the Internet on their phones, adding greatly to the carrier's bottom line.

Golvin says handset competitors such as LG, Sony Ericsson and Nokia are "really blatant" about how their new phones are clones of the iPhone. "The iPhone has raised awareness of what's possible."

Movies now available on iTunes Canada

Apple is opening its own online video store through iTunes in Canada, roughly two weeks after Bell Canada launched its own service.

Apple says it has more than 1,200 films for rent or purchase, with titles available the same day as their DVD release.

Films can be downloaded to either Mac or PC computers, unlike the Bell service which only works with PC computers using Microsoft Windows.

Both companies load the video files with copyright protections.

ITunes movies cost $9.99 to $19.99 to own and $3.99 to $4.99 to rent.

Bell movies cost $4.99 to $19.99 to own, while rentals cost $1.99 to $4.99.

ITunes customers have up to 30 days to start watching their film, and 48 hours to finish it once a movie has been started.

Bell customers also have 30 days to watch a film but only 24 hours to finish it once they hit play.

Apple’s iTunes began selling TV shows in Canada in December, two years after launching a similar service in the United States.

Apple's iTunes sells movies in U.S. on DVD release date

Apple Inc. announced Thursday that it is allowing U.S. customers to purchase films from its iTunes website on the same day they are released on DVD.

The introduction of the new service represents a shift for the major film studios, which previously had waited as much as 30 to 40 days after DVD distribution before offering new releases to the majority of video download services.

But Apple said it has partnered with most of the studios for its new offering, including 20th Century Fox, Disney, Warner Bros., Paramount, Universal and Sony Pictures Entertainment, as well as Lionsgate, Image Entertainment and First Look Studios.

Apple shares rose 2.5 per cent on the news, up $4.21 to $178.16 US as of midday in Nasdaq trading.

The service will allow US visitors to buy new release films for $14.99 US and older library titles for $9.99 US.

The announcement comes just three months after Apple announced users would be able to rent new release films through the iTunes store for $3.99.

New releases, however, are not yet available to customers in Canada through iTunes.

The decision by studios to allow users to either rent or own new release films could put added pressure on bricks-and-mortar retailers such as Blockbuster Inc.

Apple's announcement confirms that the other major studios are in step with Time Warner, whose chief executive, Jeff Bawkes, said during a conference call on Wednesday that the company's Warner Bros. studio would begin releasing movies for video-on-demand systems the same day they are released as DVDs.

That decision could open the door not only for online retailers like Apple and Amazon.com, but also spur use of cable pay-per-view systems or rental download systems like Apple TV.

Apple mulling 'unlimited' iTunes plan: report

Apple Inc. is reportedly in talks with major music companies to offer customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone handheld devices.

According to a report in the Financial Times, the "all you can eat" model would be similar to the "Comes with Music" deal Nokia made with Universal Music last December, which allows users to buy a pre-programmed Nokia device with a year's unlimited access to a subscription service featuring music from Universal's catalogue.

The Financial Times said the discussions between the Cupertino, Calif.-based Apple and the major music companies hinges on how much Apple would offer its partners in exchange for access to their music libraries.

The report states that while Nokia is said to be offering $80 per handset to industry partners, Apple has so far only offered $20 per device.

For consumers, the cost of the music could either be bundled with the cost of the player or as part of a monthly subscription, although only the iPhone device already comes with a subscription.

The reported discussions, currently in the preliminary stages, would mark a major change in philosophy for Apple, which has previously maintained tight control over the prices and format of individual music or video downloads.

Apple has more than 80 per cent of the global digital music market. Its online iTunes stores are the second-largest retailer of music in the United States, trailing only Wal-Mart, according to a February study from consumer tracking firm NPD Group.

But major music companies have chafed at Apple's success, becoming more vocal about wanting their share of profits from the sale of devices they say are built on their music catalogues.

While music downloads have increased, the same NPD Group study found the increase could not offset the continuing decline in physical CD sales, leading to an overall 10 per cent decrease in music spending — to $40 US per capita from $44 US per capita among internet users.

As a result, record labels have been exploring other means of selling their music libraries.

Last fall, online retailer Amazon.com Inc. launched its own music store, reaching agreements with Universal Music Group, EMI Music Group PLC and later Warner Music to offer millions of songs without copy-protection technology.

Apple-Polishing Time for Studios

Each of the major studios has agreed to provide movies for Apple's iTunes movie rental service, Apple chief Steve Jobs announced at the MacWorld conference in San Francisco Tuesday.

The inclusion of Universal and Sony were major surprises since each had indicated it would launch a similar service.

Moreover, Jobs said, the films could be downloaded and viewed on ordinary or high-definition TV sets via Apple's settop box -- without the use of a computer.

They would rent for $2.99 for older titles, $3.99 for newer ones -- although "newer" is relative. Films will not become available on iTunes until at least 30 days after they are released on DVD.

HD movies will cost $1.00 more than conventional ones to rent.

Analysts pointed to other drawbacks: films can only be viewed for 24 hours -- fine for home viewing but annoying for those downloading them onto iPods and iPhones for viewing in increments during their commutes, lunch breaks, or work-outs.

Moreover, only about 1,000 movies will be available when Apple's video-rental store opens online in February.

Nevertheless, Apple's maneuver received mostly positive response from analysts and newspaper critics.

Commented the London Times: "Apple's move into video rentals, if successful, is likely to change fundamentally the economics of the film industry, and provoke yet more arguments over the way internet royalties are paid to writers."

Also on Tuesday, Jobs unveiled a new, thin laptop computer, the MacBook Air -- so thin that it does not sport a slot for playing DVDs.

Apple, Fox to offer iPod movie rentals

Apple Inc. is partnering with entertainment giant 20th Century Fox to offer movie rentals through its popular iTunes program, according to a news report.

Through the proposed online video-on-demand service, consumers will have the chance to download time-limited copies of Fox DVD releases, according to a source familiar with the deal cited in the Financial Times Thursday.

The deal is expected to be announced at the Macworld show in San Francisco on Jan. 14.

The news follows a similar move by Microsoft Corp. in 2006 in partnership with Xbox 360. Together, they launched a digital video download service that allows Xbox 360 owners to buy television shows and rent movies.

The service, which was made available to Canadians just this month, lets people with broadband internet connections purchase standard and high-definition content through the Marketplace store on its dedicated Xbox Live network.

However, analysts say the sheer strength of iTunes' popularity will make the partnership between Apple and Fox highly lucrative for the two companies, including a boost in sales of video iPods.

"Fox and potentially other studios are coming around to the idea that there is nobody out there to challenge iTunes," Jonathan Weitz, a principal with IBB consulting in the United States, told the Times.

"This deal is a sign that media mobility is coming to the mainstream."

Apple shares hit the $200 mark for the first time Wednesday — largely on the strength of the iPod brand. The company unveiled a new line of personal media devices this year, updating its flash-based Nano model to enable video playback as well as introducing the iPod Touch.

The touch-screen unit includes Wi-Fi wireless capability that allows users to connect to the internet, as well as Apple's online music store iTunes and purchase songs.

According to the Times, new Fox DVD releases will include Apple's FairPlay digital rights management system, allowing the films to be legally copied from the disc onto a computer or iPod.

Limited Disney, Paramount and other films are already for sale — although not for rent — through the iTunes platform.

Apple was also said to have been in negotiations with Sony, Paramount and Warner Brothers about similar deals to make their content available through the iTunes store.

iPod Nano commercial the Apple of singer Feist's eye

NEW YORK (Billboard) - The use of Canadian singer-songwriter Feist's song "1, 2, 3, 4" in an iPod Nano TV spot is generating major attention -- online and on the Billboard charts.

Since the ad debuted in mid-September, sales of "1, 2, 3, 4" and its parent Cherrytree/Interscope album, "The Reminder," have skyrocketed.

Earlier this month, the track was selling about 2,000 downloads per week, while the album was shifting 6,000, according to Nielsen SoundScan. On the most recent charts, "1, 2, 3, 4" clears 73,000 downloads and reaches new peaks of No. 7 on Hot Digital Songs and No. 28 on the Billboard Hot 100. "The Reminder" jumps from No. 36 to No. 28 on the Billboard 200, with sales of 19,000.

In total, "1, 2, 3, 4" and "The Reminder" have amassed sales of 181,000 and 235,000, respectively. (Feist's debut album, 2005's "Let It Die," has sold 147,000 copies.)

While the iPod Nano spot is introducing Feist to mainstream America, online chatter is paving the way to sales of the singer's music. Feist is not identified in the campaign -- created by TBWA/Media Arts Lab -- and this has led many consumers to the Web in search of the voice behind the song in the commercial.

According to Nielsen BuzzMetrics -- which monitored such search terms as "1234," "iPod," "Nano" and "campaign" -- Web discussion is increasing by triple-digit percentages weekly. In the days following the singer's August 27 appearance on "Late Show With David Letterman," where she performed "1, 2, 3, 4," online buzz increased 190 percent. On the heels of Labor Day weekend, discussion of the iPod Nano ad soared 402 percent. One week later, there was a 166 percent spike in discussion.

Feist is the latest in a string of Interscope acts to appear in iPod/Apple commercials, including the Fratellis, Wolfmother, Eminem and U2.

And while bloggers have fueled rumors of a "deal" between the companies, Interscope Geffen A&M president of marketing and sales Steve Berman denied any such thing. (Apple and TBWA/Media Arts Lab declined to comment.)

"We have a great working relationship with them," Berman said. "We are a company with much music that can be construed as left-of-center."

Apple dramatically chops iPhone cost

SAN FRANCISCO — Apple slashed the price of its popular iPhone to $399 Wednesday and introduced a new line of iPod media players aimed at dramatically boosting its holiday business.

Apple CEO Steve Jobs told USA TODAY that he expects finally to have digital music from the Beatles available via Apple's iTunes Store by the middle of 2008. And he announced an alliance with coffee retailer Starbucks to sell music.

Jobs said Apple (AAPL) expects to ship the 1 millionth iPhone — which just launched in June — by the end of the month. "We want to put the pedal to the metal," he said. "A holiday season is approaching."

