By Jon Fortt
January 15, 2008

Flash-based laptops? Suped-up iPhones? The wait is over for Apple’s biggest announcements of the year.

SAN FRANCISCO — The keynote has begun. There’s a Mac vs. PC commercial showing. PC is talking about what a bad year 2007 was, with all of Apple’s announcements including the iPhone. PC says 2008, though, will be a great year. “What are you going to do?” Mac asks. “I’m just going to copy everything you did in 2007.”

Steve Jobs walks onstage from the left.

Welcome to Macworld 2008. We’ve got some great stuff for you, there’s clearly something in the air today, he says.

Jobs says he wants to look back at 2007, and says thank you to the crowd.

He’s got four things he wants to talk about today. More than 5 million copies of Mac OS X Leopard have been delivered, making it the most successful release ever. Almost 20 percent of the Mac OS X installed base has upgraded, he says. He’s going through the reviews, including raves from the Wall Street Journal and New York Times.

Microsoft Office 2008 is here. “This is the last big app to go native on Intel.”

First Thing: Time Capsule

He’s talking about Time Machine in Leopard. (Jobs calls it Tiger, the previous version, by mistake.) Today Apple is announcing a companion product to Time Machine, called Time Capsule. I has WiFi and a hard drive in it (802.11n) and together it lets you wirelessly sync your stuff. “You can back up your notebook wirelessly to Time Capsule.” In fact, you can back up all the Macs in your house. Time Capsule will be sold in a 500 gigabyte drive and a terabyte drive. The 500 will be $299, and the terabyte will be $499.

He’s playing the ad about Time Machine. There are a lot of Macs explaining that Time Machine automatically makes copies of him so that nothing ever gets lost. That’s the first thing Jobs wanted to share.

Second Thing: iPhone

The second thing is about the iPhone. Today is the 200th day since the iPhone went on sale, he says. Apple has sold 4 million. That’s 20,000 iPhones a day on average. In terms of the overall market, according to Gartner’s Q3 data, RIM had 39 percent with the Blackberry, Apple had 19.5 percent with the iPhone, Palm had 9.8 percent, and Motorola had 7.4 percent.

What’s equally interesting, Jobs says, is that Apple equally Palm, Motorola and Nokia in Q3. In the December quarter, Jobs says, he thinks Apple did even better.

What everyone’s excited about is the software development kit in late February, Jobs says. But Apple wanted to roll out new features, including maps with location. Also, you can now make web clips on your home screen — up to 9. You can SMS multiple people at once, and have chapters and subtitles in videos. You can also show song lyrics.

Now he’s going to demonstrate.

Google Maps. Push a pin, and it pinpoints the phone’s location on the map. This makes directions easy; he just taps in “Apple,” and it gives directions back to the headquarters. He cans also quickly get directions to a nearby Apple Store. Then he can move the pin and easily get directions. “We develop our Maps application in collaboration with Google,” Jobs says. “We write the front end” and we really like working with those guys. (Interesting. I think this is the first time we’ve heard that Apple writes the front end of Google Maps for the iPhone.)

Now he’s demonstrating sending SMS to more than one person. It’s pretty straightforward.

He goes to Google, and goes to a plus button at the bottom. He can “Add to home screen,” and he says add. Now the Google icon is added to his home screen. Now he goes to the New York Times. Web clips can remember where he zoomed and panned to, he says. He zooms up to the technology section, and says add to home screen. Now he has the zoomed-in technology section of the Times technology section as a web clip. When he’s going to change things, the icons start wiggling, signaling that they’re movable. He can rearrange them, and when he’s done he presses home and they stop wiggling. (This is a really clever interface to show that the icons are editable.)

“There’s no GPS inside the iPhone,” Jobs says. So how do they do location? Apple’s working with Skyhook Wireless and Google. Skyhook has 23 million WiFi hotspots in its database. Apple uses WiFi to pinpoint location, and Google uses cell towers to triangulate location. Apple is using both, Jobs says, “And it works pretty darn well.”

Now he’s demonstrating navigating through video by chapters, and easily turning subtitles off and on, and displaying lyrics to a song. “All of this is available today as a software update for every iPhone,” he says.

“What can we do for the iPod Touch? … We’ve decided to add five apps,” Jobs said. Mail, Maps, Stocks, Notes and Weather. The iPod Touch will even find location with Skyhook’s system. Starting today, the apps will be built in to iPod Touch. For existing iPod Touch users, the new software is available as a $20 software update. “That was the second thing I wanted to talk about today.”

