Apple to Introduce a Cheaper iPod

I think its time for me to finally buy one....


Apple to Introduce a Cheaper iPod

Maker Plans Budget Model
In Effort to Fend Off Rivals
And Broaden Its Market
By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL


Apple Computer Inc.'s iPod was the season's must-have holiday gift, despite its daunting price tag. Now, just weeks after pricey versions of the sleek portable music player were flying off the shelves, Apple is expected to roll out a significantly cheaper version.

Apple is expected Tuesday to introduce a new iPod that costs much less than its current $299 entry-level model, according to people familiar with the matter. (The top-of-the line 40-gigabyte iPod holds 10,000 songs and costs an eye-popping $499.) Analysts believe Apple could price the new iPod as low as $200. While that's more than the $100 figure that has circulated on Apple rumor Web sites in recent weeks, it's still a sharp enough markdown that Apple hopes will attract a much larger audience of music and gadget lovers.

Apple's move is expected to put pressure on a new crop of rivals to trim their prices.

Apple declined to comment on any new products it may be introducing this week, expected to be announced at the MacWorld conference in San Francisco.

Introduced in October 2001, the iPod was the first digital music player to combine huge song storage capacity in a style that hipsters could feel proud about clipping to their belt buckles. The gadget featured a navigation wheel that is regarded as one of the most-efficient ways to comb through a large number of songs.

Price Envy: Holiday shoppers paid top dollar for iPods like this one.


Apple has previously said it has sold more than 1.4 million of the devices, which have become icons of cool among everyone from traditional gadget-heads to music heavyweights. In the video for his hit song "P.I.M.P.," hip-hop star 50 Cent is seen scrolling around the song collection on his white iPod. A slew of slick iPod cases and accessories are available from companies trying to ride the craze.

The first iPod cost $399 and had a PC-like hard-drive with five gigabytes of storage -- enough to hold upward of 1,000 CD-quality songs downloaded from a user's computer. Apple has subsequently crammed more and more storage into the iPod -- the $299 10-gigabyte version stores upward of 2,500 songs.

The iPod was a huge hit this recent holiday season, driven in part by a major advertising campaign, featuring songs from the bands Black Eyed Peas and Jet. Amazon.com Inc. and other retailers periodically sold out of their stock of iPods in the Christmas shopping frenzy. Charlie Wolf, an analyst at brokerage firm Needham & Co., estimates Apple sold 450,000 to 600,000 iPods during the holiday quarter.

"It was right up there with the most popular products this holiday season," says David Weisman, senior director of home merchandising at Crutchfield Corp., a retailer that ran out of its iPod stock at different times during the holidays.

Needham's Mr. Wolf says the underlying components of the iPod, mainly its hard drive, have dropped enough in price that Apple could profitably charge customers $200 for a low-end device with enough space for 1,000 songs, but they likely couldn't slash the price to $100.

The reason, he says, is Apple could potentially steal some market share from the low end of the digital-player market, which is studded with cheap devices that can't hold as many songs in part because they use a different storage technology than Apple. One such device, the Nomad Muvo, costs a mere $63.20 on Buy.com, but stores only about 12 songs -- less than a CD's worth.

Pricing low is risky for Apple, which has made the iPod the linchpin of a broader foray into the music business. Apple also sells downloadable songs for 99 cents each through its iTunes Music Store, but the company has said it makes little profit off the site. Apple Chief Executive Officer Steve Jobs has said he views the music site as a way to sell more iPods. A $200 iPod would likely offer profit margins in the "single-digits or low double-digits" compared with profit margins ranging from 20% to 45% for its higher-end models, says Mr. Wolf.

Apple is also beginning to face tougher competition from big companies in the class of high-capacity music players that it currently leads. Dell Inc. last year started selling a $249 music player with 15 gigabytes of storage, or space for about 3,745 songs. That's cheaper than Apple's lowest-priced iPod and more storage capacity. SonyCorp. and Hewlett-Packard Co. are expected to introduce devices that are more competitive with the iPod. Some competitors are emphasizing features like long battery life for their products. IPod has come under criticism from some users for batteries that don't last long enough.

Apple has a long history of introducing ground-breaking products that are eventually duplicated by competitors. The company's Macintosh computers were the first popular machines to sport user-friendly graphical interfaces, but Microsoft Corp. ended up far surpassing the Mac market with Windows. Some analysts predict the same fate could befall the iPod.

For now though, none of Apple's rivals has created portable players with the coolness quotient of the iPod. It's hard to imagine other electronics devices inspiring the fan sites that have cropped up in homage to the iPod. One site, iPodlounge.com1, features one of the more curious tributes to the device -- a section called "iPods Around the World" consisting of tourist-like snapshots of the devices in front of everything from the ruins at Machu Picchu, Peru, to Kuwait. The site has close to 2,000 photos, submitted by iPod users.

But can you change the battery?