The heavily hyped iPhone originally sold for $499 and $599 with 4 or 8 gigabytes. Apple is eliminating the smaller model. The quick price cut angered some early buyers who paid that price.

But it "will really accelerate sales," says Van Baker, an analyst with market tracker Gartner. "Apple skimmed the cream from the market in the initial months, and now they're getting really aggressive."

The new iPod Touch is a direct clone of the iPhone, minus the phone and built-in camera. The unit sells for $299 with 8 GB or $399 with 16 GB, and has the acclaimed 3.5-inch touchscreen from the iPhone and Wi-Fi wireless Internet capability.

Jobs also introduced a new version of the small Nano with added video functionality, multiple colors and more capacity. In refreshing the iPod line, Apple has either dramatically lowered prices or given products substantially more storage. The 80 GB iPod was $349; now a similar model is $249. The iPod Nano with 2 GB was $149, now it has 4 GB.

When iPhone and iPod Touch customers enter a Starbucks, they will be able to access iTunes from the in-store Wi-Fi network for free. Stores in Seattle, New York and San Francisco will get it this year. Starbucks expects most of the USA's major markets to have it by the end of 2008. "The No. 1 question we get from our customers is, 'What song is that?' " Starbucks Chairman Howard Schultz said.

Apple introduced a new version of its iTunes software Wednesday that lets customers make custom ring tones for the iPhone with songs they've purchased. The tones are available for 99 cents on top of the 99-cent song purchase. The company also said it has sold 3 billion songs, 95 million TV shows and 110 million iPods to date.

Apple competitor Microsoft, which has been struggling to get a foothold in digital music, said Wednesday it would cut the price of its underperforming Zune music player by $50, to $199 from $249. The Zune has 30 GB of storage.

Digital music services try to nibble away at Apple

DENVER (Billboard) - The digital music wars are entering a new phase.

Several digital music service providers -- including MTV's Urge, Rhapsody, Verizon Wireless, Wal-Mart and Yahoo Music -- have unveiled new forays designed to shine light on their struggling services in the shadow of Apple's still-dominant iTunes.

While no individual effort is likely to dislodge Apple from its No. 1 position, all are clearly efforts to chip away at its commanding lead. According to data from NPD Group, Apple controls 73.7 percent of the retail digital-music market, with more than 3 billion tracks sold since it went live. iTunes is also the third-largest music retailer of any kind, surpassed only by Best Buy and Wal-Mart.

REALNETWORKS, MTV, VERIZON WIRELESS

In perhaps the most significant move, the three providers have joined forces to offer one integrated digital-music platform that includes Rhapsody's technology and music, editorial content and playlist programming from MTV's Urge and wireless distribution via Verizon Wireless. MTV brings strong marketing muscle -- to the tune of $230 million during the next five years, not to mention its on-air channels -- plus well-received blogs and other resources that should improve on Rhapsody's content. Verizon brings a mobile extension, something market leader iTunes still lacks. And Rhapsody brings the most popular subscription services on the market, its existing subscribers and back-end mobile technology.

The big bet, however, is on integration. Verizon will replace its Web-based digital music store with the new Rhapsody service and will send a copy of every song downloaded to a Verizon phone to the user's Rhapsody account. And Rhapsody subscribers will be able to transfer subscription-based music to Rhapsody-compatible Verizon phones once they're introduced later this year. But don't expect to download subscription tracks over the air from Verizon phones just yet.

On paper it's a strong alliance that emphasizes each partner's strengths and eliminates their weaknesses in what MTV Networks president Van Toffler called a "perfect storm" of capabilities. Whether they can execute it is another story.

WAL-MART

The big-box retailer has started a public relations initiative to highlight the availability of digital-rights-management-free (read: iPod-compatible) music from EMI and Universal Music Group. This is a particularly big deal for Wal-Mart, which has not been able to translate its success as a physical retailer to digital music. While it is responsible for about 22 percent of physical CD sales, Wal-Mart has less than 2 percent market share among music services, despite undercutting the competition on price. Protected tracks are 11 cents cheaper than on iTunes, while DRM-free tracks are 35 cents cheaper.

But this probably won't matter much until Wal-Mart can sell all its music without DRM, not just music from EMI and UMG. And the conservative company sells only edited versions of songs that otherwise would earn a parental advisory notice.

YAHOO MUSIC

Yahoo has unveiled plans to launch a Web-based music player that will allow current and non-subscribers to stream music from the service without requiring them to download the full Yahoo Music Unlimited software.

While its music portal receives more than 25 million unique hits per month, the Yahoo Music Unlimited subscription service continues to struggle for mass-market attention, just like every other subscription service out there.

According to Yahoo Music general manager Ian Rogers, the idea is to give its broader Internet community access to the same tools as subscribers and eventually convert them into paying members. Non-subscribers can hear only 30-second samples, while members can listen to the entire track.

iTunes retail test in the cards for Apple

NEW YORK (Billboard) - In a move to enhance its already prodigious stature as a music merchandiser, Apple will lead a test this fall that places artist- and album-specific iTunes gift cards in brick-and-mortar retail stores.

The iTunes gift cards, according to label and retail sources, will each feature specific album covers against a standard DVD-size cardboard backing. Albums by Maroon 5, Norah Jones and Eddie Vedder are under consideration for inclusion in the tests, which will run at Safeway, Starbucks and Best Buy. Wal-Mart and Target have been approached, but there is no word on whether those merchants will participate.

The test creates a dilemma for the major labels. On one hand, executives like the possibility that the gift cards could get music into stores that don't carry it now. They also like the increased exposure for their artists. And they foresee a role for the gift cards in stores that already carry music but where music selection and CD sales are being reduced by store closures, inventory realignments and the CD format's oncoming obsolescence.

iTunes is pitching its album-specific gift cards, which will feature the Apple and iTunes logos, as a way to get more music in existing shelf space at stores that already carry music.

One major-label distribution executive noted that when CD sales ultimately get weaker, anything that encourages music buying is to be welcomed.

But other executives worry that the gambit might in fact accelerate the demise of the CD. The strategy also will enhance the prominence of Apple, which already is perceived to be heavy-handed in wielding its clout with labels.

"It sounds like a way to help Apple get 50 percent market share," one senior label executive said. A senior distribution executive added, "It's ridiculous for Apple to negotiate with retailers on our behalf."

Another distribution executive wondered why music retailers carrying CDs would go along with the idea, since it could drive more traffic to iTunes at the expense of brick-and-mortar merchants.

iTunes didn't respond to requests for comment.

Meanwhile, sources suggest that single-album gift-card titles would be priced between $11.99 and $14.99 -- above iTunes' main album price point of $9.99 -- but each could come with music videos and ringtones. It's unclear if the labels would get their traditional wholesale cost of $7 per album.

For all his uneasiness over the idea, one executive conceded, "You have to give it to iTunes for trying to press their dominance in interesting ways."

iTunes now selling John Lennon tracks

LOS ANGELES - Apple Inc. has begun selling downloads of tracks from 16 of John Lennon's post-Beatles albums, including "Working Class Hero" and "John Lennon/Plastic Ono Band," on iTunes, the company said Tuesday.

The albums represent Lennon's recording output while he was with Capitol Records, a unit of Britain's EMI Group PLC.

While many of the late singer-songwriter's solo recordings have been available for download commercially elsewhere, this marks the first time they have been available on Apple's market-leading online music service.

Songs on two albums — "Lennon Legend" and "Acoustic" — were being made available for download exclusively on iTunes, the company said.

Video content was also being included with the purchase of some of the albums for a limited time.

The Lennon tracks will also be available without copy-protection restrictions and in higher-quality audio for $1.29 each. Regular versions are priced at 99 cents each.

"John would have loved the fact that his music will now be available in a format suited to a new generation of listeners," Lennon's widow, Yoko Ono, said in a statement released by Apple.

Apple plans iTunes video rentals

LOS ANGELES (AP) - Apple Inc. is planning to launch an online movie rental service by fall, although the company is meeting resistance from some Hollywood studios concerned about piracy, people familiar with the plan told The Associated Press on Monday.

Apple might try to launch the service sooner to coincide with the planned June 29 introduction of its iPhone, which will play video files, according to three people who requested anonymity because the talks are ongoing.

Apple spokesman Tom Neumayr said the company "does not comment on rumor and speculation."

Apple already sells films from two major studios and a number of smaller companies. But it has not entered the online rental business, which so far has not been terribly profitable for companies such as Movielink and CinemaNow.

Several studios are reluctant to license films to Apple to rent because the company will not modify its software to make it recognize pirated content and prevent it from being transferred to an iPod or iPhone, according to the people familiar with the talks.

Those same reasons, plus objections to Apple's rigid pricing, have kept several studios, including Universal Pictures, a unit of General Electric Co., Twentieth Century Fox, which is owned by News Corp., and Sony Pictures, a unit of Sony Corp. from selling its movies on iTunes.

Apple launched its online movie sales service last year with films from The Walt Disney Co.

Apple Chief Executive Steve Jobs is Disney's largest shareholder and a board member. The two companies have a close relationship, with Disney being the first to sell TV shows on iTunes as well.

Paramount Pictures, a unit of Viacom Inc., and a few other studios sells older titles on iTunes, as does Metro-Goldwyn-Mayer Studios Inc.

Only Disney sells films on iTunes the same day the titles are released on DVD.

Apple's iTunes begins selling unlocked songs

Apple Inc.'s iTunes Store started selling thousands of songs without copy protection Wednesday, marking the trendsetting company's latest coup and providing a model for what analysts say will likely become a pattern for online music sales.

Launching initially with songs from music company EMI Group PLC, iTunes Plus features tracks that are free of digital rights management, or DRM, technology — copy-protection software that limits where songs or movies can be played and distributed.

The unrestricted content means some songs purchased from iTunes will work for the first time directly on portable players other than Apple's iPod, including Microsoft Corp.'s Zune.

The inaugural batch of iTunes Plus songs includes music from Coldplay, the Rolling Stones, Norah Jones, Frank Sinatra, Pink Floyd and more than a dozen of Paul McCartney's classic albums.

The DRM-free tracks feature a higher sound quality and cost $1.29 US apiece — 30 cents more than the usual 99-cent price of other, copy-protected songs at the market-leading online music store.

