| Apple has advertised the iPod and iTunes brands in | | | | launch ads. This commercial features the song Cubicle |
| several very successful promoting campaigns. The | | | | by the French electro rock band Rinocerose. |
| first iPod advertisement, featuring the tagline "A | | | | The Company's future work and success depends on |
| thousand songs, in your pocket" was launched in | | | | the work of distributors and other resellers of the |
| November 2001. | | | | Apple's products. The Company has invested and will |
| The ad can be viewed on Apple's web site. In April | | | | continue to invest in various programs to enhance |
| 2003, Apple stated its new advertisement campaign to | | | | reseller sales, including staffing selected resellers' |
| promote the new product — a line of the iTunes | | | | stores with Company employees and contractors. |
| Music Store. The advertisement campaign was rather | | | | These programs could require a substantial investment |
| successful and gave some profit. The commercials | | | | from the Company, while providing no assurance of |
| featured a wide range of music, including The Who's | | | | return or incremental revenue to offset this investment. |
| My Generation, Sir Mix-a-lot's Baby Got Back, The | | | | Over the past several years, an increasing proportion |
| Caesars' Jerk It Out, Pink's There You Go, and | | | | of the Company's net sales have been made by the |
| Eminem's Lose Yourself. | | | | Company directly to end-users through its online stores |
| In October 2003, Apple company showed its first TV | | | | around the world and through its retail stores in the |
| advertisement of this silhouette campaign, which had | | | | U.S., Canada, Japan, and the U.K. Several resellers |
| already been presented in periodicals. It showed | | | | perceived the expansion of the Company's direct |
| silhouettes dancing to music and listening to iPods. | | | | sales as conflicting with their own businesses and |
| These advertisements promoted pop songs such as | | | | economic interests as distributors and resellers of the |
| The Vines' Ride, The Caesars' Jerk It Out, Gorillaz' Feel | | | | Company's products. Perception of such a conflict |
| Good Inc., Steriogram's Walkie-Talkie Man, Jet's Are | | | | could discourage the Company's resellers from |
| You Gonna Be My Girl, Propellerheads' Take California, | | | | investing additional resources in the distribution and sale |
| Ozomatli's Saturday Night, Jason Nevin's Mix, Franz | | | | of the Company's products or lead them to limit or |
| Ferdinand's Take Me Out, Daft Punk's Technologic, | | | | cease distribution of the Company's products. The |
| and many more. To commemorate the launch of the | | | | Company's business and financial results could be |
| U2 iPod, Apple released an ad featuring a music video | | | | adversely affected if expansion of its direct sales to |
| of Vertigo, featuring the band as characteristic iPod | | | | end-users causes some or all of its resellers to cease |
| silhouettes. One can see these Ads in quite a few | | | | or limit distribution of the Company's products. |
| places now. | | | | The Company relies on third-party digital content, which |
| The iPod shuffle was released alongside TV | | | | may not be available to the Company on commercially |
| advertisements featuring silhouettes dancing on a | | | | reasonable terms or at all. The Company contracts |
| green background with Apple's shuffle symbol moving | | | | with third parties to offer their digital content to |
| under them, displaying their intention on using their | | | | customers through the Company's iTunes Music Store. |
| silhouette campaign with each of their products. At the | | | | The Company pays substantial fees to obtain the |
| release of the iPod nano, a commercial was aired | | | | rights to offer to its customers this third-party digital |
| depicting pairs of hands turning over and examining the | | | | content. The Company's licensing arrangements with |
| device, emphasizing its small size, and fighting over it. | | | | these third-party content providers are short-term in |
| With the release of video iPod, a new commercial | | | | nature and do not guarantee the future renewal of |
| was aired showing the new iPod's video playing | | | | these arrangements at commercially reasonable |
| capabilities. The ad featured U2's Original of the | | | | terms, if at all. |
| Species from the Vertigo: Live From Chicago DVD. | | | | Third-party content providers and artists require that |
| Two more ads were released featuring Eminem and | | | | the Company provide certain digital rights management |
| Wynton Marsalis. Although the ad still featured the | | | | solutions and other security mechanisms. If the |
| silhouettes, the backgrounds were more textured and | | | | requirements from content providers or artists change, |
| had patterns or identifiable backgrounds as opposed to | | | | then the Company may be required to further develop |
| the flat colours used previously. An orange 'urban' | | | | or license technology to address such new rights and |
| theme was used in the Eminem version, and a 'cool' | | | | requirements. There is no assurance that the |
| blue jazz look to the Wynton Marsalis variant. | | | | Company will be able to develop or license such |
| On March 17, 2006, Apple released another new iPod | | | | solutions at a reasonable cost and in a timely manner, |
| ad. This ad departed from the traditional silhouette | | | | if at all, which could have a materially adverse effect |
| style, and featured thousands of CD covers pouring | | | | on the Company's operating results and financial |
| into an iPod nano. The ad again uses the tagline "1,000 | | | | position. |
| Songs in Your Pocket", in reference to the original iPod | | | | |