Apple on Wednesday broadened its entertainment ecosystem of hardware, software and services with a new touch-screen iPod, a revamp of its current iPod lineup, and a $200 price cut of its iPhone.
In overhauling its iPod portfolio, which accounts for about three-quarters of the digital music player market, Apple launched upgrades of its two music players, the iPod Shuffle and iPod Nano, while the video iPod was renamed the iPod Classic.
Apple puts the new iPod Touch on display after announcing an upgrade of the product line.
"They're continuing to suck the air out of the room for a lot of their competitors," Mike McGuire, analyst for Gartner, said of Apple's product lineup for the upcoming holiday shopping season, the busiest time of the year for retailers.
Apple chief executive Steve Jobs unveiled the latest products to reporters and analysts in San Francisco. Speculation about the expected iPod revamp consumed bloggers and Apple fans for about a week, a reflection of how Apple marketing can build hype while staying mum about future releases.
In chopping $200 off the $599 price tag of the 8Gbyte iPhone, Apple also killed off its smaller 4Gbyte version, which had sold for $499. The size of the price cut indicated that Apple recognized that the original cost of the popular combination mobile phone and music and video player was too high for mainstream consumers. "It shows they're listening to the marketplace," McGuire told InformationWeek.
The price cut will also make it more likely that Apple would meet its target of selling 10 million iPhones by next June, which would mark the gadget's first year anniversary. Jobs said the company expects to sell 1 million iPhones by the end of the month. "People will be surprised by the aggressiveness of the cut," Gartner analyst Charles Smulders said. "Apple is very focused on achieving its shipment goals for the iPhone."
In an apparent move to nudge iPod users to the iPhone, Apple launched the iPod Touch, which had many of the same features, including the touch-screen interface. "If you use an iPhone, you'll feel very much at home," Jobs said of the iPod Touch.
The iPod Classic, formerly the video iPod, is shown to reporters and analysts following Apple's introduction of a revamped product line.
The Starbucks partnership was a good example of how Apple is merging technology and services in an attempt to build an entertainment ecosystem that customers won't want to leave. Apple said an iPhone or iPod Touch user entering one of Starbucks' 5,800 Wi-Fi-enabled coffee shops in the U.S. would see a special icon featuring the company's logo. Clicking on the icon would enable the person to buy the song currently playing in the caf, or a recently played tuned.
Starbucks founder and chairman Howard Schultz, who joined Jobs on stage, is planning a gradual rollout of the service, which will launch first in New York and Seattle on Oct. 2, then in the San Francisco Bay Area Nov. 7. The service would be rolled out in Los Angeles and Chicago in February and March, respectively. By the end of 2008, most of the metropolitan stores would be covered, with all Wi-Fi-enabled stores in the U.S. offering the service in 2009.