Apple's iPod spurs mixed reactions

The Mac maker announces a digital music player to be released Nov. 10 that can store 1,000 songs. Analysts weigh its pros and cons.

CUPERTINO, Calif.--Apple Computer unveiled on Tuesday the iPod, a digital music player that can store 1,000 songs on its hard drive.

The product, the size of a deck of cards, was unveiled during an event at Apple's headquarters here.

The stainless-steel unit costs $399, has a 5GB hard drive, connects to a Mac using FireWire, includes a 10-hour lithium polymer battery, offers 20 minutes of anti-skip protection, and works with Mac OS 9 and Mac OS X. It will be available Nov. 10.

"This is going to be the hottest gift this holiday season" for Mac fans, Chief Executive Steve Jobs said when he introduced the device.

Apple iPod

Jobs said the iPod offers three breakthroughs: ease of use, ultra-portability and its ability to sync automatically with iTunes. Apple's iTunes software is used for playing digital-audio files and burning CDs.

As first reported by CNET News.com, speculation about the device kicked into high gear last week when Apple invited journalists and industry analysts for "the unveiling of a breakthrough digital device." Apple's teaser in the invitation stated, "Hint: it's not a Mac."

Apple also used the event to announce iTunes 2 software, which adds built-in support for the iPod. The free download will be available in early November.

The iPod comes with a screen for displaying artist name, song title and album name. The liquid-crystal display has a resolution of 160 pixels by 128 pixels and offers an LED backlight.

With the FireWire port, people can download an entire CD onto the iPod in under 10 seconds and 1,000 songs in less than 10 minutes, according to the company.

The iPod measures 2.43 inches by 4.02 inches by 0.78 inches and weighs 6.5 ounces.

Mixed reactions
Analysts offered mixed reactions to the iPod--especially to its $399 price tag.

IDC analyst Bryan Ma said Apple may take some heat for entering the consumer electronics market, which typically has lower profit margins than Apple gets from its computers. But, he added, the iPod could serve an important function: convincing people to buy a Mac instead of a PC.

"It's another incentive for them that can convince people to buy a Mac," Ma said.

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 Apple's musical iPod unveiled
Steve Jobs, CEO, and Philip Schiller, VP worldwide product marketing, Apple

The iPod does cost considerably more than the nearest competitor with a portable hard drive--the $249 6GB Nomad Jukebox from Creative Labs. But Ma said the iPod has significant advantages in terms of its size, battery life and anti-skip protection.

"They've totally polished...the product," Ma said of Apple. "If I were an engineer at Creative Labs, I'd be scrambling."

Technology Business Research analyst Tim Deal dinged the $399 price as "a little high." But he noted that the iPod's FireWire connectivity allows for faster song downloading than USB. The iPod also sports "a significant battery life and a fast recharge speed," he said.

Deal also praised that fact that the iPod fits into Apple's digital hub strategy. "However, I question the company's ability to sell into a tight consumer market right now at the iPod's current price."

The iPod is another stab at Sony's success in the consumer market, Deal noted.

"Clearly Apple is following Sony's lead by integrating consumer electronics devices into its marketing strategy, but Apple lacks the richness of Sony's product offering. And introducing new consumer products right now is risky, especially if they cannot be priced attractively," Deal said.

Stephen Baker, an analyst at NPD Intelect, said that the iPod will likely stand out for its large storage capacity but predicted that the device may have trouble digging out a niche in the market.

The most expensive MP3 players that use flash memory sell for around $249 right now, with the average player selling for less. Many are also adding features for playing mini-CDs. Sonicblue's Rio 600, for instance, sells for $199. It comes with 64MB of flash memory for storage. Apple's new device has far more storage--enough for 50 hours of music--but it costs twice as much.

The iPod has "good features, but this is a pretty competitive category," Baker said. "The question is whether people want that robust of a feature set with that high of a price."

Apple confident
Apple began work on the iPod roughly at the beginning of the year. "We knew we wanted to make it for Christmas," said Greg Joswiak, senior director of hardware at Apple. "That was an obvious goal."

Apple would not say how many it is producing, but there are about 7 million Macs with a FireWire port.

"We have very little doubt that every (iPod) we build, we can sell," Joswiak said.

In order to achieve its anti-skip protection, iPod includes 32MB of memory. Joswiak said the memory also enables the device to achieve its 10 hours of battery life by limiting the amount of time the hard drive is spinning.

In addition, the device can act as a portable hard drive, storing files on space not used for music.

Jobs said the focus this year was on bringing the iPod out for Macs, but he added that the company will consider making it compatible with Windows-based PCs "when we get some free time."

"While we know the experience won't be as good (with a PC), we will probably look at that down the road," he said.

The device can play music stored in four formats: MP3, MP3 variable bit rate, WAV and AIFF.

The device does not use a digital-rights management scheme.

When it auto-syncs to iTunes, the iPod can only connect to one copy of the software on one Mac. But a manual mode allows the device to share songs between any number of Macs.

However, Jobs said Apple does not condone stealing music. In fact, he said, the company spent $50,000 on CDs to go along with review copies of the unit so that Apple would not be promoting piracy.

The iPod does come wrapped in plastic with a warning in English, French, German and Japanese that states, "Don't steal music."

"Piracy is not a technological issue. It's a behavior issue," Jobs said, adding that all the encryption schemes that have been developed can also be broken.

He added that Apple tried to go out of its way to show its concern for artists' copyrights, despite the relatively open nature of its hardware.

"We own a lot of intellectual property ourselves. We're one of the few companies in the industry that does," he said.

Staff writer Richard Shim and News.com's Michael Kanellos and Joe Wilcox contributed to this report.

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