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Apple Covers Gift-Buying Scene With 2 Versions of iPod Digital Music Player

Posted on: Sunday, 20 November 2005, 21:00 CST

By John Boudreau, San Jose Mercury News, Calif.

Nov. 21--There's only one thing likely to be a bigger hit this holiday season than the iPod nano: the video iPod.

Apple Computer's got the gift-buying scene covered with two versions of its iPod digital music player. If last year's holiday season is any guide, retailers could have a hard time keeping the iPod in stock. But with two new models, shoppers might have trouble choosing.

West Valley College student George Perez found himself in that very predicament last week. He intended to pick up a nano for himself at the Apple store at Westfield Valley Fair in Santa Clara. Then he gazed at the slender iPod video, which packs considerably more storage capacity, plus the ability to play music videos, TV episodes and other video.

"The nano got me because it's so small. But for $50 more, you can get all this," Perez said, nodding at a 30-gigabyte iPod, which sells for $299. The 4-gigabyte iPod nano sells for $249.

Analysts, too, are a bit divided about how many shoppers will view the iPod video as an incremental upgrade or a reason to toss aside their old iPods and buy the new model.

Cupertino-based Apple has shown there is an appetite for video. The company, which does not break out sales of its various iPod models, announced Oct. 31 that it had sold more than 1 million videos from its iTunes music store in just three weeks. Consumers can download music videos, short films from Pixar and select TV programs, such as "Desperate Housewives" and "Lost" for $1.99 each.

The brisk sales indicate a market for digital video, but not necessarily the mass appeal of the iPod video, said Ben Bajarin, an analyst with market researcher Creative Strategies. "That's not people buying them to play them on video iPods because there aren't a million video iPods out there," he said.

At this point, Bajarin believes the iPod video players appeal more to video enthusiasts and those who want the extra storage space. "It's not one of those products that will jump off the shelves," he said.

The diminutive iPod nano, analysts say, is distinct from anything else on the market and, in particular, appeals to women.

"The nano is clearly the big seller now," Bajarin said.

To summarize:

--The iPod nano offers stylish subtlety, and weighs in at 1.5 ounces. It has a compact 1.5-inch color screen and employs the same ease-of-use engineering of its bigger brother. The 4-gigabyte model, priced at $249, will hold 1,000 songs or 25,000 photos, while the 2-gigabyte model is priced at $199 and stores about half that in flash memory.

--The iPod shuffle, Apple's bargain-priced music player that looks like a stick of gum, comes in two models: The 512-megabyte model holds about 120 songs and is priced at $99; the 1-gigabyte version stores 240 songs and is priced at $129. The shuffle does not have a lighted screen or standard iPod scroll wheel.

--The iPod video is the full-size model, priced at $299 for the 30-gigabyte, 7,500-song version, and $399 for the 60-gigabyte, 15,000-song version. The portable music/video players have 2 1/2-inch screens.

The iPod video "is doing very well," said Shaw Wu, an analyst with American Technology Research. "It's doing better than expected." Resellers such as Amazon.com have had a hard time keeping enough in stock, Wu said.

And in a note to investors Wu wrote that the video iPod is "surprisingly outselling even the very popular iPod nano."

Wu estimated that for the quarter ending in December, Apple will sell 9.4 million iPods, 5 million iPod nano models and 3 million iPod video versions. The balance will be the iPod shuffles and the now-discontinued iPod photo.

Tai Nguyen picked up an iPod nano as a gift for a friend last week at the Apple store at Valley Fair. He brushed past the iPod videos. Nguyen said he had no interest in upgrading to the latest model for himself.

"I got the 40-gigabyte last year," he said. "I don't need the video."

On the other hand, Adolfo Jimenez, a first-time iPod buyer, said the video capability makes the device "complete" and is what prompted him to buy now. He plans to put video of his baby daughter on his iPod.

"I can watch the video and listen to music," Jimenez said. "It's very complete."

Jupiter Research analyst Michael Gartenberg said Apple has covered the range of consumer enticement points in the still-emerging music player market.

"Apple has done a great job of refreshing and segmenting the product line," he said. "You wonder what they are doing in Cupertino right now."

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AAPL,

Source: San Jose Mercury News

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