Third Thing: iTunes and Apple TV

“Number three is about iTunes. I’m really pleased to report that last week we sold our 4 billionth song.” On Christmas Day, we set a new record — we sold 20 million songs in one day.

Apple has also sold 125 million TV shows, he says.

And 7 million movies. “That’s more than everyone else put together, but it did not meet our expectations …. Today we’re announcing iTunes Movie Rentals,” he says.

We’ve never offered a rental model in music because we don’t think people want to rent their music, Jobs says. Movies are different. He shows the new section of the iTunes Store.

The majors are represented: Touchstone, Miramax, MGM, Lions Gate, New Line Cinema. But Apple also has Fox, WB, Disney, Paramount, Universal, and Sony Pictures. “We have every major studio supporting up with iTunes Movie Rentals. We’re going to have all the great first-run films.”

“Here’s the deal. We’re going to launch with more than 1,000 films in February, available 30 days after DVD release. You can watch on Macs, PC, iPod and iPhone. You can watch in less than 30 seconds after you rent. Once you start watching, you have 24 hours to finish watching it. You can move the film to another device while watching. Renting an old title will be $2.99. A new release will be $3.99.

He’s demonstrating it. He rents by putting them in his lineup. He has days to start watching, and you can click a “move” button to put it on another device. “It rolls out in the U.S. starting today, international later this year. We’re dying to get this rolled out international.”

“What about this? What about this flat-screen TV I just bought? I’d like to watch them there, too. … All of us have tried. … And you know what? We’ve all missed.”

He’s admitting that Apple TV failed. “It’s not what people wanted,” he says. “We learned that what people wanted was movies, movies, movies.” No computer will be required to use it.

“Here’s what you can do.” You can rent movies directly on a widescreen TV. You can rent them in DVD quality, and HD with Dolby 5.1. You can also get audio and video podcasts, and get photos both from your computer, and from Flickr and .Mac. And you can get YouTube. (This is a good move, particularly photos — I suggested a while back that photos are a great proposition.)

You can buy TV shows and movies, and play iTunes content and photos. He’s focusing in on the HD movies. In HD, movies cost a dollar more than the prices he quoted for rentals earlier.

“All of these features in an entirely new user interface,” he says.

He’s showing it. One menu in the center. You can see what other people who have seen a movies have also watched. “I just go over here and push one button to rent this movie.” He shows that it’s ready to watch in just a few seconds. (This is impressive for a download, but he’s probably on a very fast connection. We’ll have to see how fast this is on a standard DSL line or cable modem — and it’s not HD.) Now he’s showing an HD movie that he’s already downloaded, Live Free or Die Hard. It looks good, of course.

He’s showing how to search, and says there are now more than 6 million songs available on Apple TV. He’s looking for a Linkin Park music video, and he plays it. “So, music, music videos, the whole iTunes catalog at your fingertips, on your widescreen TV.”

Now he’s showing podcasts. One is called “Teton: Gravity research.” A lot of them are now in HD, Jobs says. He shows one about what looks like extreme skiing. A guy skis off a cliff and opens up a parachute.

Now he goes to photos in .Mac. The albums are viewable. He goes to one album, and it’s playing music and showing the photos, which of course fill the screen. (Apple’s .Mac service requires a subscription though.)

He’s now showing a video from .Mac. It’s the same one he showed at the launch of the new iMovie.

Now he’s going to Flickr. He’s going to lovetohike78, and sees that person’s photos, and also that person’s friend’s photos. He’s trying to show photos from this person, and the music starts playing, but no photos. First big screwup of the keynote. “I’m afraid Flickr’s not throwing up the photos on that one. That’s what I wanted to show you today. Isn’t that incredible?” The crowd claps nonetheless.

He says Apple TV’s new software is a free upgrade.

Given the fact that we’ve got all new software … we want to make Apple TV even more accessible. “The new price of Apple TV, starting today, is just $229. We are shipping the new software upgrade to existing owners and the new $229 Apple TV in just two weeks.”

He’s going back to talk about movie rentals. You can watch them on your computer, iPod, iPhone, or TV. Apple has support from every major studio.

“The first studio to sign up with us for iTunes Movie Rentals was 21st Century Fox,” he says. Jim Gianopulos, Chairman and CEO of 20th Century Fox comes out. He’s talking about new business models. He says the key, despite all the changes is to make great movies and give them to as many people as possible. Steve Jobs leaves the stage. Interesting that he’s putting a Fox guy up on stage by himself. Could this signal the beginning of a more Hollywood-friendly Apple?