If available, users could upgrade existing purchases to DRM-free versions for 30 cents a song or $3 US for most albums, Apple said.

London-based EMI, the world's third-largest music company by sales, and Cupertino-based Apple announced their partnership in April to deliver the industry's first major offering of DRM-free songs, sharing a vision of what both companies say their consumers want: flexibility and CD-audio quality.

Other smaller online music vendors, such as EMusic.com, already offer songs without DRM, but the selections have been limited to mostly content from independent labels.

Barney Wragg, the global head of digital music at EMI, said the iTunes Plus launch capped six months of work to convert almost all of the company's digital catalogue into a DRM-free format.

"Our customers told us two things deterred them from buying digital," Wragg said. "They weren't 100 per cent confident that the songs they'd purchase could play on their devices, and they wanted something closer to CD quality."

Earlier this year, Apple CEO Steve Jobs called on the world's four major record companies to start selling songs online without copy-protection software.

Apple, labels focus on copy protection

LOS ANGELES - The last time Apple Chief Executive Steve Jobs took on major recording companies, he refused to budge on his 99-cent price for a song on iTunes.

As a new round of talks ramp up this month, however, Jobs has opened the door to higher prices — as long as music companies let Apple Inc. sell their songs without technology designed to stop unauthorized copying.

Jobs contends that would "tear down the walls" by allowing consumers to play music they buy at Apple's iTunes store on any digital music player, not just the company's iPods.

Although most of the major labels insist that safeguards are still needed to stave off online piracy and make other digital music business models work, one company has already struck a deal with Apple.

Last month, Britain's EMI Music Group PLC, home to artists such as Coldplay, Norah Jones and Joss Stone, agreed to let iTunes sell tracks without the copy-protection technology known as digital-rights management. The DRM-free tracks cost 30 cents more than copy-restricted versions of EMI songs and feature enhanced sound quality.

The other major labels — Warner Music Group Corp., Vivendi's Universal Music Group, and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG — will be watching closely to see how the unrestricted EMI tracks sell.

"At this point, no one can ignore Apple or what Apple wants, given its position in the marketplace," said Michael Gartenberg, an analyst with Jupiter Research. "The fact that they were able to do this deal with EMI puts more pressure on some of the other labels to follow suit."

For their part, at least two of the recording companies will ask Jobs to sell a wider variety of content in digital bundles of songs, videos and other multimedia, according to two recording company executives familiar with their companies' plans. They spoke on condition of anonymity, citing the confidential nature of the negotiations.

Apple already sells some bundled tracks, but the music companies hope expanding those offerings will boost online revenue and help offset lagging CD sales.

Apple and the recording companies declined official comment on their negotiations.

Four years ago, the majors bought into Jobs' one-price-fits-all vision and agreed to such licensing terms at a time when online music services were failing to attract significant interest from music fans.

Since then, the popularity of Apple's iPods has swelled and the sleek devices now dominate more than 70 percent of the digital music player market, by some estimates.

While studies have suggested that only a fraction of the music on most iPods is actually purchased on iTunes, the service has ridden the iPod's coattails and helped cement its position as the top-selling online music service and one of the biggest music retailers overall.

That's given Apple considerable leverage in its dealings with the recording industry.

Last year, the main issue that dominated iTunes licensing talks was pricing, as some of the big music companies urged Jobs to entertain charging more for some songs than others.

The dispute percolated for months, but Jobs didn't budge, not wanting to complicate iTunes' simple pricing scheme for singles.

Eventually, the music companies each agreed to one-year deals, which expire this spring.

Now, Apple is facing pressure in Europe to license its brand of DRM technology to rivals so consumers can play the music they buy on iTunes on any digital music player, not just iPods.

Critics of the recording industry have argued for years that the labels are alienating customers by placing copy restrictions on legal music downloads, especially as many CDs have been sold without them.

The technology behind such measures differs, depending on the retailer and the music device. Apple, for example, has its own version, called FairPlay, that only works with iPods, making it cumbersome for consumers to transfer songs from iTunes across other portable digital devices. Likewise, DRM systems used at other online stores won't work with iPods.

Many music fans who don't want to deal with the hassle simply turn to online file-sharing networks to download no-strings tracks for free.

The recording industry has argued that copy protection software itself is not what makes some songs incompatible with some digital players, but the fact that there are different versions of the technology in use. The music companies have called on Jobs to license FairPlay to makers of rival devices.

Jobs has countered that the best way to get rid of technological barriers is for record labels to strip the copy safeguards from their music. He defends keeping FairPlay closed, saying that if it was widely available, it would become easier for hackers to figure out how to bypass it.

No matter what, Apple plans to continue selling standard, copy-restricted versions of songs for 99 cents each. With the EMI deal, Apple will this month start selling $1.29 premium tracks that are not only DRM-free but also of higher quality, compressed at twice the usual bit rate.

John Heard, an iTunes user in Santa Monica, said he would jump at the chance to buy no-strings downloads, even if it costs more.

"If I have the choice between something that doesn't have copy protection or it does, I'm always going to choose the thing that doesn't have copy protection," said Heard, 28, a television producer who spends about $300 a year on music, almost all on iTunes.

Buying a better-sounding track is appealing to David Sholle, 54, of Long Beach, a college professor who has purchased several hundred songs from iTunes.

"I'd be willing to pay for that," he said.

Anticipating a more competitive market, other companies are looking to break into online music sales. Online retailer Amazon.com Inc. first approached the major recording companies 18 months ago about launching an online music store.

A recent meeting prompted speculation that Amazon might begin selling unrestricted MP3s and other music downloads as early as this month. The company has declined to comment.

David Pakman, president and CEO of eMusic.com Inc., said the elimination of copy protection could help his company mine the rare, catalog recordings owned by major labels but not typically available on iTunes.

EMusic already sells music from independent labels in the MP3 format and boasts some 300,000 subscribers.

Pakman believes the major record labels will also eventually relent on requiring copy restrictions.

"We really think the market is breaking our way," Pakman said. "A noteworthy major will probably take some steps in this direction later this year."

Apple sells 100 million iPods

NEW YORK (Reuters) - Apple Inc. has sold its 100 millionth iPod in just over five years, boasting on Monday that the digital device was "the fastest selling music player in history" that appeals to both young and old.

Since its November 2001 launch, the portable music player has become the must-have gadget worldwide, with Apple introducing more than 10 new models to incorporate changing technology such as the ability to record and play videos, hold photos, and with more varied, fashionable colors.

"iPod has helped millions of people around the world rekindle their passion for music, and we're thrilled to be a part of that," Apple's COE Steve Jobs said in a statement.

Apple said its iTunes online music store has sold more than 2.5 billion songs, 50 million television shows and more than 1.3 million movies.

The market-leading iPod has taken over from the original portable audio player with headphones, or the Walkman, that was launched by Sony Corp (NYSE:SNE - news). in 1979.

Grammy Award-winning singer Mary I. Blige said it was hard to remember life before the pocket-sized iPod.

"iPod is more than just a music player, it's an extension of your personality and a great way to take your favorite music with you everywhere you go," she said in a statement.

Current versions of the iPod are priced at about $249 and are no longer just ubiquitous among urban teenagers.

A survey of 100 people aged 99 years and older released earlier this month by U.S. health care co-ordinator Evercare found four percent of respondents had listened to music on an iPod.

The iPod has also sparked a vast range of over 4,000 accessories varying from cases to speaker systems and more than 70 percent of 2007-model U.S. cars offer iPod connectivity.

The iPod has become so commonplace that one of Australia's biggest banks, the Commonwealth Bank, has used a recent version -- the slimline Nano -- to compare global currencies and purchasing power in 26 countries, similar to the Big Mac index launched 20 years ago by The Economist magazine.

Apple unveils long-awaited phone, TV box

SAN FRANCISCO - Apple Computer CEO Steve Jobs on Tuesday unveiled a new mobile phone that downloads and plays music as well as a set-top box that allows people to stream video from their computers to their televisions.

Jobs said Apple's iPhone would "reinvent" the telecommunications sector and "leapfrog" past the current generation of hard-to-use smart phones.

"Every once in a while a revolutionary product comes along that changes everything," he said during his keynote address at the annual Macworld Conference and Expo. "It's very fortunate if you can work on just one of these in your career. ... Apple's been very fortunate in that it's introduced a few of these."

Apple shares jumped 5 percent on the announcements.

Jobs demonstrated the phone's music capabilities by playing "Lovely Rita, Meter Maid," from the Beatles' "Sergeant Peppers Lonely Hearts Club Band."

IPhone uses a patented touch-screen technology Apple is calling "multi-touch."

"We're going to use a pointing device that we're all born with," Jobs said. "It works like magic. ... It's far more accurate than any touch display ever shipped. It ignores unintended touches. It's super smart."

The phone automatically synchs your media — movies, music, photos — through Apple's iTunes digital content store. The device also synchs e-mail content, Web bookmarks and nearly any type of digital content stored on your computer.

"It's just like an iPod," Jobs said, "charge and synch."

IPhone is less than a half-inch thin — less than almost any phone on the market today. It comes with a 2-megapixel digital camera built into the back, as well as a slot for headphones and a SIM card. Jobs did not immediately provide details on price or availability.

Jobs also said the company will begin taking orders Tuesday for $299 video box, called Apple TV. It will be available in February.

The gadget is designed to bridge computers and television sets so users can more easily watch their downloaded movies on a big screen. A prototype of the gadget was displayed by Jobs in September when Apple announced it would sell TV shows and movies through its iTunes online store.

The product could be as revolutionary to digital movies as Apple's iPod music player was to digital music. Both devices liberate media from the computer, allowing people to enjoy digital files without being chained to a desktop or laptop.

"It's really, really easy to use," Jobs told the crowd at San Francisco's Moscone Center before demonstrating the system with a video clip of "The Good Shepherd." "It's got the processing horsepower to do the kinds of things we like to do."

Apple TV will come with a 40-gigabyte hard drive that stores up to 50 hours of video. It features an Intel Corp. microprocessor and can handle videos, photos and music streamed from up to five computers within the wireless range.

