MacRumors

Earlier this year, Apple began revealing more information about its Mastered for iTunes program, requesting that music professionals supply Apple with higher-quality recordings as source material for the compressed tracks made available for sale through the iTunes Store. The higher-quality source material, processed according to Apple's guidelines, is being requested to allow Apple to create better-sounding tracks in the 256 kbps AAC format used for the iTunes Store.

Ars Technica takes a thorough look at the Mastered for iTunes program and whether it truly does make a difference to consumers. While the whole article is an interesting read on some of the technical details of audio formats and mastering and the varying perspectives of several music industry professionals, Ars' conclusion is that the Mastered for iTunes program can make a difference in quality of iTunes Store music.

We enlisted Chicago Mastering Service engineers Jason Ward and Bob Weston to help us out, both of whom were somewhat skeptical that any knob tweaking could result in a better iTunes experience. We came away from the process learning that it absolutely is possible to improve the quality of compressed iTunes Plus tracks with a little bit of work, that Apple's improved compression process does result in a better sound, and that 24/96 files aren't a good format for consumers.

Ars worked with a number of audio engineers on test projects comparing various combinations of original 24-bit, 96 kHz master recordings, uncompressed WAV files ripped from CDs, standard iTunes Store tracks, and tracks created by applying Apple's Mastered for iTunes process to the master recordings. In one example, a standard iTunes Store track sounded "boxy" or "muffled" compared to the original CD master WAV file, but after processing through Mastered for iTunes tools, the resulting track sounded significantly better and more "alive" on a subjective basis.

Part of the difficulty in assessing sound quality comes from the emotional response involved in how sounds register to human ears. Some differences in sound quality can be quantified using various tools to analyze the waveforms generated by different audio files, but the ultimate measure of sound quality lies with the human ears receiving and interpreting the sounds.

Nevertheless, Apple markets the Mastered for iTunes program as providing a path for musicians and music professionals to have iTunes Store content more closely match "music as the artist and sound engineer intended", and more and more musicians are taking advantage of the program in attempting to improve the quality of their music available through the world's most popular music vendor.

Microsoft and Barnes & Noble today announced the formation of a new Barnes & Noble subsidiary focused around the existing Nook digital e-reader and e-book business, as well as Barnes & Noble's college business. Microsoft will make a $300 million investment in the subsidiary, which is preliminarily being called Newco until an official name is chosen, and receive 17.6% ownership of the business.

One of the first benefits for customers will be a NOOK application for Windows 8, which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of e-Books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. and internationally.

The inclusion of Barnes & Noble’s College business is an important component of Newco’s strategic vision. Through the newly formed Newco, Barnes & Noble’s industry leading NOOK Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.

As part of the deal, Microsoft and Barnes & Noble have also settled their patent dispute, which saw Microsoft suing for infringement by the Nook reader in a move Barnes & Noble had positioned as an attack on all Android-based systems. The new deal will see Barnes & Noble and Newco holding a royalty-bearing license on the Microsoft patents in question.

The Microsoft/Barnes & Noble venture seeks to increase competition in the e-book market, taking on both Amazon's dominant position and Apple's upstart status that has seen the iPad become a popular e-reading option for consumers but much lower adoption of iBookstore content. Barnes & Noble has had some success with Nook, but its momentum has slowed recently and recent antitrust suits against Apple and book publishers breaking down the new agency model for e-book distribution have raised concerns that the industry will quickly return to a near-monopoly for Amazon.

In the latest installment of its "iEconomy" series, The New York Times takes a look at how Apple minimizes its corporate tax burden, taking advantage of a number of legal maneuvers and loopholes around the world. Apple's strategies are of course fully legal and used by many other corporations, but with a spotlight on Apple as it has rapidly risen to become the world's most valuable publicly-traded company with record-setting profits, it has obviously attracted much attention about how it handles its money.

Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.

Among the tactics used by Apple:

- Setting up subsidiaries in low-tax locations such as Nevada, Ireland, Netherlands, Luxembourg, and the British Virgin Islands, routing as much revenue as possible through these locations. By routing much of its U.S. revenue through its Braeburn Capital subsidiary in tax-free Reno, Nevada, Apple is able to avoid California's corporate tax rate of 8.84%, while also reducing its tax burden on money earned in other states.

- Apple's iTunes S.à r.l. subsidiary in Luxembourg consists mainly of a mailbox and a few dozen employees, but records $1 billion per year in revenue as the entity responsible for all iTunes Store transactions throughout Europe, Africa, and the Middle East. With the iTunes Store offering strictly downloadable goods, Apple is able to take advantage of favorable tax treatment available in Luxembourg as part of the country's efforts to attract businesses.

