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What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0

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Daniel Eran Dilger
Kevin Rose has been trying his hand at making broad sweeping generalizations about the next generation of iPods, but sorry, no digg. Most of his predictions are not even original, and those that are are so vague that they’re really just worthless. Here’s what you can really expect.

Articles in this Series:
What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0
Two Decades of Portable Macs: 1989 – 2009
The iPod Power Behind Apple’s Big Mac Push
A Product Transition: Giving MacBooks the iPhone Touch
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Rose likes to suggest what’s next from Apple, but his guesses only approach reality when they’re based on leaks that occur days prior to an announcement. His flat out guesswork tends to be yet far further removed from reality, indicating that he has no special inside track on things at Apple, nor much of an imagination tempered by realistic appraisal.

A month before the iPhone was unveiled, Rose predicted it would be available from CDMA providers, have a pull out keyboard, and sport two batteries, one for music and one for the phone. Of course, splitting a battery in half is not really a brilliant solution to prevent music playback from running down your phone, but the simple fact that Rose didn’t know about the exclusive deal with Cingular (come on, it was Apple’s only mobile partner to date) and the unlikelihood of Apple tacking on an HTC-esque keyboard makes his guesswork easy to dismiss.

I had imagineered the iPhone as a web browsing iPod (“based on Nokia’s mobile contributions to Safari”) with SMS messaging features, contacts, calendar, and a camera… six months earlier. And CDMA? I recommended Apple “leave Verizon alone and partner with Cingular, TMobile, and MetroPCS using GSM technology.” The difference between my ideas and those from Rose, apart from mine being six months earlier, is that I presented mine as only reasonable ideas with some rationale behind them; Rose insisted he had special knowledge from reliable sources.

iPod Generation 6

Generation 6 iPods
An iPhone Worth Talking About

The Real iPod touch Deets.

Now he’s predicting new iPods. The iPod touch is supposed to get “fairly large price drops to distance itself from the $199 iPhone.” Sorry, wrong. The iPhone is only $199 in the minds of consumers. It gets a subsidy from AT&T, which is why you can’t just buy one for $199 and walk out the door without signing a phone contract. The iPhone’s $2,000 service contract offers plenty of distance between it and the iPod touch.

The iPod touch is not possibly going to get cheaper than the iPhone for a couple reasons. First, obviously, it costs nearly as much to make. The lack of a subsidy pretty much balances out its lack of mobile radio components. Second, Apple isn’t desperately trying to sell the iPod touch. It exists as a product to sell to users who can’t or won’t buy an iPhone because they’re tied to Verizon or don’t want a phone.

Rose worries that the iPhone is “cannibalizing sales of the iPod,” but there’s nothing more Apple would like to do than to feed every iPod user an iPhone. Sure the bonehead analysts will have another field day complaining about how there’s only minor growth among iPod sales while they ignore iPhone numbers, but these guys aren’t easy to reach with basic facts.

Apple has been giving away the $300 iPod touch to students buying a laptop; that looks like an effort to broaden the iPhone platform. Apple wants college kids playing iPhone games and interested in creating their own iPhone software. Left to their own devices, most kids would buy the old hard drive iPod Classic because they think they need to walk around with their entire torrent library of stolen music. (Get off my lawn!)

In any case, we all knew the iPod refresh was coming. I’m pretty sure they’re coming on September 22. I’m also pretty sure that the 8GB iPod touch is going away, making the 16GB model the new $199 version. That outrageous price drop, facilitated by today’s cheaper Flash RAM, would kill the remaining market for the hard drive-based iPod Classic, converting Apple’s entire lineup to Flash RAM. Additionally, it would migrate even more iPod buyers into the installed base of iPhone App Store users and hasten the cannibalization food chain that leads toward the iPhone.

The 16GB iPod touch will be sold next to the existing 32GB model, which was just released earlier this year. For that reason, I don’t see a larger capacity model being introduced now. I don’t see tremendous demand for carrying 64GB of music from people who are also ready to pay for 64GB of Flash.

Nano 4: Zune 2007?

Rose says the Nano will get a redesign that makes it look like last year’s Flash RAM Zune; iLounge already predicted this a month ago, although Rose embellished his version with the idea that “the actual plastic on the outside will be curved,” presumably like a TV from the 80s. How nostalgic! I miss having a wildly distorted tube picture, almost as much as a scratchable plastic iPod screen. Oh the good ol’ days.

Will Apple expend significant resources to make the Nano 4 into a widescreen tall/long player and define a new 4GB hardware model to fit into a niche that is only $50 less than the new 16GB $199 iPod touch? How much room for differentiation is there under $200?

