So the conversation onstage focused largely on the iPod, iTunes and Apple’s (AAPL) relationship with the music industry, and the forthcoming launch of the iPhone. A few months earlier, Jobs had penned a widely read open letter, “Thoughts on Music,” calling on the “big four” music companies to sell their music without digital rights management. iTunes was already the world’s largest online music distribution system, so his thoughts generated quite a bit of discussion–and a fair bit of controversy.

Today, the iPhone is nearly three years old. It has sold 50 million units worldwide, and the multitouch interface and app ecosystem it pioneered have arguably revolutionized the smartphone industry.

Today, the iPad is no longer a rumor. Launched just two months ago, it has already sold two million units and seems poised to revolutionize an industry or two of its own.

And today, Jobs is once again shaking up an industry with another open letter, “Thoughts on Flash,” a withering rumination on Adobe’s (ADBE) Flash platform and the future of online video.

Much has changed in three years. But one thing has remained constant: Apple, under Jobs, continues to drive innovation in every industry it touches.

Liveblog

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

5:54 pm: In a few moments, Steve Jobs will once again take the D stage for the opening session of D8.

6:21 pm: Following a welcome from News Corp. (NWS) CEO Rupert Murdoch and a few introductory remarks from Walt and Kara, the pair welcome Jobs to the stage.

6:22 pm: The first question is about Apple surpassing Microsoft in market valuation. Jobs says “It’s surreal, but it doesn’t really mean anything.”

6:23 pm Walt references Jobs’s recent “Thoughts on Flash” essay. Even if everything you say is true, is it really fair to consumers to be so abrupt and cut them off, he asks? Jobs doesn’t seem to think it’s unfair. “Apple is a company that doesn’t have the most resources in the world, and they way we’ve succeeded is to bet the right technological horse, to look at technologies that have a future. We try to pick things that are in their springs. And if you choose wisely, you can be quite successful.”

Apple has a history of doing that, Jobs says, noting that Apple was the first company to dump the floppy and later, to adopt USB. “Sometimes when we get rid of things, people call us crazy….But sometimes you just have to pick the things that are going to be the right horse to ride forward….And Flash has had it’s day…but HTML5 is starting emerge….The video looks better and it works better and you don’t need a plug-in to run it. And while 75 percent of the video on the Web may be available in Flash, a lot of it is available in HTML5 as well.”

6:29 pm: What about developers, asks Walt. How are they impacted? Jobs draws a quick parallel to Apple’s HyperCard. “HyperCard was huge in its day,” he says, going on to note that the thousands of apps on the iPhone OS platform are testament to developer involvement.

6:31 pm: Jobs: “We didn’t set out to have a war over Flash. We made a technical decision. And it wasn’t until the iPad that Adobe raised a stink. They came after us….That’s why I wrote “Thoughts on Flash.”…We were getting tired of being trashed by Adobe in the press.”

6:32 pm: Walt: What if people demand Flash. What if they say the iPad is crippled without Flash. “We’re just trying to make great products,” says Jobs again. “We don’t think Flash makes a great product, so we’re leaving it out. Instead, we’re going to focus on technologies that are in ascendancy. If we succeed, people will buy them and if we don’t they won’t….And, so far, I have to say, people seem to be liking the iPad. We are selling an iPad every 3 seconds.”

6:35 pm: Ah! The inevitable lost-iPhone question. Walt quickly recounts the history of the discovery of the iPhone prototype, its revelation on Gizmodo and the subsequent police investigation that involved the seizure of a blogger’s computers. Where do you come down on this, asks Walt. “To make a wireless product work well, you have to test it. And one of our employees was carrying one and there’s a debate about whether it was left in a bar or stolen….And the person who found it decided to sell it…and it turned out this person plugged it into his roommate’s computer and that roommate called the police.”

6:40 pm: Jobs continues, “And the police showed up and took this guy’s computers…and the DA is investigating it…and I don’t know where it will end up.” In other words, it’s a police matter. That said, Jobs is very clearly irked by the whole debacle.

6:40 pm: Any comments on the Foxconn suicides which we’ve been hearing so much about, asks Kara. Apple is extraordinarily diligent and rigorous about vetting its manufacturing partners, Jobs answers. “Foxconn is not a sweatshop,” he adds. “They’ve got restaurants and swimming pools….For a factory, it’s a pretty nice factory.”