Jobs also said Apple has sold more than 2 billion songs on its popular iTunes music download service, catapulting the company into the top ranks of music sellers worldwide. Apple, which sells 58 songs per second, or 5 million songs a day, sells more songs than Amazon.com and ranks behind only Wal-Mart, Best Buy and Target as a music retailer.

"We couldn't be happier with the growth rate of iTunes," Jobs said.

He said Apple will sell digital movies from Paramount. Apple has partnered with Disney for several months, offering about 100 movies on iTunes. With Paramount's selection, it will have 250 movies available for downloading on the site.

With Tuesday's launches, it remains to be seen whether the leading seller of digital music players can colonize an entirely new category of gadgets. Apple could use a megahit along the lines of its iconic iPod to divert investors' attention from the stock options-backdating scandal that has tainted its reputation.

The backdating of stock options, which has been widespread among Silicon Valley companies, involves pegging stock options to favorable grant dates in the past to boost the recipients' award. It isn't necessarily illegal, but securities laws require companies to properly disclose the practice in their accounting and settle any charges that may result.

In a December filing with the Securities and Exchange Commission, Apple said Jobs was aware of, or recommended the selection of, some favorable grant dates but he neither benefited financially from them nor "appreciated the accounting implications."

Apple shares were up $4.29 to $89.76 in midday trading on the Nasdaq Stock Market. The stock has traded in a 52-week range of $50.16 to $93.16.

Hacker unlocks Apple music download protection

SAN FRANCISCO (Reuters) - A hacker who as a teen cracked the encryption on DVDs has found a way to unlock the code that prevents iPod users from playing songs from download music stores other than Apple Computer Inc.'s iTunes, his company said on Tuesday.

Jon Lech Johansen, a 22-year-old Norway native who lives in San Francisco, cracked Apple's FairPlay copy-protection technology, said Monique Farantzos, managing director at DoubleTwist, the company that plans to license the code to businesses.

"What he did was basically reverse-engineer FairPlay," she said. "This allows other companies to offer content for the iPod."

At the moment, Apple aims to keep music bought from its iTunes online music store only available for Apple products, while songs bought from other online stores typically do not work on iPods.

But Johansen's technology could help rivals sell competing products that play music from iTunes and offer songs for download that work on iPods as they seek to take a bite out of Apple's dominance of digital music.

ITunes commands an 88 percent share of legal song downloads in the United States, while the iPod dominates digital music player sales with more than 60 percent of the market.

Cupertino, California-based Apple, whose profits have soared in recent years on the strength of the iPod, declined to comment.

Johansen, known as DVD Jon, gained fame when at the age of 15 he wrote and distributed a program that cracked the encryption codes on DVDs. This allowed DVDs to be copied and played back on any device.

His latest feat could help companies such as Microsoft Corp., Nokia, Sony Ericsson and Samsung Electronics Co. Ltd., which have all announced plans over the past few months for music download services combined with new devices to challenge Apple.

Apple says shipped iPods carrying computer virus

NEW YORK (Reuters) - Some of Apple Computer Inc.'s iPod digital music players shipped in the past month carry a computer virus, according to a posting on Apple's technical support Web site.

Apple said since September 12, less than 1 percent of Video iPods -- the pocket-sized devices that can play music files and video clips -- left the company's contract manufacturer carrying the virus RavMonE.exe. The virus affects computers running Microsoft Corp.'s Windows operating system.

"So far we have seen less than 25 reports concerning this problem. The iPod nano, iPod shuffle and Mac OS X are not affected, and all Video iPods now shipping are virus free," the company said on the site.

An Apple spokesman declined to name the contract manufacturer or specify how many iPods were affected.

Apple said the virus can be detected and removed using many popular anti-virus software programs. It said that Microsoft and Apple shared the blame for shipping the virus.

"As you might imagine, we are upset at Windows for not being more hardy against such viruses, and even more upset with ourselves for not catching it," Apple said on its Web site.

Microsoft fired back in a statement, saying the virus does not appear to take advantage of a Windows vulnerability.

"We encourage all third party vendors to follow best practices and help protect their users regardless of platform through careful scanning of the software they ship, so that they do not expose their customers to unnecessary risk from malicious software," the company said.

Apple's iTunes to start selling movies

SAN FRANCISCO (Reuters) - Apple Computer Inc. said on Tuesday it will begin selling movie downloads from Walt Disney Co.'s film studios, aiming to turn its iTunes online music store into a one-stop shop for digital entertainment.

Chief Executive Steve Jobs also said Apple planned to ship a device in the first quarter of 2007 to let consumers stream movies, music, photos, podcasts and television shows to their home entertainment systems. Code-named iTV, it will cost $299.

Jobs said iTV and other new products will put Apple squarely in homes, cars and consumer pockets as it looks to stamp its mark on all aspects of the digital lifestyle.

"I hope this gives you a little bit of an idea of where we are going," Jobs said at an event in San Francisco, where he also unveiled new versions of the popular iPod media player.

Apple's eagerly anticipated movie service will sell new releases from the Disney, Pixar, Touchstone and Miramax studios for $12.99 if pre-ordered or bought during the first week available. Normally, new releases will cost $14.99 and other feature-length films will cost $9.99.

Jobs said about 75 films are now available on iTunes, and that they take about 30 minutes each to download for users with high-speed Internet connections. Consumers can view the movies on their iPods and computers, and eventually on televisions with the upcoming iTV player.

"In less than one year we've grown from offering just five TV shows to offering over 220 TV shows, and we hope to do the same with movies," Jobs said. "iTunes is selling over 1 million videos a week, and we hope to match that with movies in less than a year."

Jobs, a Disney director and one of the company's largest individual shareholders, also introduced new versions of the iPod with brighter screens and longer battery life as Apple looks to expand its dominant position in digital music.

Analysts have said it was only a matter of time before Apple started selling full-length movie downloads via iTunes, which has already sold 1.5 billion songs and more than 45 million TV shows.

If Apple's efforts are ultimately successful, the company could solve the entertainment industry's current dilemma: how to bridge the gap between the living room TV and the computer.

If Apple can do that, analysts have said, they can see the potential for another round of robust growth at a time when the company is facing a growing contingent of competitors in the digital music market, including from Microsoft Corp..

There are already competitors in the nascent movie download market, including CinemaNow, Movielink and Amazon.com Inc..

Other new devices unveiled on Tuesday include an iPod with the most capacity to date -- an 80 gigabyte player that would cost $349. Apple said new versions of the popular digital music players would sport video games such as Pac-Man and Tetris.

The company also introduced a thinner iPod Nano available in five colors with 24 hours' battery life. The new Nanos will sell for $149, $199 and $249.

Apple introduced a 1 gigabyte Shuffle that holds up to 240 songs and is nearly half the size of the original version. It will sell for $79.

Apple shares ended up 0.18 percent at $72.63 on Nasdaq.

Apple May Add Movies to iTunes Store Next Week

Techie blogs and other websites spread the word Monday that Apple CEO Steve Jobs is expected to announce on Sept. 12 that Apple's iTunes Music Store will begin selling a feature film download service, permitting users to pay $9.99 for a movie that can be viewed on a new wider-screen iPod or, via a new wireless video streaming device, on a television set. Several websites indicated that Apple is still testing its next-generation video iPods and "Airport Express" and that it may be several weeks or even months before they are ready to hit the market.

Price a sticking point as Apple negotiates for movie downloads

Apple Computer Inc. is negotiating with most of Hollywood's studios to offer movie downloads on its iTunes website, potentially by the end of 2006.

The major sticking point to the talks seems to be price, according to Variety magazine.

As with the recording studios, who have been pressuring Apple to offer different pricing for different songs, the studios want to charge more for their most popular products.

But Apple chief executive Steve Jobs wants a flat price of $9.99 per movie.

The flat price format has worked well for music at iTunes. Its simplicity appealed to consumers, who adopted legal downloading in large numbers with the advent of Apple's iTunes music store.

In May the recording studios agreed to renew their contracts with Apple with the same flat price scheme, which gives them 70 per cent of the revenue.

But Hollywood has so far rejected the concept of flat pricing, Variety reports, saying executives want a range of prices, such as consumers might see at stores selling video and DVDs.

Hollywood movies have a limited online market now at websites like Movielink and CinemaNow, and Warner Bros. recently agreed to make movies available via BitTorrent. But no site offering films yet has the wide exposure of iTunes.

Several European countries are worried about iTunes' dominance in the music downloading market.

Scandinavian consumer action

France is trying to introduce a law that will force Apple to make its iTunes music operable on any portable player.

Last week consumer agencies in Norway, Sweden and Denmark sent a joint letter to Apple, accusing it of having illegal restrictions on product usage.

Apple is violating contract and copyright laws by ignoring consumer rights to copy music they've bought into any format, they said.

The regulators have given the company until to Aug. 1 to respond and say they will take Apple to court if they're not satisfied with the answer.

They also objected to Apple's practice of constantly changing software and its contract with consumers, which waives the company from responsibility for damages related to its service.

"Consumers must be free to choose the equipment and software they want to use. Access to content should not be limited by accidental choices of technology," Torgeir Waterhouse, a senior adviser on the Norwegian Consumer Council, wrote in a complaint to the Norwegian Consumer Ombudsman.

Nike and Apple tell runners: "It's worth it"

LOS ANGELES/NEW YORK (Reuters) - Is all this exercise really helping me?

Nike Inc. said on Tuesday it is making running shoes that will tell the wearer how far and how fast he or she has run and how many calories they have burned.

The instant information will come from a miniature Apple Computer Inc. iPod and a new wireless system called Nike+iPod.

Nike shares rose over 2 percent following the announcement of its plan to capitalize on the popularity of iPod portable digital music players with runners, 75 percent of whom already listen to music while they exercise.

Using a Nike+iPod Sports Kit, expected to sell for about $29, miniature versions of the iPod will be able to give audio data on time, distance, pace and calories burned on-demand through an attachable receiver that gets data from a sensor in the insole of special Nike shoes.

The new Air Zoom Moire line of running shoes -- priced at $100 -- are the first to have space for the sensor, but others will follow, Nike said. The removable sensor, about the size of a piece of bubble gum, can be used with any compatible shoe.