I've been keeping an eye on the Rio Karma player. 20 gb drive and it lets you play .flac and ogg vorbis. I saw a link for one today at $249 after rebate.

iPod mini $199

$249

In reverse chronological order:

- It's over
- Jobs is summarizing
- Mac or PC. $249. Shipping next month in the US. April worldwide
- Just one more thing... about the iPod mini. It comes in colors. Gold, Silver, Blue, Pink and Green. A whole family of colors. Anodized aluminum.
- Supports both Firewire and USB2. Can charge from USB2 or Firewire. both cables are supplied. And we supply a new belt clip with it. Two accessories. A dock, and am armband.
- When you turn it on, you don't get some cheesy user interface, you get the same user interface as the iPod. We added buttons to the solid state scroll wheel.
- Even smaller then the iPod. It is the size of a business card.
- Instead of 256MB, it's got 4000MB (or 4GB). Instead of 60 songs, it holds 1000 songs. It is half the thickness of these other MP3 players. And we are going to sell it for $249.
- We are going to introduce the second member of the iPod family today. to go after these guys. It's called the iPod Mini.
- Also these players have a bad user interface.
- So, the iPod. Now I want to go back to this market share data. I want to drill down into this a little more. Now, we look at this, and the iPod has the 31% marketshare. What's the rest? The big chunk is flash... about 60% of that. 30% are Flash players between $100-$200. Equal 30% that's under $100. We looked at this high end flash market and we want to go after that. The under $100 flash players get put into a drawer since they don't hold enough songs.
- Last thing. A new ad. People have really liked the new Ad campaign.
- Second thing is a pair of in-ear headphones. come in a cool box. $39.
- Today, we are updating the 10GB to 15GB today for the same price $299.
- In Oct/Nov. We had a 31% marketshare in units. and 55% in revenue. #1 in the entire MP3 space. We think December #s are going to be higher
- Over 2 millionth iPod sold in December. Showing sales curve. (going up)

And the battery?

Originally Posted by TimmyTimmy

And the battery?

Good question...

I hope this doesn't put a damper on the success Apple has had recently. Does anyone know if this problem has cropped up in the desktops?

Apple Problems Brewing

Originally Posted by TimmyTimmy

And the battery?

I don't even have to see one to tell you it won't have a battery compartment.

There is no way to fit one in and keep the current thin form factor, and making it bigger isn't really an option.

So the battery will be power-user replaceable, or apple servicable. just like the current iPods.

--nw

It appears to be an internal battery... which is pretty much necessary for something this small.

Maybe this will goad Apple into inventing a pocket-sized cold fusion reactor.

Fuel cell is where the action is at. I'd buy a Powerbook with a 10 hour fuel cell.

Originally Posted by Pete Teoh

$249

How disappointing.

• For $50 bucks more you can get a slightly larger "classic" iPod that holds almost 4 times as much.
• At $50 less, the mini would have been much more competitive with other players, like the Rio that Jobs was comparing to the mini at MacWorld.
• The current price level could mean the mini would cannibalize sales from other iPods, rather than gaining market share.
  

Originally Posted by elbert

How disappointing.

• For $50 bucks more you can get a slightly larger "classic" iPod that holds almost 4 times as much.

I think I'll go with the new "classic" 15GB ipod for $300.

While I'm no marketing mgr, I predict we'll see another $50 price cut from Apple on the mini within 6-8 weeks (prolly less).

I agree, the $50 difference is absurd. It will be interesting to see how sales go.
Keep in mind the great number of people who have between zero and 1000 mp3's total, and the $50 savings would make a difference. Really, there are a huge number of people who don't know what a gigabyte is. There are a lot of people who are just catching on.

Another key market may be Japan... Smaller and cuter is a big deal in that market.


--nw

Originally Posted by hts

While I'm no marketing mgr, I predict we'll see another $50 price cut from Apple on the mini within 6-8 weeks (prolly less).

I was just thinking that too. Let the early adopters buy it now, and drop the price soon.

Originally Posted by nowonder

I agree, the $50 difference is absurd.

I think people realize that miniaturization costs money. They see teeny cell phones costing more than big clunky ones, low-profile subnotebooks costing more than clunky ones, etc.

To some people, the tradeoff is worth it... if I used an iPod while running every morning, for example, I'd want the iPod mini, with its armband.

The mini also comes with accessories the 15GB low end standard iPod does not include, IIRC.

Originally Posted by elbert

How disappointing.

• For $50 bucks more you can get a slightly larger "classic" iPod that holds almost 4 times as much.
• At $50 less, the mini would have been much more competitive with other players, like the Rio that Jobs was comparing to the mini at MacWorld.
• The current price level could mean the mini would cannibalize sales from other iPods, rather than gaining market share.
  

I was having this conversation with a coworker. I think it WILL eat into 15Gb iPod sales, but looking at the two side-by-side, especially in person where the size difference will be MUCH more apparent, with the colored metal cases (never liked the all-snow look) and the, IMO, better controls (closer to the original iPod) it's not a bad move at all. Unless you're the type to keep your entire MP3 collection on the iPod or use it as a portable HD, the 4Gb limit isn't a huge deal. And if Apple is smart, they would leave the option (hack) open to swap out the 4Gb MicroDrive with a larger one in the future. I agree, $199 would be the Magic Number for this device, and I'm willing to bet that it will happen sooner rather than later.

Originally Posted by nowonder

Another key market may be Japan... Smaller and cuter is a big deal in that market.

I can guarantee you Japan will go bonkers over this one. The multi-colored metal shell is also very Japanese. Most small metal digicams (Sony P/U/T series, Canon IXY) come in multple colors there where we only get silver.