By Joseph Menn in San Francisco, Matthew Garrahan in Los Angeles and Kenneth Li in New York
Published: July 27 2009 01:01 | Last updated: July 27 2009 23:45
Apple is racing to offer a portable tablet-sized computer in time for the Christmas shopping season, in what the entertainment industry hopes will be a new revolution.
The device is expected to be launched alongside new content deals, including some aimed at stimulating sales of CD-length music, according to people briefed on the project. The touch-sensitive computer will have a screen that may be up to 10 inches diagonally.
It will connect to the internet like the iPod Touch - probably without phone capability but with access to the web, and to Apple's online stores for software and entertainment.
Apple is gambling that it can succeed where everyone else has flopped, including Microsoft, which tirelessly pushed a tablet-ready version of its Windows operating system as a personal favourite of founder Bill Gates.
The entertainment industry is hoping that Apple, which revolutionised the markets for music players and for phones, can do it again. "It's a portable entertainment device," said one entertainment executive. "It's going to be fabulous for watching movies."
Recording industry executives said Apple planned to use the larger screen to offer new services such as interactive booklets and liner notes that come along with purchases of entire music CDs.
While iTunes moved legal sales of digitised music into the mainstream, the digital take-up for full CDs has disappointed the industry. Consumers usually select just one or two tracks.
Book publishers have been in talks with Apple and are optimistic about being included in the computer, which could provide an alternative to Amazon's Kindle,Sony's Reader and a forthcoming device from Plastic Logic, recently allied withBarnes & Noble.
"It would be a colour, flat-panel TV to the old-fashioned, black and white TV of the Kindle," one publishing executive said.
Apple does not appear to have briefed film studios, but Hollywood executives said they would be willing to contribute more content than is now available over iTunes. Large video game publishers are also eager for the product and say they could quickly optimise existing games for a hardware display that shows off graphics-intensive content.
Since demand for tablet computers has been disappointing so far, Steve Jobs, Apple's chief executive, has been pressing for compelling hardware functions.
Tim Cook, the chief operating officer last week ruled out competing directly withnetbooks at the lower end of the notebook PC market, which have made rapid gains in an otherwise shrinking market.
Instead, the new machine could cost between $600 and $1,000, according to Oppenheimer & Co analyst Yair Reiner. "I think it will have a lot of the functionality of the iPod touch, but will be quite a bit bigger," he said.
Mr Reiner and others cautioned that Apple might not be able to get all of the components it needs in the right packaging by the end of the year, though Apple is aiming for September or October.
Additional reporting by Chris Nuttall in San Francisco and Chen Yu-ting in Taipei