In 2004 archrival Adidas-Salomon AG launched a so-called "smart shoe," embedded with a computer chip and a motor that constantly adjusts the shoe's cushioning to suit the runner's needs.

But Nike Chief Executive Mark Parker said such a "smart shoe," would not, by itself, be able to access relevant data until after the run was done and the shoes had been removed.

"We realized making a smart shoe wasn't really smart enough," Parker said at a New York launch event attended by Apple CEO Steve Jobs, Tour de France champion Lance Armstrong and marathon record-holder Paula Radcliffe.

Nike, the world's biggest maker of sports shoes and apparel, also launched a line of performance clothing, including jackets, shirts and shorts, that holds iPods and keeps wires untangled and out of sight.

"We share the same types of consumers (with Apple)," said Trevor Edwards, Nike's vice president of global brand management. "We know that these two brands work really well together."

A 2002 deal between Nike and the Netherlands' Philips Electronics NV that resulted in a portable digital music player that tracked time and distance fizzled, Edwards said, because of differences in the two companies' target consumers.

Apple came to Nike after it separated from Philips, CEO Parker said after the event.

"We both had a mutual interest in pursuing (an) opportunity in this area," Parker told Reuters. "Not for Nike to get into the mp3 market per se, but for Nike to establish an opportunity with somebody who is really leading in that area."

Apple, which has shipped over 50 million iPods, controls 77 percent of the U.S. market for portable digital music players, according to market research firm NPD Group.

SELLING MORE FOOTWEAR?

Analyst John Shanley of Susquehanna Financial Group said the Nike+iPod launch was innovative but would not appeal to the company's core base of teenage boys.

"Is it going to move the needle in terms of them selling more footwear?" he asked. "Probably not."

But investors and sporting goods retailers were encouraged by Nike adding to its performance apparel business, since sales of that line have been outpaced by growing brand Under Armor Inc..

The connector kit will be available in both Nike and Apple stores within two months, the companies said, adding that Nike will also sell nano iPods, but Apple will not sell Nike shoes.

Apple will also include a Nike Sport Music section on its iTunes music store, which will feature playlists of well-known athletes such as Armstrong, the companies said.

The Nike+iPod system will let runners call up a favorite song instantly and then instantly upload their workout information to a Nike Web site, www.nikeplus.com, where they can share the information with their friends.

Nike shares closed up $1.01, or 1.3 percent, at $78.99 on the New York Stock Exchange. Apple shares fell 23 cents or less than 1 percent to $63.15 on Nasdaq.

Apple renews record label deals, sticks with 99 cents per song

SAN JOSE, Calif. — Songs at Apple Computer's iTunes Music Store will remain 99 cents per download after the company extended its distribution deals with major recording labels.

The recording industry and Apple had been at odds over Apple's insistence to keep its flat rate with some labels wanting variable pricing, including higher prices for new releases.

"Apple has all the cards, and when you have all the cards, you can play hardball," said Ted Schadler, analyst at market research firm Forrester Research.

Apple shares jumped 2.9% Tuesday, after the renewals were confirmed.

The distribution contracts were up for renewal for the first time since iTunes launched in April 2003. Apple said Tuesday it would continue to offer the 99-cent pricing from a library of over 3 million songs, but declined further comment.

ITunes helped propel the legitimate music download business, and Apple claims it has about an 80% share of the market, which last year climbed to 353 million song downloads in the United States, according to Nielsen SoundScan.

Analysts say recording labels make about 70 cents per download but could pocket significantly more if the prices were raised by a few cents.

Representatives from two of the four major labels — Sony BMG Music Entertainment and EMI Group PLC — declined to comment on the iTunes contract renewals. The remaining two — Vivendi Universal's Universal Music Group and Warner Music Group — did not immediately return phone calls.

None of the negotiating parties would say how long the new deals will last, but Schadler suspected the record labels insisted on shorter-term contracts.

Apple's dominance of the download market means the Cupertino-based company does have the upper hand for now, but analysts predict its market share will pare down as rival services, including online music subscription services, gain traction.

Shares of Apple closed at $71.62, up $2.02, in Tuesday trading on the Nasdaq Stock Market.

For iPod users, a budding problem

Seattle-based builder and author Pete Nelson blasts his iPod to drown out the sound of his power tools when he works. He cranks it up when he skis and even listens to the portable music player while working at his computer.

"I'm having a love affair with my iPod," says Nelson, whose wife, 15-year-old daughter and 13-year-old twin sons all have iPod addictions.

They're like millions of other Americans who listen to their MP3s for hours each day.

Apple has sold more than 40 million iPods since they hit the market in 2001. Last year, 14 million were snatched up in the fourth quarter alone. Those figures don't include purchases of iRiver, Sony and other brands of MP3 players.

But lately it seems a backlash may be brewing against MP3 players with claims that the gadgets, which typically are used with dime-sized, disc-shaped earphones called ear buds, can cause hearing loss:

• Last month, a Louisiana man filed a federal lawsuit against Apple claiming iPods cause hearing damage.

• Rep. Edward Markey, D-Mass., wrote a letter to the director of the National Institute on Deafness and Other Communication Disorders in January, calling for a review of the scientific information on the effect of portable music players on hearing loss. He also asked for recommendations to help consumers avoid potential damage from MP3 players.

• In France, the government has set a limit of 100 decibels in MP3 players, and Apple has made adjustments. Company executives, when contacted for this report, declined to comment on the maximum volume an American-sold iPod can reach.

But independent testing showed that maximum volumes hovered in the 120-decibel range, about the level of a jet plane taking off, says audiologist Brian Fligor, a hearing expert at Children's Hospital Boston.

According to the deafness institute, almost 28 million Americans have hearing loss. One-third have damage because of loud noise.

Very few documented cases of noise-induced hearing loss are tracked to long-term use of handheld stereos alone, but more research is needed, Fligor says.

Fligor is researching safe-listening levels in MP3s. He and colleagues published a study in 2004 that determined safe-listening levels with portable music players such as the Sony Walkman; the study found that one hour a day at about 60% volume was safe. Preliminary results of the MP3 study show figures in the same ballpark, he says.

Hearing loss is preventable

If it's not healthy, why give listeners the option to pump it up to 120 decibels? Pure pleasure, Fligor says.

"There are just some songs you want to rock out on," says iPod user and Texas musician Bob Schneider, 40, who has been performing for 17 years and concedes he probably has some hearing damage. "At this stage of the game, I still play the music pretty loud. I can still hear pretty well, but that might be a whole different story when I'm 60."

By then, it might be too late for Schneider or families such as the Nelsons who sometimes listen to their MP3s more than three hours a day.

Using earphones for hours at high volumes basically causes "shock and awe" to delicate hair-like cells deep within the inner ear that help the brain process sound, says Ron Eavey, director of pediatric otolaryngology at Massachusetts Eye and Ear Infirmary. After years of abuse, those structures won't function anymore, he says.

Nelson, 43, is concerned about hearing loss and already experiences ringing in the ears, called tinnitus, which is a symptom of damage. But he says he has no plans to cut back on his MP3 use.

Noise-induced hearing loss is preventable, says Pam Mason, an audiologist with the American Speech and Hearing Association in Rockville, Md.

Mason suggests dishing out the cash for a good pair of earphones. Sound-isolating earphones made by companies such as Future Sonics, Shure and Etymotic reduce ambient noise outside the ears so that listeners don't have to pump up the volume as high.

"People think if they listen at a lower volume, they won't get the same quality of sound. But good headphones actually allow you to hear more detailed nuances in the music without the high frequencies that do damage," says Marty Garcia, founder of Philadelphia-based Future Sonics.

Boston-based Bose and other companies sell another option: noise-canceling headphones. Battery-driven, they cover the entire outer ear and work by picking up ambient noise outside the headphones and then emitting a counter frequency that cancels out the incoming noise. This technology also allows a user to reduce the volume on his MP3 because there is little outside noise to overcome.

No two people are alike, so it's difficult to predict who will develop hearing loss, experts say.

But if you have tinnitus, find that noises sound muffled, experience temporary hearing loss after a loud concert or have difficulty hearing someone 3 feet away, you need to get your hearing tested.

Apple and other MP3 player manufacturers can help listeners by reducing volume levels, experts say. But in the end, it is up to the user. Says Harvard's Eavey: "It's like using sunblock to prevent skin cancer. Ultimately, iPod users need to make the right choices to avoid hearing loss."

Sound guide to problem noise

Any sound over 85 decibels (dBs) exceeds what hearing experts consider the "safe" range. More than that and over time, there's a good chance you'll damage your ears.

Decibel level
Firearm 140+
Jet engine 140
Jackhammer 130
Sporting event 127
Live music concert 120+
Jet plane takeoff 120
Band practice 120
iPods and other MP3 players at maximum volume 120
Health club and aerobics studio 120
Movie theater 118
Motorcycle 95-120
Chain saw or pneumatic drill 100
Lawnmower 90
Subway 90
Busy street 80
Alarm clock 80
Vacuum cleaner 70
Conversation 60
Dishwasher 60
Moderate rainfall 50
Quiet room 40
Whisper, quiet library 30
Source: American Speech-Language-Hearing Association

ON THE DOWNLOAD

Apple announcing Thursday that one billion songs have been legally downloaded from its iTunes Music Store since it was launched less than three years ago. The billionth song downloaded was Coldplay's "Speed of Sound."

NBC Jumps on ViPod Bandwagon

Following the lead of Disney and ABC, NBC Universal is bringing some of its shows to an iPod near you.

Episodes of several current NBC shows -- "Law & Order," "The Office" and "Surface" -- will become available for download on Apple's iTunes service, to play on a video iPod or personal computer. NBC Universal is also offering up episodes of USA's "Monk," Sci Fi's "Battlestar Galactica," segments from "The Tonight Show" and "Late Night" and a handful of shows from its library, including "Dragnet" and "Knight Rider."

"We are committed to helping viewers enjoy the wide breadth of our programs across an equally wide range of devices and distribution models," NBC Universal chairman and CEO Bob Wright says. "Apple has developed a distribution platform that is attractive to consumers while at the same time providing the safeguards against theft that are so important to us and to every content provider."

Episodes of current shows will be available for download the day after they air, for $1.99 each. Older shows are available anytime.

