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iSuppli backs new iPods & slates iTunes video

First analysis of Apple's big product launch

Analysts at iSuppli have criticised the lack of video content on the iTunes Store, though broadly backed the new products announced by Apple yesterday.

iSuppli believes Apple's $200 price cut on the 8GB iPhone will help Apple maintain its market lead in smartphones and future phone sales.

Although some have speculated the move comes in response to disappointing sales of iPhone, iSuppli's consumer research indicates that the iPhone outsold all competing smartphone and feature-phone models in the US in July on an individual basis. iSuppli's research indicates that Apple was generating a robust hardware margin at its previous pricing, and will still be profitable at the new pricing.

The new iPod nano adds video playback and features a larger two-inch display with 204 pixels per inch. iSuppli notes its own research indicates that 64 percent of US consumers have "at least some interest in using video on their MP3 players". Nearly 10 percent of US consumers were already using video by the end of 2006.

iSuppli predicts 69 percent of MP3 players will support video by 2011, with shipments of flash-based video players growing 91 percent annually.

However, while Apple emphasised video at the start of yesterday's event it did fail to follow this up with any content-related development for video, observed Chris Crotty, senior analyst, consumer electronics, for iSuppli.

"Historically, Apple has coordinated hardware and content launches more effectively," Crotty said. An announcement involving video may also have diffused the fall-out resulting from Apple's recent quarrel with NBC, which will no longer be distributing its content through iTunes.

The analysts also note that the introduction of the iPod classic appears to be a "stop-gap measure", noting that a significant product refresh in this category may not occur until Apple can secure sufficient flash memory at an affordable price to provide high-capacity options.

"It raises the question of why a company would offer its best display, needed for videos - particularly films - without employing the corresponding high storage capacities useful for video storage," iSuppli notes.

"Why was Apple against the idea of an iPod touch with a hard drive? It seems like Apple had anticipated flash prices being lower and being able to offer higher capacities for the iPod touch," iSuppli said.

Despite that criticism, Apple's Wi-Fi implementation appears more powerful than those of its competitors, Crotty said. Apple has consistently executed better after adding a particular feature, whether it's Wi-Fi for the iPod Touch or the high-resolution display for video on the new nano, the analysts said.

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