Apple Launches New iPods, Announces Massive Price Cut for iPhone

At a special event Wednesday, Apple announced its late 2007 lineup of iPod portable media players, most of which have been updated significantly since last year. Among the new iPods is a completely new iPod touch model that is based on the iPhone and a wider, video-capable iPod nano. Additionally, Apple took the unprecedented and surprising step of reducing the price of the iPhone $200 from $599 to $399, a move that has outraged many early adopters but should boost sales dramatically. Apple's announcements yesterday come amidst some upheaval in the digital media world: Media conglomerate NBC says it is leaving Apple's iTunes Store in favor of the unproven Amazon Unbox service, while Microsoft announced Wednesday that it is lowering the price of its Zune MP3 player from $249 to $199 in the US.

The only iPod that wasn't dramatically changed in some way is the diminutive iPod shuffle: That screenless device remains at $79 and still offers 1 GB of storage. New this year, however, are several bright new colors, including a bright red version that will help AIDS victims in Africa through the (PRODUCT) RED program.

The iPod nano was substantially changed with a wider, video-capable QVGA screen and a wider body to accommodate it. The new nano also features a more visual new user interface and ships in 4 GB ($149) and 8 GB ($199) variants. Like the nano, it is available in a variety of colors as well.

The old iPod with video has been renamed to iPod classic and retains the same basic form factor as its predecessor. Now, however, it ships with massive amounts of storage, with both 80 GB ($249) and 160 GB ($349) versions. The iPod classic comes in white and black versions, as did its predecessor.

The big news yesterday, perhaps, is the iPod touch, an iPhone-like iPod with a multitouch screen, amazing visual media views, and landscape video playback functionality. Available in 8 GB ($299) and 16 GB ($399) versions, the iPod touch is what customers have been clamoring for since Apple announced the iPhone back in January: A true video iPod. But the iPod touch goes beyond that with integrated Wi-Fi, allowing the device to purchase songs over the air from the new iTunes Wi-Fi service, which offers the full iTunes Store catalog. Unlike the other iPods, the iPod touch won't be available until later this month, Apple says.

The iPhone's massive price drop was also big news, given how recently Apple began shipping the device. Amid speculation that iPhone sales have slowed dramatically in recent days, Apple's price cut seems designed to jump start sales and open up the expensive device to a more mainstream part of the market. To date, Apple fans and gadget early adopters were likely most of the iPhone user base. The hope is that this price cut, while angering many earlier buyers, will turn the iPhone into a mass market success like the iPod. Apple also announced some iPhone functional changes, including ringtone support through the iTunes Store and support for the new iTunes Wi-Fi service.

Meanwhile, despite the strength of Apple's market position--the company has sold 110 million iPods to date and over 3 billion songs from the iTunes Store--all is not well in Apple land. Last week, NBC announced that it would pull its content from the iTunes Store over a disagreement with Apple on variable pricing. NBC, which according to analysts is responsible for 40 percent of TV show sales through iTunes, says that Apple has lied publicly about NBC's desire to raise prices. Instead, NBC says it was looking for more flexible pricing, including steeper discounts for full season purchasers. This week, NBC found what it was looking for in online retailer, which offers a video download service called Unbox. NBC's shows will be made available via the service this year for prices that undercut what Apple was offering. The problem, of course, is that Unbox is incompatible with the iPod, diminishing the consumer relevance of this deal.

And finally, Microsoft quietly announced Wednesday before the Apple event that it was dropping the price of its Zune portable media player from $249 to $199. The single Zune model, which sports a 30 GB hard drive and a bigger screen than the iPod classic it most closely competes with, has done decent but not spectacularly over the past year. According to NPD, Microsoft has sold over 1 million units and has typically controlled about 10 percent of the market for hard drive based MP3 players. However, looking at the bigger picture, Zune represents only 3 percent of the entire MP3 player market, compared to 71 percent for Apple. Microsoft will reportedly step up competition in this space later this year with at least one new Zune model.

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