Seems more likely that Apple will instead only release a cheaper version of the existing 4GB Nano that’s closer to $99, leaving room for a $149 8GB Nano in between. That will pull Shuffle buyers up into splurging on a full video Nano. If you want to watch video sideways, you can get an iPod touch for $199. What kind of widescreen cinematic experience can you get with a long/tall Nano/Zune? When I reviewed the Flash Zune, one of the complaints was that half (but only half) of the controls reconfigure when you hold it sideways.

Plus, existing iPod Games wouldn’t work in the widescreen orientation; both the display and the controls would be messed up. On top of that, regular video playback would be forced to play back wide, and/or look bad because its stretched. Microsoft has no qualms with playing video in an odd aspect radio, but the iPod is made by Apple, which has some aesthetic boundaries that constrain its behavior.

 Wp-Content Uploads 2007 12 Cimg7806-1-3

Winter 2007 Buyer’s Guide: Microsoft Zune 8 vs iPod Nano

iPhone 2.1

Rose says Apple will also release “iPod touch 2.1 software, iPhone to get update very soon after.” We already all knew the iPhone 2.1 update was coming, and that it’s going to be significant, and that it is due for release around the same time as the new iPods. Whether the new iPod touch will ship with it in advance of the iPhone would depend on whether iPhone-only features in the release hold it up, but Rose doesn’t suggest any special knowledge or rationale behind this claim.

iPhone 2.1 is supposed to usher in new GPS features and the push Notification system, but the real demand for downloading it will be that it fixes a major problem that currently causes third party iPhone apps to crash on launch and randomly when running. Apple needs to get this out quick before it blows the reputation of iPhone software stability in the minds of users. That’s reason to believe that iPhone 2.1 might ship even before the new iPods, rather than the other way around.

Because software developed using the iPhone 2.1 SDK won’t run on iPhone 2.0.x, expect everyone to need to update their software to download a new generation of 2.1-only apps. This will be free for iPhone users, but might incur a nominal fee for iPod touch users due to accounting rules.

Myths of Snow Leopard 3: Mac Sidelined for iPhone
Ten Big New Features in Mac OS X Snow Leopard

iTunes 8.0

Rose says iTunes 8.0 “it’s a big update with new features,” but doesn’t say what they are. He also says it will be “a real point upgrade” deserving the 8.0 name. However, there is little rhyme or reason to Apple’s iTunes version numbering, and no real correlation between the amount features introduced and the version number increment.

iTunes 2.0 added iPod support after ten months of iTunes 1.0, but iTunes 3.0 only added minor features the next year. It was replaced by iTunes 4.0 a year later, which added the Music Store and AAC support. Two years later, iTunes 5 introduced some cosmetic changes and was immediately replaced with iTunes 6.0 only a month later, without any major new features. Another year later, iTunes 7.0 arrived with a new look, video game support, and Coverflow. It has since seen loads of new features, from support for Apple TV to the iPhone to new iPods and new movie rentals, all of which were only numbered as minor updates.

We’ve had iTunes 7.x for two years now, so iTunes 8.0 is not really ballsy prediction at this point. Of course, Apple is just as likely to skip ahead and release iTunes X. And if iTunes X isn’t ready, we can might even get iTunes 7.8 and 7.9 over the next couple years. Oh my sides.

With the likelihood of entirely new iPod touch or Nano models being quite low (after all, the Zune isn’t going to get a refresh until late next year, and Apple isn’t facing any tough competition at the moment), Apple’s iPod announcement might end up more about a new iTunes than the iPod.

Rose doesn’t make any iTunes 8.0 feature predictions, instead jumping ahead to suggest that Apple is working to make sure Mac OS X 10.5.6 will provide support for Sony’s BluRay, the competition to iTunes that nobody cares about. Hmm. Steve Jobs has so little regard for optical discs that he basically shunned iDVD last year when showing off iLife 08, but now he’s going to resurrect BluRay and excite customers by including it on the company’s laptops, where any resolution advantage it offers over DVD would be nearly invisible? Oh ho ho my sides.

iTunes Unlimited?

The rumor mill is talking about subscription music in the next iTunes. Steve Jobs has opposed subscription music since iTunes got started. He worked for years to convince the labels to let go of the dream of billing users to essentially listen to the radio. Subscription music has always revolved around outrageous DRM that requires the (historically Microsoft PlaysForSure) player to sync up and check in every month or lose its music.

I’ve written up lots of reasons why subscription music was an awful idea that wouldn’t fly. I doubt Apple will actually float it as rumored (“iTunes Unlimited” for $129 sounds awful). However, enough has changed in the last two years to reconsider how subscription music could be delivered. For starters, the iPhone and iPod touch are now wireless, so they can both stream and verify exploding media DRM.