- Apple has substantial operations in Ireland, but the report notes that one of the main benefits of locating there is that Apple is able to internally transfer its patent royalty earnings to a subsidiary there, with the money being subjected to a 12.5% tax rate rather than the 35% tax rate found in the United States. More than one-third of Apple's worldwide revenue is booked through its Irish subsidiaries.

- Apple records 70% of its revenue overseas, even though much of the product value would normally be considered to derive from their design, which occurs in the United States.

Overall, Apple paid $3.3 billion in corporate taxes in 2011 on earnings of $34.2 billion in profits, an effective tax rate of 9.8%, which is considered low by corporate standards. But with the company's tactics relying on a complex and disjointed system of tax laws throughout the world, it is difficult for the United States to single-handedly require Apple to book more of its revenue in its home country, which currently has the highest corporate tax rates in the world when federal and average state rates are included.

Apple has provided an official response to The New York Times, highlighting its role in job creation in the United States, the tax payments it does make, and its charitable giving. The company also notes that its business practices are in full compliance with all laws and accounting rules.

Update: As noted by Forbes, The New York Times is reporting an incorrect calculation of Apple's effective tax rate for 2011 of 9.8%, simply reusing numbers released several weeks earlier by the Greenlining Institute. Forbes points out that Apple's $3.3 billion in taxes paid during 2011 come from its quarterly estimated tax payments made during the year, but that federal tax guidelines instruct taxpayers to base their calculations on the previous year's earnings.

Consequently, Apple's 2011 quarterly tax payments are actually based on 2010's earnings, with the correct amount of tax for 2011 not being settled until Apple files its final taxes in 2012. And given Apple's strong growth rate, the incorrect assumption that Apple's 2011 tax payments were based on 2011's earnings grossly understates Apple's tax rate.

As outlined in his previous piece debunking the Greenlining Institute's claim, Tim Worstall notes that Apple reports its effective tax rate in its annual 10-K filings with the Securities and Exchange Commission, and that rate came in at 24.2% for 2011, much more in line with industry norms.

Reuters reports that Apple has been negotiating with movie streaming service EPIX for the rights to stream content to the Apple TV set-top box. According to sources, the deal would also extend to future streaming devices such as the much-rumored Apple television set.

Apple, which now sells a $99 set-top box that hooks up to a television set and lets users stream online content from Netflix and the MLB channel, opened discussions with three-year-old EPIX, created by Lions Gate Entertainment Corp, MGM and Viacom's Paramount Pictures.

One of the sources told Reuters that any discussions would apply to its set-top box and also to upcoming devices that stream content.

Sources note that talks between Apple and EPIX remain preliminary and that no deal is expected in the near future. Still, the rumors suggest that Apple is continuing to push forward in its attempts to secure content as it seeks to build a bigger footprint in the living room.

EPIX has an exclusive streaming agreement with Netflix that extends through September, so it seems unlikely that any agreement with Apple could go into effect before that time, but it also remains unclear how the financial situation would shake out for EPIX in adding Apple while Netflix loses its exclusivity.

Advertising tracking firm Ace Metrix today shared its data on viewer reactions to Apple's new celebrity iPhone 4S ads featuring Siri and starring Samuel L. Jackson and Zooey Deschanel. The new ads are registering well with consumers, generating scores higher than any other iPhone 4S ad released so far this year.

“Apple’s ads for iPhone had been falling rather flat earlier in the year, all scoring below the Apple iPhone norm of 620. This new creative tack that uses likeable celebrities struck a chord with American viewers,” said Peter Daboll, CEO of Ace Metrix. “These ads performed very well, especially with younger women, who did not react as strongly to Apple's more feature-focused ads from earlier in the year. Celebrity ads are risky, as many celebrities can be polarizing. In these latest ads, Apple has chosen wisely, using celebrities with broad appeal."

But while the new celebrity iPhone 4S performed very well, they were unable to unseat Samsung's top Galaxy Note as the most popular mobile phone ad of 2012. The Galaxy Note and iPhone 4S hold the top nine positions among mobile phone ads released so far this year, with Samsung's "Samsunged Again" Super Bowl commercial directly targeting Apple and iPhone users placing tenth.

The new celebrity ads also fell short of Apple's iPhone 4S camera ad from late October, which was named the top mobile phone ad of 2011 with a viewer score of 659.

As pointed out by MacGeneration [Google translation], Apple's Mac App Store has reached a new milestone with 10,000 apps available for purchase or free download through the marketplace.

Our own sister site AppShopper confirms the milestone, currently indexing 10,339 applications in the store. Apple launched the Mac App Store in January 2011 and has quickly moved to offer its own major software titles through the marketplace, viewing it as the future of software distribution on the Mac platform. Even OS X Lion itself is distributed via the Mac App Store.