Disney was the first media giant to offer some of its content on iTunes, pairing up with Apple as soon as the video iPod was released in October. Episodes of its hits "Lost" and "Desperate Housewives," along with the now-cancelled "Night Stalker" and two Disney Channel shows, are available on the service, along with several thousand music videos and short films.

Apple says iTunes customers have downloaded more than 3 million videos since the service's introduction on Oct. 12.

Apple Faces Suit Over iPod Nano

Apple Computer Inc. faces a lawsuit that alleges the company knew its nano portable music player was defective but still decided to press on with the product's release last month.

The lawsuit depends on a judge to decide whether it can be grouped with other complaints to win class action status. Sales of iPods account for almost a third of Apple's sales.

The credit card-sized nano, which replaced the best-selling iPod mini and is smaller than the traditional iPod, met with rave reviews. But users quickly started grumbling on Internet message boards that the device's screen scratches too easily.

The lawsuit, filed in San Jose, Calif., last week, claims that the nano scratches "excessively during normal usage." It alleges that though Apple knew the nano had design problems, it released the product and led consumers to believe it was durable -- forcing them to shoulder the cost of replacing defective music players.

The complaint blames the nano's defectiveness on the film of plastic resin that covers it to protect it from damage. Previous versions of the iPod were coated with thicker and stronger resin, the suit says.

"Rather than admit the design flaw when consumers began to express widespread complaints ... Apple concealed the defect and advised class members that they would need to purchase additional equipment to prevent the screen from scratching excessively," the complaint says.

Apple admitted in late September that some iPod nano screens cracked too easily, but blamed that separate issue on vendor quality problems and said it had occured in less than one-tenth of 1% of the nanos sold at that point.

The plaintiff named in the California lawsuit, Jason Tomczak, bought a nano in September. He said it quickly became so scratched he could not view the screen. Apple replaced that device because of a battery problem, but the complaint claims the replacement nano also became so scratched that Tomczak decided to return it.

Because Tomczak and other complainants were required to pay a $25 fee to return the nano, the proposed class action suit seeks the return of those fees along with the device's original cost and several other forms of damages.

The suit, filed by law firm Hagens Berman Sobol Shapiro LLP, says Apple has "failed to remedy the problem in any meaningful way" and claims Apple deleted postings on its Web site that relate to the scratching problem.

A spokesperson for Apple, whose main offices are in Cupertino, Calif., could not be reached for comment.

Apple Introduces Video IPod, TV Deals

SAN JOSE, Calif. - Apple Computer Inc. introduced an iPod capable of playing videos on Wednesday, evolving the portable music player of choice into a multimedia platform for everything from TV shows to music videos.

Videos will now be sold online alongside songs on Apple's iTunes store.

Citing a groundbreaking deal with ABC Television Group, Apple chief executive Steve Jobs said video offerings via iTunes will include episodes for $1.99 each of the hit shows "Desperate Housewives" and "Lost," which will be available the day after they air on television.

The purchased video can be watched on a computer or taken on the road for viewing on the new iPod's 2.5-inch color screen.

The much-anticipated new iPods, available starting next week, will replace Apple's current 20-gigabyte and 60-gigabyte models. A 30 GB version will sell for $299 and a 60 GB version will cost $399. A 30 GB model can hold about 7,500 songs, 25,000 photos, or 75 hours of video, Apple said.

Apple hopes to repeat with Hollywood the coup it achieved with music labels: Ease an industry's piracy fears and transform its business models to include convenient, legal distribution of digital content over the Internet at reasonable prices for consumers.

"It's never been done before, where you could buy hit TV shows and buy them online the day after they're shown," said Jobs, whose other company, Pixar Animation Studios Inc., has a long relationship with ABC's parent, The Walt Disney Co. Short films from Pixar also will be sold via the iTunes store.

But that's just the beginning, Apple executives say, noting that the iTunes store catalog has grown to 2 million songs from 200,000 at launch in 2003. More than 600 million downloads have been recorded since.

"We've gained a lot of credibility in the industry in the past two and a half years with what we did with songs," said Eddy Cue, Apple's vice president of applications. "And that's what we're trying to mirror in the video space."

Analysts consider a video iPod a test of whether consumers would embrace video on such a small screen. Over-the-air TV services are already available for cell phones but the quality remains substandard.

Competing portable video players have been available for several years but very little compelling content has been available, and Apple's move comes amid fledgling initiatives to offer original video programming on the Internet.

"This is the first giant step to making more content available to more people online," said Robert Iger, Disney's chief executive. "It is the future as far as I'm concerned. It's a great marriage between content and technology and I'm thrilled about it."

The new video iPod, available in black or white, will be able to play video and podcasts. Apple said the 30 GB model will have up to 14 hours of battery life while the 60 GB model's battery will last up to 20 hours. Both versions will include a clock, a calendar, a stop watch and a screen lock.

"It's really very beautiful and very thin," Jobs told assembled journalists and guests.

The video iPod will lock TV shows, films and music videos downloaded from the iTunes store with copy-protection software — just as Apple does for music. Users will be able to download purchased video to up to five computers and transfer it to iPods, but unlike songs, users will not be able to burn the videos onto a CD.

The new iPod will also support the MPEG-4 video standard, meaning users could view home movies and other unencrypted videos on it.

Susan Kevorkian, an analyst with research firm IDC, said she expected Apple to increase the screen size of the video iPod in future generations.

"This will tell us a lot about whether their consumers will be comfortable watching longer-format programming on a small screen," she said.

Apple has been riding high on the success of its iPods, which helped quadruple the company's profits last quarter.

In the last fiscal quarter, about 6.5 million iPods were sold, accounting for nearly a third of Apple's revenue; Macintosh computers, Apple's historical core product, accounted for about 44 percent with 1.2 million units sold.

On Wednesday, Apple also introduced two newer, thinner models of the all-in-one iMac desktop computer.

Each of the 17-inch and 20-inch iMac G5 models, priced at $1,299 and $1,699 respectively, comes with a built-in webcam and a slim, six-button remote control about the size of thin pack of gum.

Using software called "Front Row" that comes with the iMacs, the remote control allows users to quickly browse and access their music, photo and video files from across the room, as far as 30 feet away, according to Apple.

The new iMacs also carry new software called "Photo Booth" that allows users to take quick snapshots and send them to others via e-mail.

It all falls in line with Apple's goal of making the computer a digital multimedia hub and the iPod its portable extension.

Apple shares closed Wednesday down $2.34, or 4.5 percent, at $49.25 on the Nasdaq Stock Market. In after-hours trading Apple lost 2 cents to $49.20. The shares' 52-week low was $18.83 on Dec. 12, 2004.

Fiona Apple's 'Machine' needed a push to get going

NEW YORK — Fiona Apple is curled up on a couch, fighting back tears. But it's not what you think.

When the diminutive, doe-eyed singer/songwriter rose to fame as a teenager in the late '90s, many perceived her as angry, troubled or at least colorfully neurotic. Her precocious lyrics reveled in baiting and scorning lovers, while in interviews, she regaled reporters with accounts of having been raped as a girl.

Apple, now 28, clearly hasn't lost her flair for drama. But these days, she is more likely to attract it than be consumed by it.

Consider the story behind Extraordinary Machine, Apple's first new CD in six years. Recording sessions began in 2002, with Apple and longtime producer Jon Brion working on and off. Apple says both she and her label were less than thrilled with the results.

"Sony didn't think there was a hit," says the singer, who is signed to Epic Records, a division of Sony Music. "And I wanted to redo some songs."

Producer Mike Elizondo (Eminem, 50 Cent) came on board, and Apple says the label suggested "that I could maybe hand in one song at a time. But I thought that was an incredibly bad idea, because it implied that if they didn't like what I handed in, they could try to change it. Or they could say, 'You can't have any more money, and we're shelving it.' "

(Epic spokeswoman Lois Najarian says: "Things were definitely miscommunicated during the time when Fiona was switching producers, and unfortunately she was led to believe that the label was only allowing her to record one new version at a time. That was surely not the case.")

Recalls Apple: "At that point I said, 'I quit.' " But an anonymous admirer had other ideas. While on her new computer one day, Apple discovered that some of her early, Brion-produced tracks had been leaked online. "It was the weirdest feeling, like somebody had taken my diary and printed it."

The singer soon learned that fans had started a "Free Fiona" movement and sent letters, apples and drawings of apples to Sony's offices. "I remember thinking it was ridiculous and funny. Here I was, jobless, sitting around in my bathrobe watching TV. But then I started crying, because I thought, 'Oh, my God, these people care so much.' I feel so moved by that."

Apple's gift to the faithful, the finished version of Machine, arrives Tuesday, and the album — including the biting single Parting Gift—

confirms that she hasn't lost her flair for confessional candor. "I started writing songs and continue to write because it's how I deal with my life. I don't make up stories."

She prefers not to discuss in specific terms how ex-boyfriends such as filmmaker Paul Thomas Anderson influenced her lyrics. "I've been in other relationships since Paul. He's been a big part of my life, and he's a very good friend now. But the songs are informed by all my relationships. There are certain lines that are directly about one person or situation, so directly that I'm sure those people recognize it. And that may be why I do this, to get my point across — though not in a mean way."

The singer won't say whether anyone special is keeping her company these days, other than her dog, Janet, a pit bull mix she took in "because no one claimed her or wanted her." She has resolved to forge ahead with her career for the time being.

"For a while I was looking forward to having to get another job," Apple says. "I had this fantasy about applying to this place in upstate New York, Green Chimneys. They do occupational therapy with kids, using farm animals. I thought that was something I could be passionate about. But music just kept on coming back."

Apple CEO Nixes iTunes Price Hike

PARIS - Apple Computer Inc. CEO Steve Jobs said Tuesday he would resist music companies' "greedy" demands for price increases on the iTunes music download site and warned that such a move would encourage piracy.

Jobs, speaking to reporters before the opening of the Apple Expo in Paris, acknowledged that some record companies were pushing him to raise the price of each song download, currently 99 cents on the U.S. iTunes site.

Record companies already make more profit by selling a song through iTunes than on a CD, with all the associated manufacturing and marketing costs, Jobs said.

"So if they want to raise the prices it just means they're getting a little greedy."