Apple’s iTunes, modern iPods, Apple TV, and the iPhone also now already handle exploding DRM for movie rentals, which blew over last year without any complaint, although it doesn’t look like iTunes’ movie rentals have had a massive impact on the world due to their relatively high price point. Offering movie rentals appeared to be a requisite concession leading up to convincing the movie studios to agree to movie sales in iTunes.

Apple could sell access to subscription music directly from the iPhone and iPod touch that worked similar to movie rentals, and the labels might even allow users to freely copy rental tracks between computers linked to the same iTunes account. Such an arrangement hasn’t found mainstream popularity elsewhere, but nobody else had been able to sell music prior to iTunes either.

While the rumors suggest there could be a discount for MobileMe users, it would be a lot smarter to make it part of MobileMe instead. That would limit subscribers to Apple’s loyal base, easing in the system rather than exposing a brand new subscription service to ten million handheld users and 150 million iTunes users and all but promising another meltdown. At least by making it part of MobileMe, Apple could add lots of subscribers and upgrade existing subscribers to a $99 “unlimited music” additional fee. Keep in mind that all this is highly speculative. I doubt “unlimited iTunes” will fly, as the idea was not leaked but rather simply invented.

 Wp-Content Uploads 2007 10 200710122204-5

How Apple Could Deliver Workable iTunes Rentals
The Online Music and Movie Rental Myth
Rise of the iTunes Killers Myth

As Long As We’re Speculating…

If Apple does convert its entire iPod line to Flash players, it would make sense to incorporate a new audio codec setting that maximized the amount of songs you could copy into an 8GB player. For years, Apple’s major selling point on the iPod what that it offered massive hard drive storage capacity. Now it’s migrating to Flash, which is more expensive but considerably more shock resistant and suitable for a handheld computer device like the iPod touch. Working to cram more music into tighter spaces would allow Apple to make the iPod touch and iPhone more competitive against a hard drive player. AAC is already optimized for low-bitrate playback.

Apple also needs to add remote functionality for controlling Apple TV to iTunes, just as you can already do via the free iPhone app. And how about direct streaming of content between iTunes, Apple TV, and the iPhone, such as for movie rentals. Currently, to get a rented movie from an iPhone to Apple TV you have to do two syncs involving a middleman iTunes PC.

iTunes also needs to expand on the options for syncing media to the iPod and iPhone. In addition to syncing specific playlists, it should be able to automatically sync over a smart “Party Shuffle” mix of music that fills a specific proportion of the device, such as 50% music, 10% podcasts, and then the specific movies, TV, and audio books the user selects. Then shuffle out the listened to tracks and add new music every time it’s synced.

Allow users to hide songs from iTunes just as you can hide photos from your iPhoto album to simplify the view without deleting anything. Add Time Machine support so you can go back to see earlier play counts and browse your media library as it appeared in the past. Add integrated support for viewing PDFs and other QuickView document types, so you could use iTunes as a metadata-rich document browser with search and playlist features. Or give Preview an iTunes metadata document database interface.

More Music Deals.

Add other corporate sponsors to the Starbucks deal, so you can discover their playing music and buy tunes over their WiFi link. And isn’t it about time Apple and AT&T got together and hammered out that plan to open iPhones to AT&T’s hotspots? I’d debit a 99 cent WiFi access fee from my iTunes account if it were necessary. What’s the point of setting up $8 per hour WiFi services for the zero people who use them? And on that tangent, how about rolling out my Ubiquitous WiFi idea for allowing other mobile users to borrow your AirPort’s WiFi signal?

I’d also like to see Apple get AT&T to allow users to place calls over their WiFi link as a concession for not having a functional 3G network in place yet. I also think AT&T should sell or rent AirPort base stations to its millions of broadband users, with all of them open to WiFi sharing so that iPhone users could place a freaking call and access the web at faster than EDGE speeds between now and whenever AT&T actually gets 3G rolled out.

Apple also really needs to deliver some sort of central media server, possibly tacked onto Apple TV. Just add a USB hard drive and have it serve up the contents as a Bonjour-discoverable iTunes library to your local network. This would allows users to dump all the media off their laptop. And then allow WiFi sync to optionally copy fresh media to the iPhone from the central media server library.

There’s plenty that could be tacked onto iTunes, but the biggest new thing in the iPod announcement actually might be something entirely different than last year’s iPods for cheaper and a new rev to iTunes. I’ll spill that in the next articles, starting with Two Decades of Portable Macs: 1989 – 2009.

Ten Big Predictions for Apple in 2008

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54 comments

1 whmlco { 08.24.08 at 6:18 am }

“I don’t see tremendous demand for carrying 64GB of music….”

Just three words: Video. Video. Video.

My iPhone has music, and movies, and TV shows, and audiobooks, and video podcasts, and photos, and applications. And I’m using one of the apps that let you store documents on your iPhone as well. Let me tell you, 16GB doesn’t go nearly as far as it used to go.