6:42 pm: Jobs notes that the recent suicides at Foxconn, which number 13 at last count, I think, are still below the national average in the U.S. “But this is very troubling to us,” he says. “So we send over our own people and some outside folks as well, to look into the issue.”

6:44 pm: Walt: You spent a significant portion of your career involved in a platform war with Microsoft (MSFT). And you lost. But now there are new platforms out there and you’re doing quite well on them, as are others–Google (GOOG) and Facebook. So there’s a new platform war going on. Do you see it like that?

No, we don’t see ourselves in a platform war says Jobs. “We never saw ourselves in a platform war with Microsoft, either…Maybe that’s why we lost. … But we never thought of ourselves in a platform war; we just wanted to make good products.”

And what about Google, asks Walt. The relationship has clearly changed there, hasn’t it? “Well, they’re competing with us,” says Jobs, referring to the mobile space. “We didn’t go into search.”

6:47 pm: Kara: How do you look at Google as a competitor? Eric [Schmidt, Google CEO] was on your board.

Jobs: “They decided to compete with us and got more and more serious.”

Walt circles back, asking if Jobs doesn’t feel betrayed by Google. Jobs, clearly not buying in to this line of questioning, parries: “My sex life is great, how’s yours” he says trying to end it.

6:50 pm: Kara asks if Apple might remove Google from the iPhone and iPad. Jobs says no. Again, he notes that Apple is simply trying to make the best products it can and that the market will decide whose is better. “Right now, we have the better product.”

6:52 pm: Walt wonders why Apple bought Siri, a search company. “I don’t know if I would describe Siri as a search company,” Jobs says. “They’re not in the search area…they’re in the AI area.” Then he adds, a bit vehemently: “We’re not going into search.”

6:53 pm: Walt asks about AT&T (T), whose network continues to face criticism. Jobs: They’re doing pretty good in some ways and in others they could do better. We meet with them once a quarter. Remember, they deal with way more data traffic than anyone else. And they’re having trouble. But they have the fastest 3G network and they’re improving. I wish they were improving faster….I’m convinced that any other network, had you put the iPhone on it, would have had the same problems.

6:56 pm: Jobs continues: We found a way to sell the phone that we wanted to sell and to define it the way we wanted to define it. We were able to change the rules of the game, and that’s what got us excited about the phone business….AT&T took a big leap on us and decided they were going to trust us to do the right thing with the phone. And that’s worked out quite well for both of us.

6:59 pm: The conversation moves to talk of tablets. Walt asks if Apple knew it would build a tablet before it built the iPhone.

Jobs: “I’ll tell you a secret. It began with the tablet. I had this idea about having a glass display, a multitouch display you could type on with your fingers. I asked our people about it. And six months later, they came back with this amazing display. And I gave it to one of our really brilliant UI guys. He got [rubber band] scrolling working and some other things, and I thought, ‘my God, we can build a phone with this!’ So we put the tablet aside, and we went to work on the iPhone.”

7:01 pm: What does the iPad mean for the publishing industry, Kara asks. Is it the savior that some are touting it as?

“One of my beliefs very strongly is that any democracy depends on a free, healthy press, and so when I think of the most important journalistic endeavors in this country, I think of things like the Washington Post, the New York Times, The Wall Street Journal and publications like that,” Jobs replies. “And we all know what’s happened to the economics of those businesses. I don’t want to see us descend into a nation of bloggers. Anything that we can do to help the news-gathering organizations find new ways of expression so that they can afford to keep their news-gathering and editorial operations intact, I’m all for.”

7:03 pm: Jobs adds that he believes people are willing to pay for content and that content providers are not pricing their offerings as aggressively as they should.

7:05 pm: When you did your presentation on the iPad, you described it as a new category of device, says Walt. But in order for it to succeed, people have to feel that it’s worth carrying around. Do you think the tablet will succeed the laptop, he asks.

Jobs: “When we were an agrarian nation, all cars were trucks, because that’s what you needed on the farm. But as vehicles started to be used in the urban centers, cars got more popular. Innovations like automatic transmission and power steering and things that you didn’t care about in a truck as much started to become paramount in cars. … PCs are going to be like trucks. They’re still going to be around, they’re still going to have a lot of value, but they’re going to be used by one out of X people. … I think that we’re embarked on that. Is the next step the iPad? Who knows? Will it happen next year or five years from now or seven years from now? Who knows? But I think we’re headed in that direction.”