The 10,000 Mac App Store apps pale in comparison to the 600,000 apps available through the iOS App Store, but the Mac App Store remains a success by desktop software sales standards. Last December, the store passed 100 million downloads, making it the "largest and fastest growing PC software store in the world".

Last month, the State of Texas announced that Apple would be making a major expansion of its existing customer support and administrative campus in Austin, investing over $300 million to add 3,600 workers at the site. The move would more than double Apple's workforce in Austin.

Over the past several weeks, a number of governmental agencies, including the State of Texas, Travis County, and the City of Austin have been working on tax break packages designed to secure Apple's commitment to bring the new jobs to Austin. While most of the incentive packages have been approved, the Austin American-Statesman reports that delays in work by Travis County are leaving Apple "frustrated" and the deal "in peril".

Dave Porter, senior vice president for economic development at the Greater Austin Chamber of Commerce, said Thursday that Apple's plans to bring its Americas operations center to Austin are up in the air because of the county's continuing deliberations and calls for new conditions on its incentives deal with the company.

"This deal is not done. It remains in peril. And Apple is frustrated," Porter said.

Travis County had been expected to offer tax breaks of $5.4-6.4 million as part of the overall incentive package of $35-36 million over 10-15 years, and while Travis County had given initial approval to its portion of the deal earlier this month, it has yet to be finalized.

The delays are related to objections raised by the opponents of the deal, who have claimed that the terms of the deal are too favorable for Apple and could see the company avoid penalties should it fail to meet some of the contract's terms.

Apple had been said to also be considering Phoenix, Arizona as a potential location for its new facilities, and while it seems likely that the company would much prefer to locate the new facility at its existing campus in Austin, it is likely continuing to weigh its options until a final deal for the Austin site is signed.

Back in late 2010, Apple announced that it would cease supporting Java for OS X, with Steve Jobs noting that Apple was always a version behind that being distributed by Sun/Oracle, which handled Java for all other platforms.

Confusion about whether Oracle would step into the Java void created by Apple's removal of support was addressed several weeks later when Apple and Oracle announced plans to expand Oracle's OpenJDK project to include OS X as a means to deliver Java SE 7 to Mac users.

Oracle today announced that is taking the next step toward OS X compatibility with the release of Java SE 7 Update 4 and JavaFX 2.1. For Java developers, the update marks the first release of the Java Development Kit (JDK) and JavaFX Software Development Kit for OS X. The OpenJDK community is continuing its work on a consumer version of Java SE 7 for OS X, and Oracle says that a public release for consumers will be coming "later in 2012".

This release marks Oracle’s first delivery of both the Java Development Kit (JDK) and JavaFX Software Development Kit (SDK) for Mac OS X.

- Java developers can now download Oracle’s JDK, which includes the JavaFX SDK, for Mac OS X from the Oracle Technology Network (OTN).

- Oracle plans to release a consumer version of Java SE 7, including the Java Runtime Environment (JRE) for Mac OS X later in 2012.

While the transition to Oracle/OpenJDK for Java support on OS X continues, Steve Jobs' comments about Apple's Java packages always being a version behind and how that arrangement "may not be the best way to do it" proved prescient in recent weeks with the appearance of the Flashback malware. The latest incarnations of Flashback managed to infect over 600,000 Macs by taking advantage of a vulnerability in Java that had been patched by Oracle in February but which had not yet been patched on OS X.

In response, Apple released several updates to Java for OS X, including one that disables the automatic execution of Java applets. As an additional layer of security, once a user manually turns on automatic execution, the system will once again disable it after a period of time if no applets have been executed.

Apple has replaced the iMacs that were previously on the kids' table at its retail stores with iPads, as first noticed by iMore. The switch is a clear sign of the direction the company is going, particularly with regards to its younger customer base.

The kids' table has been a staple of the Apple Retail Store since it the first locations opened more than 10 years ago. The original tables featured CRT iMacs surrounded by black balls from the Baleri Italia company for children to sit on. Apple, as is typical, spares no expense when it comes to its retail stores -- the chairs cost more than $500 each.

Over the years, as the iMacs themselves have been updated, Apple has replaced the machines with newer models, but this is the first time that a product other than a Mac has been featured.

(Image of old kids table courtesy Flickr/Ralph and Jenny)

Since taking the helm of department store chain J.C. Penney last November, former Apple retail chief Ron Johnson has rebuilt much of his new company's executive team, in many cases bringing in associates he had worked with at Apple or in his earlier stint at Target. Until now, Johnson appears to have avoided tapping Apple's staff directly, bringing in Apple veterans who had already left the company for other jobs.

But as announced in a J.C. Penney press release today, Johnson has expanded his executive team again, this time hiring Ben Fay, a key member of Apple's retail store design team to help lead the next-generation of department store designs.