I would have preferred a 32GB iPhone just to hold all of the above, but 64GB would have been even better. And especially when talking about the Touch, which would tend to be even MORE video and game heavy.

2 elppa { 08.24.08 at 6:31 am }

“And on that tangent, how about rolling out my Ubiquitous WiFi idea for allowing other mobile users to borrow your AirPort’s WiFi signal?”

I can think of quite a few problems opening your home wifi network to any iPod Touch/iPhone user who happens to be walking by. Most people have their home networks secured for good reason.

3 Is this the new iPod Nano? - Page 3 - MacTalk Forums { 08.24.08 at 8:05 am }

[...] Drafted has a pretty good take on the whole hoo-haa as usual: What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 — RoughlyDrafted Ma… [...]

4 JulesLt { 08.24.08 at 9:02 am }

I’d agree on the 64Gb for video argument (plus keeping ALL your photos + documents on your iPod – I suspect most iPhoto libraries are over 1 Gb by now).

And even my legit audio collection is over 40Gb (and that’s now all my CDs) . . . but I don’t feel the need to take it all with me.

I’d prefer a better quality codec as the same size than further compression, but information loss is information loss.

The major change I’d like to see with iTunes is making it as easy to work with albums as it is with songs (‘Latest 25 albums’ playlist, ‘albums without covers’).

5 Galley { 08.24.08 at 9:17 am }

If we were able to stream any content from our library via Wi-Fi, or cellular, then a 16GB or 32GB “cache” would be plenty. At the very least Apple should allow transcoding of tracks on the fly on all iPods, not just the shuffle. You can’t get many lossless files on 6GB of space on an iPhone.

6 retnuh { 08.24.08 at 9:20 am }

@ JulesLt

64GB heck yeah… lets see iPhoto library ~11 Gb and I really don’t take many pictures. Music & video, from itunes ~270 Gb with ~245 Gb of that being video. So yes the more storage they make available for the iPhone the better.

Its not that I want or need to keep everything with me, but sometimes when I know there’s going to be a week or two gap where I can’t resync it’d be nice to carry around a few more episodes or movies with me.

7 antiorario { 08.24.08 at 10:05 am }

Allow users to hide songs from iTunes just as you can hide photos from your iPhoto album to simplify the view without deleting anything.

That is actually already possible, since you can uncheck tracks and ask iTunes not to sync those with iPod/iPhone. They’re not visually hidden, but it has a similar effect.

8 antiorario { 08.24.08 at 10:09 am }

And to complete my previous comment (re-reading helps comprehension, it seems): I know it’s less convenient than hiding, but leaving unchecked tracks out of smart playlists actually hides them from view.

I use smart playlists a lot, and I don’t find myself browsing through the main library all that much. But I do realize that quite a few users (those I know, at least) don’t find smart playlists as intuitive as I do.

9 solipsism { 08.24.08 at 11:08 am }

All these comments on a 64GB player but no mention of how it could be done right now. I don’t think it would be possible with the same price point of the current 32GB model.

Now if they only used one larger chip in the device and kept the other the same capacity Apple could increase the size and potentially keep the same price point. Meaning, instead of 8, 16 and 32GB they had 12, 24 and 48GB iPod Touch sizes. This is possible because Apple uses two two chips in the Touch and iPhone, not one; but I don’t think this will happen. I think that a lower price point is the likely route.

10 Mr. Reeee { 08.24.08 at 11:17 am }

Who is this Rose character and why get all twisted up over it? Why demean yourself, it doesn’t sound like he’s worth the effort?

I don’t see hard drive based iPods disappearing within the next few years.

There ARE many users like me who rip their own CDs using Apple Lossless to retain as much fidelity as possible. There are even tweaky audiophile docks and amps to go with them.

The current size of solid state iPods is joke. My 80GB iPod is too small now and doesn’t even scratch the surface of my music collection. I’ve even been tempted to get a few 160s; 1 for Classical, 1 for Opera, 1 for Jazz, World, etc.

I’d settle for a 128GB solid state iPod, maybe TWO! ;^)

iTunes DOES need better track management, if I were separating music out to 3 iPods for instance. Now it’s pure tedium, so I don’t bother. I tend to play complete albums rather than a hodge-podge of single tracks. I WOULD rip more CDs and swap things around, like different performances of the same orchestral pieces. Being able to do that easily would be great.

11 nat { 08.24.08 at 11:39 am }

Nice to hear you taking on Rose’s rather uninspired predictions Daniel. I hope you’ll publish what you expect to be Apple’s September Mac refreshes/redesigns too.

I am a little perplexed by the following from this article, however:

“Currently, to get a rented movie from an iPhone to Apple TV you have to do two syncs involving a middleman iTunes PC.”