7:10 pm: What are your thoughts on content creation on the iPad, Walt asks, noting that some people believe tablets aren’t good devices for content creation.

“Well, why wouldn’t they be good for content creation,” asks Jobs. “It can’t be that the software isn’t powerful enough, because the software is improving….These devices over time are going to grow to do new things. … You know, people laugh at me because I use the phrase “magical” to describe the iPad. But it’s what I really think. You have a much more direct and intimate relationship with the Internet and media, your apps, your content. It’s like some intermediate thing has been removed and stripped away. …. I think we’re just scratching the surface on the kind of apps we can build for it. I think one can create a lot of content on the tablet.”

What sorts of apps, asks Kara.

Productivity apps…video-editing software, says Jobs.

7:12 pm: Now a question about App Store rejections: Isn’t there a downside to Apple’s efforts to protect its customers from porn, malware, etc.

In reply, Jobs first notes that Apple, by supporting HTML5, supports a completely open platform. But it also supports a curated platform–iPhone OS. And that platform has rules. “We approve 95 percent of the apps that are submitted to the App Store every week and we approve them within in seven days.”

So what happened with that political-cartoon app you declined to approve a few weeks ago, asks Walt.

“We have a rule that says you can’t defame people,” says Jobs, noting that political cartoonists by virtue of their profession sometimes defame people. The cartoon app was rejected on those grounds, he adds. “Then we changed the rules…and in the meantime, the cartoonist won a Pulitzer….But he never resubmitted his app. And then someone asked him, ‘Hey why don’t you have an iPhone app?’ He says we rejected it and suddenly, it’s a story in the press….Bottom line is, yes, we sometimes make mistakes…but we correct them….We are doing the best we can, changing the rules when it makes sense. What happens sometimes is that some people lie, we find it, and reject it, and they run to the press, and get their 15 minutes of fame and hope it will get us to change our minds. We take it on the chin, and we move on.”

7:20 pm: Kara: “What do you do all day?”

Jobs: “I have one of the best jobs in the world. I get to hang out with some of the most talented, committed people around and together we get to play in this sandbox and build these cool products….Apple is an incredibly collaborative company. You know how many committees we have at Apple? Zero. We’re structured like a start-up. We’re the biggest start-up on the planet. And we all meet once a week to discuss our business…and there’s tremendous teamwork at the top and that filters down to the other employees…and so what I do all day is meet with teams of people and work on ideas and new problems to come up with new products.”

7:24 pm: Are people willing to tell you that you’re wrong, asks Walt.

Of course, Jobs answers. The best ideas have to win, no matter who has them.

7:25 pm: What do you imagine the next 10 years of your life is going to be about?

Oddly Jobs replies with a comment about Gizmodo and the lost iPhone prototype. “When this whole thing with Gizmodo happened, I got a lot of advice from people who said you’ve got to just let it slide…you shouldn’t go after a journalist because they bought stolen property and tried to extort you….And I thought about that and I decided that Apple can’t afford to change its core values and simply let it slide….We have the same core values as when we started, and we come into work wanting to do the same thing today that we wanted to do five years ago.”

7:27 pm: But you are going into new businesses, says Walt, trying to redirect Jobs back to the question at hand or at least get him to comment on any new markets that the company is eyeing. Advertising, for example, with its new iAds initiative.

Jobs concedes that Apple is pursuing new businesses like iAds. But he suggests the main reason it’s doing that is to make its developers more money. “We want to help our developers make some money so that they can keep providing free or really low-cost apps to customers,” he says. “That’s why we’re doing it. We’re not going to make much money in the ad business.”