The Apple co-founder and CEO indicated he plans to stand firm. "We're trying to compete with piracy, we're trying to pull people away from piracy and say, 'You can buy these songs legally for a fair price,'" he said.

"But if the price goes up a lot, they'll go back to piracy. Then everybody loses."

Apple has sold about 22 million of its iPod digital music players and more than 500 million songs through the iTunes Music Store. The service accounts for 82 percent of all legally downloaded music in the United States.

Apple appears poised for iTunes phone launch

SAN FRANCISCO (Billboard) - The Apple rumor mill swung into overdrive this week when the company reported it would make a big digital music announcement on Wednesday (September 7).

Most observers expect Apple Computer to unveil the iTunes-compatible mobile phone that has been in development with Motorola for more than a year. Several industry sources have identified Cingular as the wireless operator making the long-anticipated device available to subscribers.

But Apple may have more in store. One analyst says Apple also will introduce a wireless interface to the iTunes Music Store, customized for Cingular. If so, Cingular would be the first U.S. wireless operator to announce a full-song download music service.

Verizon and Sprint each have discussed launching their own wireless full-song download services before the end of the year. Should Cingular beat them to market, it would do so with the most popular music service on the Internet today.

"Cingular, with Apple and iTunes, has just spoiled that party," says Roger Entner, analyst with research firm Ovum. "It makes it very, very difficult for (Verizon and Spring)."

But Cingular has not yet upgraded its network to the same broadband speeds that Verizon and Sprint boast, meaning that downloading songs will be quite slow. A more likely scenario, at least at first, is that the Motorola iTunes phone will be able to sync with computer-based iTunes files in the same way an iPod does now.

Enthusiasts recently discovered an interface in the latest version of iTunes that lets users choose to sync with either an iPod or a mobile phone.

MENU OF OPTIONS

The iTunes phone is not the only rumored advancement of Apple's digital music strategy that could be addressed Wednesday (September 7). Other potential announcements include an iPod that supports video playback, a line of flash-based iPod Mini devices or iTunes support of a portable subscription service.

The video iPod and the flash-based Minis are considered inevitable. Apple recently changed the language in its iPod patent to include video as one of the files it can display, and iTunes already sells some music-video content.

Although initially critical of flash-based digital music players, Apple has since embraced the technology for its iPod Shuffle. Many expect the company to introduce a flash-based version of the popular iPod Mini in time for the holiday sales season. (Research firm iSuppli reported that Apple has bought as much as 40 percent of Samsung's flash-chip inventory for the second half of this year.)

A music subscription service is considered a long shot for Apple at this time, even though CEO Steve Jobs recently has relaxed his criticism of such services. Analysts generally agree that Apple will wait until there is more interest in portable subscriptions before releasing such an upgrade.

Apple plans announcement; some see new music player

SAN FRANCISCO (Reuters) - Apple Computer Inc. on Monday said it will announce a new product in early September and fanned expectations it will introduce an updated iPod Shuffle music player with much more capacity.

Apple is known for its marketing prowess and keeps new products under tight wraps before unveiling them at carefully staged events.

The company is widely expected to introduce a relatively roomy four-gigabyte iPod which uses sticks of flash memory, the type of storage used in digital cameras, rather than a hard disk drive. That would hold about 1,000 songs.

In an email invitation showing a picture of a jeans pocket, Apple alluded to its original 2001 announcement for the portable iPod, saying, "1,000 songs in your pocket changed everything. Here we go again."

Apple plans a San Francisco news conference on September 7 at 10 a.m. PDT (1700 GMT). Apple spokeswoman Natalie Kerris declined to comment further.

Apple introduced its portable music player in late 2001 with the promise that it could hold 1,000 songs. The first iPod was powered by a hard disk drive, but this year Apple introduced the "Shuffle" with flash memory to hold data.

Industry analyst Tim Bajarin of Creative Strategies Inc. in Campbell, California, said the news could be a new 4-gigabyte Shuffle, which would have four times the memory of the current model.

"The obvious news may be the higher density iPod Shuffle," he said. "But (Apple CEO Steve Jobs) may have something else up his sleeve. Steve loves surprises," he said.

Recent analyst reports out of Asia have noted that Apple plans to buy as much as 40 percent of the flash memory chips produced by South Korea's Samsung Electronics Co. Ltd., the world's second largest chip maker and the largest maker of flash memory used in music players.

Apple currently sells three types of iPods: the classic high-capacity hard-disk iPod capable of storing up to 15,000 songs on 60 gigabytes; the iPod Mini, which comes in two versions, either four- or six-gigabyte hard disk models; and the Shuffle.

Cupertino, California-based Apple has come to dominate the digital music player market, accounting for some three-quarters of industry sales this year, according to analysts estimates.

Apple shipped 6.2 million iPods in its latest quarter.

Microsoft beats Apple, files iPod patents

There are likely some red faces at Apple Computer.

Apple took too long to file a patent on part of its blockbuster iPod music players, so Microsoft jumped in and beat Apple to it.

Tech pundits are snickering at the prospect of Apple having to pay Bill Gates big royalties on the hugely popular iPods, which account for more than a third of Apple's revenue.

On Tuesday, technology lawyer John Ferrell said Apple still has a lot of options, and this isn't a knockout blow. He said Apple could file a declaration stating it invented the technology before Microsoft filed its patent request.

The company could also alter the patent claims so they don't overlap Microsoft's. Ferrell estimates it could be at least another six months before it's all sorted out.

Apple to give levy back to iPod owners

Music lovers who paid extra for their iPods because of a levy will soon be able to get their money back, Apple Canada announced Monday.

"Apple is pleased that the Supreme Court of Canada let stand a lower court ruling that blank media levies on iPods are invalid, and will shortly announce a claims process so consumers can request a refund for the levies they paid," the company said in a release.

In July, the Supreme Court refused to overturn a Federal Court of Canada ruling that quashed the levy, which was applied to iPods and similar digital music players.

The tax had been passed on to consumers by companies like Apple and was collected by the Canadian Private Copying Collective, a non-profit agency that works on behalf of musicians and record companies.

The levy was in effect from December 2003 until a year later, when the Federal Court overturned it.

The Canadian Coalition for Fair Digital Access, which represents retailers and manufactures like Future Shop, Wal-Mart Canada, Apple Canada, Sony Canada and Dell Computer Corporation of Canada, had lobbied to have it abolished.

The tariff was $2 for non-removable memory capacity of up to one gigabyte, $15 for one to 10 GB, and $25 for more than 10 GB.

About $4 million was collected by the CPCC from sales of iPods and the like during the tariff's one-year life.

The CPCC got the levy instituted in the first place because it successfully argued that iPod users were making illegal copies of songs, so money should be collected on behalf of the copyright holders.

Details of how to apply for the refund from Apple were not announced on Monday.

No levy on IPods, court rules

TORONTO (CP) - The fight over a levy on IPods and other digital music devices ended Thursday when the Supreme Court of Canada refused to hear any further arguments on the matter.

That means there will be no levy applied to digital audio recorders such as Apple's popular IPod and IPod Shuffle as well as other MP3 players like IRiver.

"Obviously we're disappointed. We felt it was self-evident that those products are sold for the purpose of copying music," said David Basskin, of the Canadian Private Copying Collective (CPCC), the non-profit agency which collects tariffs on behalf of musicians and record companies.

The group had wanted the high court to overturn last year's Federal Court of Appeal decision which quashed the levy on the popular gadgets.

The non-profit agency had been collecting the tariff - $2 for non-removable memory capacity of up to one GB, $15 for one to 10 GBs, $25 for more than 10 GB - since December 2003 through a tax built into the price of the devices.

It stopped in December 2004 when the Federal Court overturned the policy at the urging of retailers and manufacturers such as Future Shop, Apple Canada and Dell Computer Corporation of Canada.

The CPCC argued that since the new technology opened yet another avenue to make illegal copies of songs, a levy should be collected on behalf of music creators.

The group said Thursday that approximately $4 million was collected between December 2003 and December 2004.

The money is sitting in an account and will be returned to the importers and manufacturers of the products, said Basskin.

The CPCC is an non-profit agency which collects and distributes tariffs on behalf of performers, songwriters, music producers and record companies. It also collects a levy on blank audio such as CDs and mini-discs.

Apple says iTunes music downloads top 500 million

NEW YORK (Reuters) - Apple Computer Inc. on Monday said its iTunes online music service has sold more than 500 million songs since its inception over two years ago.

While iTunes by itself is not viewed as a money maker for Apple, it has helped drive sales of the company's iPod, by far the most widely used digital music player which has helped boost profits.

Music Videos May Be Coming to iPods

NEW YORK - An iPod with video? Apple Computer Inc. has been talking to several major recording companies, looking to license the sale of music videos through the popular iTunes music site, The Wall Street Journal reported in Monday's editions.

Negotiations are an indication that Apple is moving to release a device that plays video files, possibly by September, The Journal said. Analysts see the development as likely because of Apple's strength in video software, including the Quicktime movie format and video-editing software, such as Final Cut Pro and iMovie.

An Apple spokeswoman declined to comment.

The Journal notes that so far, commercial movie download services have not met with much success, nor have devices already on the market allowing users to transfer video files from their PCs.

IPod Battery Life May Get a Boost - [General]

Apple Computer may soon be able to demolish criticisms of the battery life of its IPod family, thanks to PortalPlayer. PortalPlayer has begun shipping a new processor, the PP5022 System-on-chip (SoC). This is the next generation of the processor IPods use today--and needs a lot less power to run. PortalPlayer claims devices using the new processor could benefit from three times their current battery life.

PortalPlayer's vice president of sales and marketing Michael Maia says: "Our goal with the PP5022 was to offer a solution that balances lowest operating power while continuing to increase system performance. "We achieved this goal and will continue to deliver the lowest operational power during playback and encoding of rich media content-the PP5022 is our most innovative SoC to date, resulting in best-in-class battery life in hard drive jukebox systems."