In what situation would you have an iTunes movie rental on your iPhone, but not already in iTunes? Maybe it’s just the phrasing because it doesn’t make much sense to try to move a movie from “iPhone to AppleTV.”

So to get a movie on an Apple TV, you’d either buy and download it on the Apple TV itself, or sync it to Apple TV after buying on a computer, which would require one sync, not two (again if you’re simply trying to get a movie to the Apple TV).

12 What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 « Recycleosphere { 08.24.08 at 11:50 am }

[...] Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0: “ Daniel Eran Dilger Kevin Rose has been trying his hand at making broad sweeping [...]

13 Shunnabunich { 08.24.08 at 1:51 pm }

Never mind flashy new features — how about they do for iTunes 8 what they’re doing for Mac OS X Snow Leopard, so it doesn’t take iTunes a full quarter of a minute to open on my PowerBook G4 with just a 266-song library?

14 solipsism { 08.24.08 at 2:01 pm }

@ nat,

The way a rented movie works in iTunes is that it’s physically moved from one source to another using iTunes as the intermediary.

Let’s say you rented a movie on iTunes, then moved it your AppleTV to watch it but then you had to leave for whatever reason so wanted to put it on your iPhone/Touch.

It’s no longer available in your PC/Mac’s iTunes account to copy to your iPhone/Touch. You’d have to first copy it from the AppleTV to your iTunes account and then copy it to your iPhone/Touch. They don’t even have a mechanism to have the process automated as a single copy from AppleTV to your iPhone/Touch is one swift move using iTunes.

Not only that, because of the exploding DRM restrictions you can’t do a transfer if your internet is down.

The image below may explain it better…

http://farm3.static.flickr.com/2042/2210307395_817ac97bd4.jpg?v=0

15 nat { 08.24.08 at 2:14 pm }

solipsism,

Argh, that’s right! :D I forgot that rentals are moved, not copied. Thanks and yeah, I agree that the process needs to be simplified.

Are you sure about the need for an internet connection though when transferring? First off, we are talking about all movie rental “syncing,” not just PC to iPod/iPhone or PC to Apple TV, right? FairPlay encoded audio or video, as far as I know, has never required an internet connection for anything (other than the actual download of said content, of course). Movie rentals don’t have a built-in timer or atomic clock, they simply go off what the system – computer, Apple TV, iPod or iPhone – clock.

I rented a movie from iTunes a while back and when time was running low before I had watched it, I simply set my Mac’s clock back a week and poof, another week to watch the movie.

16 nat { 08.24.08 at 2:17 pm }

@ Shunnabunich,

Really? Is this on an aluminum PowerBook, or one of the older titanium models? On my 15″ aluminum PowerBook G4 (1.67GHz, 1.5GB RAM, 80GB HDD, Tiger 10.4.11), iTunes’ initial start-up time is around 10-15 seconds. It’s literally the fastest and most stable iTunes has ever been.

17 solipsism { 08.24.08 at 2:29 pm }

Nat wrote, “Are you sure about the need for an internet connection though when transferring?”

Check out the image I linked in my previous post. It says it at the bottom of the iTunes transfer window.

18 nat { 08.24.08 at 2:35 pm }

solipsism,

D’oh! Thanks again. :D

19 nat { 08.24.08 at 3:12 pm }

Shunnabunich,

Yeah, I just realized you said quarter of a MINUTE, aka 15 seconds. While I still find the current version the fastest and most stable, you’re right about the initial start-up.

Whew, I’m off today.

20 Scott { 08.24.08 at 3:39 pm }

On Monday, July 21st Apple Chief Financial Officer Peter Oppenheimer said that “gross margins for the coming quarter, and possibly beyond, would be lower for three reasons: 1) a back-to-school special; 2) a one-time charge related to a contract manufacturer, and; 3) ‘a future product transition that I can’t discuss with you today,’” he also said “we are working to develop new products that contain technologies that our competition will not be able to match.”

I hope you will touch on all of this in your next post. My gut feel is that we will see: 1) lower prices for the iPods especially iPod Touch; 2) more SKUs in the iPod Touch Line, and; 3) redesign of the MacBooks and Cinema Displays.

Mr. Jobs said,” Nick Wingfield reports for The Wall Street Journal. “If sales stay at the current pace, Apple stands to reap at least $360 million a year in new revenue from the App Store, Mr. Jobs said.’This thing’s going to crest a half a billion, soon,’ he added. ‘Who knows, maybe it will be a $1 billion marketplace at some point in time. I’ve never seen anything like this in my career for software,’ he said.”