7:29 pm: Jobs continues on the mobile advertising theme. “Something really interesting is happening on mobile phones,” he says. “They’re not mirroring desktops or laptop PCs. If people want to find out what restaurant to go to, they’re not going to their search engine typing in “Japanese” and “Palo Alto,” they’re going to Yelp or whatever app they want. Ads in mobile apps today, you touch them, and what is the first thing they do? They rip you out of your app, send you to the browser and then you’ve got to figure out a way back to your app. So, wouldn’t it be great if mobile ads didn’t take you out of the app, but rather took over the screen, gave you this great experience of an interactive ad, but anytime you wanted you could hit a little button that takes you right back to where you left off in your app? We figured out we could build something like this into the operating system so the apps don’t have to do it. We can make it so that an app developer can add these interactive ads in their apps with 30 minutes’ worth of work versus working with every advertiser to do some custom thing in their app, which is crazy.”

7:31 pm: A question about privacy. Is privacy looked at differently in Silicon Valley than in the rest of the world?

“We’ve always had a very different view of privacy than some of our colleagues in the Valley,” Jobs says. “We take privacy extremely seriously. That’s one of the reasons we have the curated apps store. We have rejected a lot of apps that want to take a lot of your personal data and suck it up into the cloud. Privacy means people know what they’re signing up for. In plain English, and repeatedly, that’s what it means. Ask them. Ask them every time. Make them tell you to stop asking if they get tired of your asking them. Let them know precisely what you’re going to do with their data.”

Q&A

Q: Given the events of the past few years, what would you add to the Stanford graduation speech you gave a few years ago?

A: I’ve no idea. I’d probably just turn up the volume a little bit because the past few years have reminded me how precious life is.

Q: I’d like you to put your Disney hat on for a moment….How do you preserve the value of content?

A: The way that we market movies is undergoing a radical shift. It used to be that you spent a fortune on advertising on TV running your trailers. But now you can advertise on the Web….When we went to the music companies, we said “who is your customer?” And they said, “Best Buy, Tower”…their distribution partners. But that wasn’t their customer. They needed to recognize who their true customer was….So what changed in the music business was not the back end, but the front end. The way that you market to the consumer….The film industry needs to embrace that. And it needs to let people watch the content they want to watch, when they want to watch it and where they want to watch it.”

Q: A complaint about dropped calls on AT&T’s networks. Is someone from Apple working on that?

A: You can bet we’re doing everything we can do….I can tell you what I’m told by reliable people: To make things better, people reallocate spectrum and they do things like increasing backhaul and they put in more robust switches…and things in general, when they start to fix them, get worse before they get better…and if you believe that, things should be getting a lot better real soon.

Q: How is HDCP helping the antipiracy effort?

A: We didn’t invent the stuff. The problem is that Hollywood doesn’t want what happened to the music industry to happen to them. You can’t blame them. But content protection isn’t their business and they’re grasping at straws here. But we’ve got to deal with their restrictions….I feel your pain.

Q: What’s your vision of social gaming?

A: Clearly, iPhone and iPod touch have created a new class of gaming and it’s a subset of casual gaming, but it’s surprising how good the games are. Typical console games cost $40, but on the iPhone, they cost somewhere between free and $10, and gaming on the platform is taking off. We’re trying to do the right things to enable more gaming and social gaming.

Q: Is it time to throw out the interface for TV? Does television need a new human interface.

A: The problem with innovation in the TV industry is the go-to-market strategy. The TV industry has a subsidized model that gives everyone a set top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us… ask Google in a few months. The television industry fundamentally has a subsidized business model that gives everyone a set-top box, and that pretty much undermines innovation in the sector. The only way this is going to change is if you start from scratch, tear up the box, redesign and get it to the consumer in a way that they want to buy it. But right now, there’s no way to do that….The TV is going to lose until there’s a viable go-to-market strategy. That’s the fundamental problem with the industry. It’s not a problem with the technology, it’s a problem with the go-to-market strategy….I’m sure smarter people than us will figure this out, but that’s why we say Apple TV is a hobby.

More Coverage on the Steve Jobs D8 Speaker Page »

There was this from Google Senior Product Manager Rishi Chandra: “We’re going to have the same impact on the TV experience that the smartphone had on the phone experience.”

And then this from Google CEO Eric Schmidt: “TV has not been reinvented in any significant way since color television was brought in in the mid-1960s.”

With Google TV, Google clearly believes it is ushering in the rebirth of television. But, to Schmidt’s point, sure, TV hasn’t been reinvented in 50 years, but not for lack of trying.

The evolutionary path of the device is littered with failed Internet-TV initiatives. As the Time Magazine cover from Apr. 12, 1993 suggests, this is not a new idea. Nor has it been a successful one, at least not in implementations to date.

