Apple shrinks iPod's size and price

The "iPod Mini," which uses a new generation of tiny hard disks, holds 4GB of storage -- or about 1,000 songs -- in a half-inch-thick case the size of a business card. The device, which will cost $249 (£137) and come in a choice of five colours, will be available in the US in February and worldwide in April.

"We've got a lot of things on the way," he said, wearing his trademark black mock turtleneck and blue jeans. "It's going to be a great 20th anniversary year."

To see a video of Steve Jobs introducing the iPod Mini, click here.

This is a critical period for Apple, which has now branched out from its focus on personal computers to a broad range of multimedia software and hardware, all designed to be used with the PC as the hub. But Windows-based machines are quickly catching up on several multimedia fronts that Apple has dominated, despite its small market share.

On the iPod front, "Apple is going to have instant competition," said Tim Bajarin, president of research firm Creative Strategies.

Digital Networks North America (maker of the Rio line), Creative Labs and Archos all offer 20GB players in the mid-$200 range, for example. That price is equal to the iPod Mini, which holds one-fifth the data, and cheaper than the $399 Apple charges for a 20GB iPod.

Nor will the iPod Mini be without competition. On Monday, Digital Networks said it will release a 4GB Nitrus player, and others are on the way.

Still, Bajarin said the iPod Mini's interface and design would attract buyers.

Expo attendee Monique Krauer-Redmond, who works on information technology for biotech firm Genentech, agreed. "I like the size; I like the weight" of the mini player, she said. "I want to get an iPod -- it just made the decision harder."

But another attendee, Chico State University student Jeffrey Cutter, thought the price could be a deterrent. "It's pretty cool, because it's small," he said. However, "it's still too pricey."

Click here for a hands-on preview of the iPod Mini.

Meanwhile, rivals of the company's successful iTunes song store are popping up at the rate of several per month, and Windows computers are increasingly being used for a wide range of multimedia applications, from powering home entertainment centres to recording professional quality music.

Transformation, 20 years later
The introduction of the Macintosh 20 years ago brought the graphical user interface, windows-based screens and the use of the computer mouse to the mainstream computer market for the first time.

Highlighting the anniversary of the company's most famous product, Jobs showed pictures of the first brochure distributed for the Macintosh and photographs of the original Macintosh development team.

"We had to teach people what a mouse was, what pointing and clicking was," Jobs said. "It was a strange concept."

Jobs also replayed the infamous "1984"-themed advertisement that ran only once, during that year's Super Bowl. The clip, however, did have one modification -- the main character sported an iPod.

But computers, whether Mac- or Windows-based, are now undergoing a substantial transformation. Once largely personal productivity tools or game-playing machines, they are now evolving to the point of rivalling the television and home-entertainment centre for music and video consumption, and they're giving consumers powerful new ways to create their own multimedia projects.

Apple's anniversary-year strategy is geared largely around that transformation.

As part of its own stream of new products, the company is providing a substantial update of its iLife media creation products -- including the addition of home-recording software called GarageBand.

With dozens of simulated software instruments, virtual guitar amplifiers, and recording and mixing capabilities, the software makes much of what is available in professional studios available on the desktop.

Apple has been recognised for its work with musicians, even winning a Grammy in 2002 for its "technical contributions to the music community." Previously, musicians had fewer, third-party tool options, such as Digidesign's Pro Tools package.

The release of GarageBand is recognition that lower-priced software packages such as Sonic Foundry's Acid or Cakewalk's Sonar have begun luring musicians to PCs. GarageBand includes many of the features developed in those earlier programs.

Other software announced on Tuesday includes a new version of the iPhoto digital photography package, which will now support up to 25,000 photos without slowing down, Jobs said. Previous versions had slowed substantially when trying to load a large number of photos.

The new version also allows easy sharing of photos between different computers over a wireless or wired network connection, using the company's Rendezvous software.

iMovie, Apple's basic digital video-editing software, also includes several new features, such as improved audio handling and title making, and the ability to import video from Apple's iSight Webcam. iDVD, the company's DVD-creation software, will have improved navigation and encoding capabilities.

The iLife package, including GarageBand, iTunes, iDVD, iPhoto and iMovie, will cost $49 or will be free with new Macs, Jobs said. The company will no longer provide free downloads of iPhoto or iMovie, which is a strategy that it seriously considered last year and that could anger some customers.

iPod, iTunes moving ahead
The $249 iPod Mini was the most anticipated announcement of the show, as rumors of smaller and cheaper players had circulated for weeks. Jobs also said the existing 10GB iPod will be expanded to 15GB while retaining its $299 price tag. Like the older iPods, the Mini will work on Macs and Windows PCs.

Jobs noted that the iPod has a 31 percent market share among all MP3 players sold, as of November. Jobs also confirmed that the existing iPod was a strong seller during the holidays, with 730,000 of the players selling last quarter.

Focusing on the company's iTunes music download store, Jobs said the company had now sold more than 30 million songs, up from 25 million in mid-December. The rate of purchases spiked in late December, reaching close to 1.9 million songs a week, he said.

Jobs also showed figures from Nielsen/NetRatings that show that the iTunes store still has 70 percent of the legal online music download market, despite increasing competition from rivals such as Napster and Musicmatch.

"It feels great to get above that 5 percent mark, doesn't it," Jobs remarked, referring to the company's market share in the broader computer market, which has stayed below 5 percent for years.

The music store has been a core focus for Apple since last spring, when it released the first Mac-only version of the iTunes download service. The company released a Windows version in October, in a move that marked Apple's only major Windows-based software, aside from its venerable QuickTime multimedia software, and underscored the importance of the download service to its corporate strategy.

Jobs previously said Apple doesn't make substantial profits on the sale of songs, however; it instead relies on the store to help drive sales of its profitable iPod.

The announcements come just days ahead of the Consumer Electronics Show in Las Vegas, where several other companies, including RealNetworks, are expected to unveil digital song stores.

Although rumours had circulated of protests planned by customers upset about iPod battery life and iBook laptop reliability issues, no such demonstrations emerged before Jobs' keynote. Attendees, largely faithful Macintosh devotees, appeared more interested in hearing about new iPods than complaining about old versions.

Other software announcements included the spring release of Microsoft's Office 2004 and a new version of the Final Cut Express home video-editing software.

The development of Mac Office 2004 is good news for Apple, given that many potential customers consider compatibility with Office to be a key requirement before purchasing a Mac. Microsoft previously said little about the next version of Office for the Mac.

Apple did not announce updates to any of its mainstream Macs at the show, but did introduce new versions of its Xserve server and Xserve RAID storage products.

The new Xserve G5 adds the G5 chip to the rack-mounted server, as well as other changes. A 2GHz single-processor server sells for $2,999, while a dual-processor version sells for $3,999.

On the storage front, Apple introduced an updated Xserve RAID that can store up to 3.5 terabytes of data. The prices range from $5,999 for a 1TB version to $10,999 for the 3.5TB version.