I think that Jobs is seeing the money and the money is on OS X iPhone platform. To establish that platform as a matter of agency Jobs/Aplle will have to: 1) lower their demands re – the iPhone, this has happened; 2) lower the prices on the iPod Touch line, and; 3) increase the SKUs on offer, to cover all possible price points.

I also think that there is an opportunity in establishing a dedicated software division in Apple that develops games and productive software exclusively for OS X and OS X iPhone.

21 tomtubbs { 08.24.08 at 4:46 pm }

@ Scott:Yes, P.O. (Apple Chief Financial Officer Peter Oppenheimer) did talk about gross margins being affected by BTS, 1 time charge and a future product transition.

However, this isn’t without precedent. Normally, the transition info comes in the Q&A section of the Earnings Call. After all, PO only mentioned it once in the conference call, prior to Q&A – it’s the journalists/others in the conference calls that kept coming back to it.

Ben Reitzes – is their a philosphy change on margin, volume?
P.O. talked about price points competitors couldn’t match in response to this.

If anything, the phrase “We have **some** of these types of investments in front of us that I can’t discuss with you today and we plan to continue to execute this strategy in the future.” is more interesting.
OP anticipated 30% gross margins (g.m.) in fiscal 2009. But that isn’t really a shock, as this was anticipated years ago!
David Bailey pushed P.O. on gross margin, as did Keith Bachman, Mark Moskowitz, and Toni Sacconaghi in the call. Toni tried to get a slip up from P.O. about production or component issues to date for the iPhone. Yair Reiner also tried the cheeky route, asking about whether gross margin changes implied “that these new products will actually be shipping or being built in this quarter?”
P.O. – “Part of the reason regarding the September quarter gross margin – is because of a product transition” But what does that really mean, product transition? Just a bump change to a few SKU?

F2Q08 – gross margin decline pegged in part on a product transition – Leopard coming in. Some interesting quotes as we get closer to iPod refresh time:

P.O. “we’ve learned in the last years that really what drives the MP3 market to different levels are innovative product launches and the seasonal holiday buying in the December quarter”
T.D.C. ” “we wanted to establish an entirely new type of iPod, the iPod Touch. The iPod Touch has the potential grow the iPod from being just a music and video player into being the very first mainstream WiFi mobile platform running all kinds of mobile applications, and we overwhelmingly met this goal. Introducing the Touch at the high end of the line may have traded off a bit of unit volume but it was the right decision to achieve the strategic goal of establishing a platform.”

Retrospectively, doesn’t that sound a bit like they’re wanting to flesh out this mainstream WiFi mobile platform – does this count just Touch and iPhone? Or other new products coming on stream?

Apple’s main goal last year for December – to establish an entirely new type of iPod, the iPod Touch. “The iPod Touch has the potential grow the iPod from being just a music and video player into being the very first mainstream WiFi mobile platform running all kinds of mobile applications, and we overwhelmingly met this goal.”

F4Q07 – had a product transition of an all new iPod line up, with gross margin guided down in part due to impact of recent product transitions.

F3Q07 – Expected gross margin to be ~29.5%, with hey presto, BTS, commodity costs, and product transitions pegged as the reasons.

Wouldn’t the Intel transition be a big product transition? Would the Earnings Call prior to the change (made public June 6th 2005) talk about it? Not to my knowledge.

F2 07 P.O. – “for the June quarter I’ve guided gross margins to 32%. While I’m doing that for June, I would continue to target gross margin in the 27% to 28% range on a longer term basis” So it’s not unheard of to have the gross margin lower.

As an aside – David Bailey: “Given the amount of time between the iPhone announcement and the launch, does that give you any advantage as far as being able to ramp in volume before the end of June?”
Tim Cook: “We’ve been focusing very heavily on the production capability of iPhone and as you know, we bring a lot of experience into this. We did 21 million iPods in the first fiscal quarter and so we’ve got that same level of expertise that we’re putting in place for iPhone, but I wouldn’t want to predict the ramp at this point.”

Second guessing Apple is an interesting, but hard game.

22 tomtubbs { 08.24.08 at 4:48 pm }

P.S. – Is the http://www.roughlydrafted.com/wp-admin/ page for RD supposed to show on login?

23 John Muir { 08.24.08 at 5:08 pm }

@ elppa

The idea he’s talking about consists of having two simultaneous networks. One secured and “unlimited” for personal / household use. The other unsecured and bandwidth capped / session limited for everyone else’s. Also: I think the public one was to be optionally only open to other users who do the same thing, much like those open wi-fi guys who Steve Jobs reportedly spoke to at the time.

24 John Muir { 08.24.08 at 5:14 pm }

Rose is your standard issue web “celebrity” kid who gets no more inside info than the average reader of MacRumors and AppleInsider. His predictions are always just wild guesses.

If he were honest about that, no one would pay attention … so he’s not.