Steve Perlman’s WebTV, one the earliest products to bring the Internet to television, failed to gain significant market traction and didn’t do much better after it was acquired by Microsoft (MSFT) and turned it into MSNTV.

AOL TV, America Online’s (AOL) effort to extend its dominance from the PC to the television with a Web-TV hybrid, was scuttled in 2003, three years after it launched.

Brought to market with the help of some impressive hardware partners, like Hewlett-Packard (HPQ), Microsoft’s Media Center Extenders never really caught on.

Launched more recently, Yahoo’s (YHOO) Connected TV initiative hasn’t garnered much notice. Then there’s Kodak’s (EK) Theater HD Player, which doesn’t seem to be doing that well either.

So what makes Google (GOOG) think it’s going to succeed where so many have failed? Particularly with a platform that, frankly, looks a lot like TiVo (TIVO) with a Web browser?

Aside from arrogance, that is?

Well, there’s an impressive list of partners. Certainly, adoption of Google TV stands to benefit quite a bit from Sony (SNE), Logitech (LOGI) and Dish Network (DISH) baking it into television sets, Blu-ray players and set-top boxes. And sources tell me other electronics manufacturers will soon join them. Content partnerships with Netflix (NFLX) and Amazon (AMZN) will also help.

But the partnerships that matter most with an effort like this–cable company partnerships–are entirely absent. The simple fact is that cable companies like Comcast (CMCSA) and Time Warner (TWX) not only distribute the majority of the set-top boxes in the U.S, they also have a strong hold over content providers. Unless Google can convince them that their current business model is in need of something like Google TV, pushing the platform into the mainstream is likely to prove quite difficult.

[Image Credit: Time Magazine]

But the company’s origins are interesting indeed. You see, Agnilux was reportedly founded by a group of former Apple (AAPL) employees that includes several from P.A. Semi, the boutique chip design company Apple acquired in 2008. Among them: P.A. Semi founder and CEO Dan Dobberpuhl, former P.A. Semi principal Amarjit Gill, and Mark Hayter, once one of the company’s leading system architects. Already on board at the company: A handful of engineers from Cisco (CSCO) and a software architect from TiVo (TIVO).

Serious talent, but what does Google (GOOG) want with it?

The answer isn’t clear. Unconfirmed reports suggest Agnilux has been working on “some kind of server.” If that’s the case, Google could be thinking of using that server or the design savvy that created it to enhance its own servers, which it designs and builds itself.

That said, Dobberpuhl and company are the folks who presumably led development of Apple’s new A4 chip, which powers the iPad, so it’s possible that Google might have some mobile aspirations here as well. Impossible to say until someone talks. And right now, no one is doing much of that.

Is there a device that would enable me to watch streaming movies from Netflix directly on my TV, without using a computer?

A:

Yes, there are many. A small portion of Netflix’s huge catalog is available for streaming, as opposed to viewing on DVD, and the company has struck deals with various makers of set-top boxes and other TV-connected hardware that allow these movies to be played directly on a TV. Among these are the Roku digital video player, TiVo digital video recorders, and the Xbox 360 and PlayStation 3 game consoles. The simplest and least expensive is the Roku, which starts at around $80. A complete list is at netflix.com/NetflixReadyDevices.

Q:

I’m going to graduate school, and need a PC mostly for word processing. I am not interested in gaming, movies, etc. I am looking at the Asus UL20A. Is that a good idea?

A:

I haven’t reviewed this model, but, if you’re comfortable with its keyboard and screen, you should be fine using it mainly for word processing (though it’s capable of many other tasks). However, there are many competitors in this size and price range, and, unless you have already done so, I’d suggest shopping around to make sure the Asus is the best choice for you.

Q:

Which version of Windows (XP, Vista or 7) runs best using Apple’s Boot Camp?

A:

I have run all three just fine on an iMac using Boot Camp, Apple’s built-in feature for booting Mac hardware into Windows when you like instead of into Apple’s (AAPL) own operating system. However, I would suggest Windows 7. It’s much better than Vista and much more modern than XP.

You can find Mossberg’s Mailbox and my other columns, free of charge, at walt.allthingsd.com.

Write to Walter S. Mossberg at walt.mossberg@wsj.com