"Ben is an incredibly creative professional with extraordinary leadership skills. Having worked with him over the last 12 years, I am delighted to see Ben step into this new role at jcp," said Johnson. "His design influence has made the Apple stores highly regarded retail destinations around the world, and I am excited to have Ben place his own mark on jcp as we re-imagine the jcpenney store of the future."

According to his LinkedIn profile, Fay spent eight years as a senior director at Apple, overseeing retail store and corporate office design. Prior to arriving at Apple itself, he spent four years at architecture firm Gensler, where he focused on Apple's retail projects. With that résumé, Fay clearly played a key role in the development of the Apple retail store concept alongside Johnson and other members of the team.

Fay's move to J.C. Penney comes just as former Dixons Retail CEO John Browett begins work at Apple as Johnson's replacement. Browett was named Apple's senior vice president of retail in January, but did not officially start with the company until last week.

Browett brings an international flavor to Apple's retail effort, with international stores having been an increasing focus for Apple in recent years, a trend that is expected to continue as Apple works to expand its global reach. The company has also been placing emphasis on larger, iconic stores to help promote the company's brand while providing more space to serve the growing number of Apple customers.

The San Jose Mercury News reports (via The Next Web) that Apple has received approval from the City of Cupertino to build a new 21,500 square foot cafeteria several blocks away from its main headquarters. The facility is being planned to primarily support workers from Apple's satellite buildings in the immediate vicinity, giving them a private location to eat and conduct business without needing to worry about competitors overhearing their conversations.

"We like to provide a level of security so that people and employees can feel comfortable talking about their business, their research and whatever project they're engineering without fear of competition sort of overhearing their conversations," Dan Whisenhunt, Apple's director of real estate facilities, said at Tuesday's meeting. "That is a real issue today in Cupertino because we've got other companies here in our same business."

The facility will offer a full cafeteria, as well as private meeting rooms, lounge areas, courtyard space, and a 70-space parking garage underneath the cafe. Whisenhunt notes that Apple is also in the process of developing plans to add a private cafeteria at its Results Way campus leased last July to support further expansion while the company moves forward to build its major new headquarters on the former HP campus in Cupertino.

Apple is genuinely concerned about its employees divulging secret information while socializing at outside restaurants, with Adam Lashinsky noting in his recent book Inside Apple that "company lore" suggests employees have been fired after undercover Apple security officers at BJ's Restaurant & Brewhouse across a parking lot from Apple's main campus overheard them sharing sensitive information in the open.

The company has of course also experienced the loss of several iPhone prototypes in outside establishments, with an iPhone 4 having disappeared in a Mountain View bar in 2010 and eventually turning up in Gizmodo's hands while an iPhone 4S apparently went missing from a San Francisco bar last year and has not been found. While Apple certainly can't prevent its employees from patronizing outside establishments, the use of privately-controlled cafes can help minimize information leaks in situations where employees are most likely to be talking with each other about their work.

Back in late 2009, an Apple patent application surfaced showing that the company had explored ad-supported operating systems, with the user receiving free or discounted goods or services in exchange for viewing the advertisements. The patent application, which was filed in 2008 and shows ad integration in Mac OS X, was notable for listing Steve Jobs as the lead inventor.

As Ken Segall reveals in his new book, Insanely Simple: The Obsession That Drives Apple's Success, the idea did indeed belong to Jobs, although he initially considered implementing it for the 1999 release of Mac OS 9.

Rather than charge the normal upgrade price, which in those days was $99, he was thinking of shipping a second version of Mac OS 9 that would be given away for free – but would be supported instead by advertising. The theory was that this would pull in a ton of people who didn't normally upgrade because of the price, but Apple would still generate income through the advertising. And any time an owner of the free version wanted to get rid of the advertising, he or she could simply pay for the ad-free version. Steve's team had worked out the preliminary numbers the concept seemed financially sound.

Jobs envisioned the ad-supported version of Mac OS 9 displaying a 60-second commercial from a "premium" company at startup, with the ads occasionally being automatically swapped out for new ones over the Internet. He also visualized the use of contextually relevant ads, such as an Epson printer ink ad being displayed when the user's printer was reporting that it was low on ink.

Segall was not in favor of the idea, but left that meeting under the impression that Apple was going to proceed with it as the TBWA\Chiat\Day team begin thinking about the premium companies it could target for high-quality advertising. But for whatever reason, Jobs and Apple ultimately decided to scrap the idea.

But while the genesis of the idea indeed appears to lie with Jobs, it is still unclear why Apple decided nine years later to file for a patent on the idea, whether it was due to a serious reconsideration of the idea or merely a tying up of loose ends that saw the company attempting to protect one of Jobs' ideas that had already been discarded.