25 John Muir { 08.24.08 at 5:23 pm }

@ tomtubbs

Nice quote mining! I listen to the podcast of the quarterly conference every time they come out, and it is always a bit of a mind game between Oppenheimer, Cook and the media. Interesting stuff.

I think they’ve actually been quite clear about what they’re doing with the iPhone / iPod touch platform. They launched it: succeeded in that. And now it’s time to push it really mainstream. They want that mobile platform to be the centre of Apple’s portable business.

So I expect some movement in iPod touch prices and capacities in September. They’re going to be aggressive. Daniel is right that the Zune and the rest of the industry aren’t exactly pushing Apple right now, but I think the inside line from the quarterly conferences should not be overlooked.

The iPhone 3G launch was all about being aggressive. The early numbers sound like it is indeed a monumental success. Next up in the touch platform is the iPod’s turn. I think Apple really are trying to go for the big one here, completely devastating the minor rivals they still have in portable audio and taking the touch platform truly mainstream.

Don’t mistake my optimism for daft ideas like selling products at a loss. Apple are far too smart to do that. But I do think the non-iPhone touch models (and who knows what they have up their sleeve, neither me nor Rose!) are going to be tightened on margin and geared up for volume like we’ve never seen before. This platform’s time is now and Apple have shown with the 3G and its worldwide markets that they are striking while the iron is hot.

26 MisterRon { 08.24.08 at 7:13 pm }

While there is a distinct future for flash-based iPods, there is a real need for hard-drive based machines as well. I have been in the process of converting some of my (many) DVDs to iPod Video, and I enjoy having a big selection available. If Apple came out with a terabyte iPod at a reasonable price (maybe not today, but in a few years?), I certain that there are many who would buy it.

27 ericdano { 08.24.08 at 8:09 pm }

Kevin is such the idiot. He really doesn’t do jack other than make a diggnation video every now and then and generally nothing else. Except predict the obvious.

28 tomtubbs { 08.24.08 at 8:18 pm }

@John Muir – Thanks – I’d had a pretty long look at the iphone all the way to this last WWDC back on an old macrumors.com thread, and had looked at AAPL and Infineon’s earning’s calls in a different light – but it does bear some prior look at what Apple’s used “product transition” to mean in the past.

Is it really new light being shed to have Oppenheimer talk about a product transition prior to using it as a reason for a lowered guidance on gross margin when asked about gross margin in the Q&A section? It seems yes & no.

There was repetitive questioning about it from what, six or so folks in the call, so he had to go back and repeat the line.

I’d imagine that they’d like to hit their stretch goal on places selling iPhones and Touches a good few months before any product bumping/updating, till they presumably can get all the countries in sync product cycle wise, and then join the big boys in terms of product release volumes. (It’d be interesting to see the initial spike, and actual sale levels worldwide for e.g. a Nokia launch of say N95, or upcoming N96 for example).

Apple was anticipated to do a certain run number for v2 iPhone, but the figures suggest that’s been raised from 25 million (I think) to 45 odd million the rumor mill says. QC points and Apple infrastructure for dealing with higher sales aside.

I’d agree they’re getting the WiFi mobile internet platform out as fast as they can. Hence a Back to school with Touches rather than iPods. I think the Touch will be potentially more competitively priced, but that they’ll have higher end priced models though still. Can they cram 64GB in? I’d be happy to have it (a lossless music fan I am).

There is value for money, and also Apple being ahead of the curve here also. The “gotta have it”/ obsolecence of other tech through introducing new tech effects are usually wisely wielded by Apple (albeit it sometimes feels they drag their feet on some product refreshes that could happen (which equates effectively to a increase in gross margin at the tail end of every product cycle as the value for money drops for the customer e.g. Mac mini currently).

“products that contain technologies that our competition will not be able to match” hints at some of this – it seems it’s talking more about rivals being behind on software, hardware, holistic design etc than not being able to meet Apple for this feature set on price.

Do they keep the touchwheel in? It’s a useful qustion as it affects a whole lot of iPod lines. It’s a hell of an iconic item, and I think it serves to remind how ahead in some areas Apple is by comparison, and also that it’s more useful than touch in some situations – a touchwheel shuffle/nano in a gym has some benefits over having a valuable touchscreen iPhone for example.

In the end, Rose isn’t being called up way enough on his bad calls. No mention beyond 1 picture given, about any veracity, or extra information. You can seemingly glean more from David Sieger e.g. http://eyeonapple.wordpress.com/2008/08/17/product-transition-comes-up-again/ than from Rose.

29 dominiej { 08.24.08 at 9:06 pm }

Dilger, you’re wrong. Zune is getting a refresh soon too…. (http://www.zuneboards.com)

And if a nano refresh were to happen as you criticize due to games not being available, this wouldn’t be the first time Apple would have done so. The 3G nano was heavily criticized for not supporting previous versions’ games. You DO remember the 3G nano had a different aspect ratio than previous ones….