Additional features include integrated USB 2.0 support--to the extent that designers could enable devices built using the processor to be compatible with peripherals, such as digital cameras. The company also introduced its first processor for the flash-based music player market, the PP5024 System-in-Package. This fully-integrated solution is designed to meet the need for high-capacity flash memory-based personal media players. It combines the media processor, peripheral input/output (I/O) controllers, and analogue audio and power management functions on one processor. "This enables high-performance audio jukebox features such as subscription music services and database caching support in a low-power flash platform," the company explains.

Apple releases cheaper photo IPods, more roomy IPod mini

CUPERTINO, Calif. (AP) - Apple Computer Inc. on Wednesday released new versions of its popular IPod digital music player, cutting prices and expanding memory capacities.

The price of the four-gigabyte IPod mini was cut $50 to $199 US. A new six-gigabyte version will sell for $249.

The 60-gigabyte IPod Photo, which can display photos on its small colour screen or when connected to a TV set, was cut from $599 to $449. A new 30-gigabyte model for $349 replaces a 40-gigabyte version for $499.

Apple also said it expects to start selling a cable that allows the transfer of photos straight from a digital camera to an IPod photo, eliminating the need for a computer. The IPod Camera Connector is expected to be available in late March for $29.

Apple iTunes sells 250 million songs

SAN JOSE, Calif. (AP) - With its music downloads selling at a rate of more than a million per day, Apple Computer Inc. said Monday customers have purchased more than 250 million songs from its online iTunes Music Store.

The store, now available in 15 countries, is selling 1.25 million songs at 99 cents apiece per day, the computer and multimedia company said.

Apple helped invigorate the market for legal music downloads when it launched the iTunes store in April 2003. Its robust sales far outpace rival services.

The success is due in part to Apple's wildly popular IPod portable music players, which do not play songs purchased from competing online music stores.

The Cupertino-based company sold 4.5 million IPods in the fourth quarter and more than 10 million since its debut in October 2001.

Shares of Apple rose 65 cents to $71.14 in afternoon trading on the Nasdaq Stock Market. The stock has traded in a 52-week range of $21.70 to $74.42.

Apple Enters Value Market with Cheap iPod, Mac

SAN FRANCISCO (Reuters) - Apple Computer Inc. on Tuesday moved to make its products more affordable for the masses, unveiling its cheapest Macintosh computer ever and a version of its iPod digital music player for under $100.

Apple co-founder and Chief Executive Steve Jobs, announcing the new products at the Macworld show in San Francisco, also said Apple had sold 4.5 million units of the various models of its blockbuster iPod in the 2004 holiday quarter.

Apple has traditionally aimed for high-end markets both for its Mac computers and the iPod, eschewing discount models. But the company reversed that course in one fell swoop Tuesday with the $99 "iPod shuffle" and the $499 "Mac mini."

The new products expand Apple's four-year-old "digital hub" and could broaden Apple's market considerably, analysts said.

But rumor sites had anticipated the new products, and Apple shares fell nearly 4 percent.

"I think that the expectations were about as high as they could get for it," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co.

The iPod sales were also in the range of Wall Street expectations.

SMALLER THAN A PACK OF GUM

The "iPod shuffle," is shaped like a pack of gum with no display screen. The smaller one, with 512 megabyte of memory, holds about 120 songs and costs $99. The larger one holds 1 gigabyte, or about 240 songs, and costs $149.

The lack of a screen may discourage some consumers, but it is too soon to tell, said Tim Bajarin, an analyst with Creative Strategies. "It's designed for use with the PC and the assumption that people will use their personal computer to manage their music anyway."

The new iPod falls into a category of music players that use "flash memory," chips like those found in digital cameras and some portable media players, rather than the hard drives used in current iPods.

Jobs said the iPod holds a 65 percent share of the entire market for portable digital music players, up from only 31 percent a year earlier.

Given that sort of consumer support, Jobs said a number of car companies like Mercedes-Benz USA, Volvo and Ferrari would integrate the iPod line into their car stereo systems.

DISCOUNT COMPUTER

The "Mac mini" will come in $499 and $599 models, depending on processor speed and hard-drive size. Weighing less than 3 pounds and under 2 inches tall, the mini connects to televisions as well as PC monitors.

Financial analysts, alerted to the mini by rumor sites now being sued by Apple, have said it would appeal to iPod users on the Windows operating system.

"It's very clear that these were designed to make the Mac platform more accessible to a broader audience," Bajarin said. "They want to entice more people either to switch, or, which is even more intriguing, to convince traditional PC users to make the Mac the center of their creative, digital work."

Some had doubted Apple, which has less than 5 percent of the worldwide PC market, would go the lower-end route.

"What we are doing is adding a product that reaches even more people," said Phil Schiller, Apple's head of worldwide marketing. "Consideration of the Mac is a lot higher than it has been in some time."

Apple also unveiled iLife 05, its suite of software to manage music, create movies, DVDs and manage and edit digital photographs; and iWork, which contains an updated version of its Keynote presentation software; and a new word processing software program called Pages.

The news appeared to have gone over well, as Apple's online store was briefly unavailable after the news broke.

Shares of Apple fell $4.40, or 6.4 percent, to close at $64.56 on Nasdaq. The stock more than tripled in 2004.

Apple Profit Quadruples on iPods

SAN FRANCISCO (Reuters) - Apple Computer Inc. on Wednesday posted a quarterly profit that blew past even the highest Wall Street forecasts on skyrocketing sales of its iPod digital music players and the highest number of Macintosh computers sold in more than four years.

Shares of Apple, which issued a forecast for the current quarter that was above consensus analyst expectations, jumped 13 percent in after-hours trading.

The rising iPod sales are now clearly translating into higher sales of the company's signature Macintosh computers, a trend that's been dubbed the "halo effect," analysts and Apple Chief Executive Steve Jobs said.

"In selling more than 1 million Macs, we're clearly seeing it," Jobs said in a telephone interview. "We're thrilled."

Apple, based in Cupertino, California, said net income for its fiscal first quarter ended Dec. 25 nearly quintupled to $295 million, or 70 cents a share, from $63 million, or 17 cents a share, a year ago.

That sailed beyond the high end of analysts' expectations, 55 cents, by a wide margin, according to Reuters Estimates, and both net income and revenue set records.

"Apple is a name in technology that at least for the next couple of quarters will have the wind at its back," said Owen Fitzpatrick, head of the U.S. Equity Group for Deutsche Bank Private Wealth Management.

Shares of Apple, which on Tuesday unveiled a smaller, cheaper iPod that starts at $99 and a slim Mac without a display starting at $499, more than tripled last year.

Apple Chief Financial Officer Peter Oppenheimer said the company sold 337,000 of its all-in-one iMac G5 computers in the quarter. Barry Jaruzelski, lead partner in Booz Allen Hamilton's global technology and electronics practice, said that the iMac's average selling price rose to $1,359 from $1,105 a year ago.

"The halo effect is real," Jaruzelski said.

Revenue rose 74 percent to $3.49 billion from $2.01 billion. Analysts had forecast revenue of $3.14 billion.

Apple said it shipped 4.58 million iPods in the holiday-sales-fueled quarter, compared with 2 million in the previous quarter.

Sales of iPod, songs from Apple's online music store and iPod accessories accounted for 40 percent of overall revenue.

Since their introduction in October 2001, Apple has sold more than 10 million iPods. "It took Sony six years to sell 6 million Walkmans," Jaruzelski said.

Apple's shares climbed to $74 in after-hours trade on the Inet electronic brokerage from their close of $65.46 on Nasdaq.

"There's no question that this was a positive report -- it shows the interest in the iPod -- in particular before the Christmas holiday season -- but going into 2005 and the latter half of '05 I don't know if that interest level will be sustained," said Kevin Beadles, managing director of institutional equity trading at Wedbush Morgan.

For its fiscal second quarter, the company forecast revenue of about $2.9 billion and earnings of about 40 cents a share. Analysts on average have expected earnings of 33 cents.

Oppenheimer said Apple retail stores had a good quarter and that the company plans to end 2005 with a total of 125 stores, up from 101 currently.

Analysts said that Apple is selling computers at twice the industry growth rate, countering long-held skepticism that Apple could gain market share.

"Between the announcements at Macworld yesterday and the results today, it's really about much more than just the iPod," said Darcy Travlos, an analyst with Caris & Co.

Apple Rolls Out Cheaper iPods

NEW YORK (Reuters) - Apple Computer Inc. on Monday introduced lower-priced versions of its iPod digital music player with longer battery life, positioning itself against rivals trying to use lower prices to undercut iPod sales.

Apple said the new model iPod has up to 12 hours of battery life, compared with eight hours in previous models. Poor battery performance in some iPods has drawn criticism.

The 20-gigabyte model, which can hold about 5,000 songs, has a list price of $299, lower than the previous price of $399 for a 20-gigabyte iPod. The 40-gigabyte model costs $399.

"Apple is closing the pricing gap between iPod and competitors," said Steve Lidberg, an analyst with Pacific Crest Securities. "Combined with a longer battery, Apple addresses the two biggest issues it had with the product."

The Cupertino, California, company, best known for its Macintosh computer, has turned to digital music as it has failed to make major gains in the highly competitive personal computer market. But in digital music players, Apple also faces strong competition from Dell Inc. and Sony Corp.

iPod claims a 50 percent market share in digital music players. Its sales almost tripled in the previous quarter. Analyst Lidberg expects shipments of 1.2 million iPods this quarter, more than tripling its sales last year.

Greg Joswiak, vice president of hardware product marketing at Apple, said it expects "a very strong growth" in the third quarter, helped by the upgrade. Traditionally the third quarter is stronger than the second quarter due to back-to-school sales, he said.

Joswiak shot down market rumors of 60-gigabyte models in the pipeline. "We have no plans in regard to announcing 60-gigabyte models," Joswiak said. "We are trying to create a much more compelling lineup with two models for 20 and 40 gigabytes at extremely compelling prices."

As part of a pilot program, Duke University plans to give iPods loaded with school calendars and other information to its 1,800 incoming freshmen. Students can download class materials to listen to anything from audio examples of textbook exercises to Spanish songs.

iPod users can now change the playback speed of audio books. The new iPods, which are thinner, also offer improved menu programs.

Apple's iTunes online music service is the most popular legal download site, claiming 70 percent of all songs bought online.

The stock fell 23 cents, or less than 1 percent, to close at $31.97.