Gianopulos happens to mention that the next-generation format “will be Blu-ray, looks like.” That’s sure to rile up the HD DVD fans. He says that the new Family Guy DVD will contain a digital copy that you can easily move to iTunes and the iPod, which is an interesting development. “We’re really excited about our partnership, and we look forward to bringing you lots of exciting entertainment in years to come.”

Fourth Thing: MacBook Air

Now, on to the fourth thing Jobs wanted to talk about today. “That brings us to number 4. There’s something in the air.”

“As you know, Apple makes the best notebooks on the planet. The Macbook and the Macbook Pro. Today we’re announcing a third kind of notebook. It’s called the MacBook Air. What s the MacBook Air? In a sentence, it’s the world’s thinnest notebook.”

He shows the Sony TZ series. “They generally weigh about 3 pounds, and they generally are about .8 inches to 1.2 inches.” They also compromise, he says, because their displays are 11 or 12 inches, the keyboard is miniature, and the processor is slower than standard.

He says there’s too much compromise on everything but weight.

He shows a profile of the MacBook Air, which is .76 inches down to .16 inches. “The thickest part of the MacBook Air is still thinner than the thinnest part of the TZ series.” He says it fits inside an inter-office envelope. So he grabs an envelope off of the lectern.

It has a 13.3-inch widescreen, an LED backlit display, a built-in iSight camera, and a full-size keyboard. “This is perhaps the best notebook keyboard we’ve ever shipped.” The keyboard is also backlit, as it is in some other Apple laptops. It has a trackpad, and multi-touch gesture support. It looks like the gestures work with the trackpad. You can pan and move windows with two fingers on the trackpad, and rotate photos the same way. You can use three fingers to pan between fingers. And you can zoom by pinching in and out.

(This laptop is really darn thin.)

“How did we fit a Mac in here? How did we do it?” It has a 1.8-inch hard drive in it. (Interesting … not flash.) There’s an option for a 64-gigabyte flash drive. This uses the Intel Core 2 Duo, so, Jobs says, Apple didn’t compromise on performance.

“We’ve got a great relationship with Intel. Both companies are engineering-driven, and they both like to challenge each other.” Jobs said they wanted the Core 2 Duo chip on a smaller package. Jobs welcomes Otellini to the stage. (This is impressive because Intel has an earnings announcement today, and those usually take all-day preparation from CEOs. This is the second time Jobs has had him on stage. Last time, he gave Otellini a plaque to thank him.)

Jobs is going over the rest of the features. Wireless networking, and all the ports you’d expect. The one thing he hasn’t mentioned yet is an optical drive. “No matter how hard you look, one thing you’re not going to find in a MacBook Air is an optical drive.” There’s an external one for $99, he says. Jobs says he doesn’t think most people will need one. Wireless movie rentals, iPods and other things take the place of optical drives.

What about software? There’s a new feature called “Remote Disk” that shows Macs or PCs in your vicinity, and you can pick a machine and ask to borrow its optical drive. Special software asks to borrow the drive, and it wirelessly installs software from either a Mac or a PC. (This sounds pretty complicated for a lot of users. Lots of people will want the external drive.)

The MacBook Air will get 5 hours of battery life, he says. (That is really extraordinary.) Features, he’s going over again: 3 pounds, .16-.76 inches thick, 13.3-inch display, full size keyboard, multi-touch gestures, iSight camera, 1.6 GHz Core 2 Duo, 2 gigabytes of memory, 80 GB hard drive (with a flash drive option), 802.11, more. It will be $1,799, he says. It ships in two weeks.

He’s showing an ad. Someone takes it out of an interoffice mail envelope, and opens it. “MacBook Air. The world’s thinnest notebook,” the on-screen text says.

Now he’s talking about progress toward environmental initiatives. He says Apple is going to talk about this with major product announcements from now on. It’s mercury-free and has arsenic-free glass. Circuit boards are BFR-free, PVC-free. The packaging has 56 percent less volume than the previously smallest Mac product packaging, which was the MacBook Pro.

“That is the fourth thing that I wanted to talk about with you today.”

He goes over what has been presented.

“We have a special treat today. I wanted someone who could help us bridge the gap between iTunes Movie Rentals and music,” he says, and the best person to do that agreed: Randy Newman. Newman is going to perform.

(Clearly, there’s not going to be “One More Thing” or “One Last Thing” this time around, which sort of breaks a Macworld tradition.)

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