30 danieleran { 08.24.08 at 9:17 pm }

@ dominiej: You link to the revelation that the existing HD based model will get a bigger 120GB hard drive.

You think Apple needs to reconfigure its product lineup to match Microsoft’s late-2008 “release” that only brings its products up to date with last year’s iPod Classic? Oh my sides.

Also, the 3G Nano/Classic did need updated games (that is, they couldn’t run the existing iPod 5G games) at launch, but since then, all of the existing titles have been updated and the 5G iPod, the 3G Nano and the Classic all run the same titles. Check in iTunes! There was no problem with different aspect ratio, as that didn’t change. The difference was internal software features.

31 Partners in Grime { 08.24.08 at 9:29 pm }

Looking forward to a 64GB touch. More videos!

32 solipsism { 08.24.08 at 9:32 pm }

@ Partners in Grime,

Prepare to be disappointed. I highly doubt it’ll happen, but if it does the price will exceed the the current 32GB Touch.

33 daGUY { 08.24.08 at 9:33 pm }

Daniel,

“I’m also pretty sure that the 8GB iPod touch is going away, making the 16GB model the new $199 version. That outrageous price drop, facilitated by today’s cheaper Flash RAM, would kill the remaining market for the hard drive-based iPod Classic, converting Apple’s entire lineup to Flash RAM.”

I agree with you that the 8 GB Touch is most likely going to disappear, with the 16 and 32 GB models dropping in price to fill in the gap. And I also agree that Apple is going to drop the HDD-based iPod Classic entirely, sooner or later (just the fact that they’re calling it “Classic” is a pretty sure sign that it’s on the way out).

However, I’m not so sure that a 32 GB Touch for $299 is going to negate the need for the Classic just yet. What’s the main (only?) selling point for the Classic? Capacity. And those options (80 or 160 GB) are still WAY higher than what the Touch offers. The Classic may be the only iPod for people with large libraries that lets them bring EVERYthing with them.

Maybe if they introduce a 64 GB Touch, they can drop the Classic from the lineup.

Of course, anything is possible, so…we’ll see what happens :-)

34 solipsism { 08.24.08 at 9:42 pm }

@ danieleran,

Is the Classic popular enough to warrant a 3rd capacity option: 80, 120 and 160GB? I’d say no.

What about upping the 80 to a 120GB since they are both single platter drives? Again, I’d say no since I can’t find any info that there is a 1.8″ drive larger than 160GB, the two models would be too close in size and the 120GB HDD comes at too much of a price increase.

I’d be curious to read an article that specifically outlines your predictions for the September event instead of just eliminating what you think it can’t be from other predictions. (that is not meant to sound derisive)

35 PhilipWing { 08.24.08 at 11:34 pm }

“…Add other corporate sponsors to the Starbucks deal, so you can discover their playing music and buy tunes over their WiFi link. And isn’t it about time Apple and AT&T got together and hammered out that plan to open iPhones to AT&T’s hotspots? I’d debit a 99 cent WiFi access fee from my iTunes account if it were necessary. What’s the point of setting up $8 per hour WiFi services for the zero people who use them?
…”

Well, at least at *one* AT&T hotspot, you can use their WiFi. It’s about a city block in area and call AT&T Park… :) I did that yesterday.

I do consider it odd that your quote fit their marketing during the game yesterday, though. They ran a segment using the stadium announcer discussing AT&T WiFi hotspots. With the list of suggested devices, they mentioned PSPs, but did not mention iPhones, which they sell. I presume because of the lack of billing for them… :(

And I continue my current streak of using my laptop at a Giants game for every year the park has been opened. Even sometimes for work, although the guard at the front did attempt to order me to not to use it for work… :)

36 WirelessNetwork.org » News » =?windows-1252?Q?What=92s_Next_from_Apple_Sept_22=3A_New_iPods=2C_iPhone_?==?windows-1252?Q?OS_2=2E1=2C_iTunes_8=2E0?= { 08.25.08 at 1:33 am }

[...] =?windows-1252?Q?What=92s_Next_from_Apple_Sept_22=3A_New_iPods=2C_iPhone_?==?windows-1252?Q?OS_2=2E1=2C_iTunes_8=2E0?= By wireless • Aug 25th, 2008 • Category: News http://www.roughlydrafted.com/2008/0…-21-itunes-80/ [...]

37 Brau { 08.25.08 at 2:20 am }

@ Shunnabunich

I don’t know what’s going on with your PB, but mine (1GHZ G4 PB) opens in about 5 seconds with 1920 songs and a total of 15.35 GB of combined music/video.

38 JulesLt { 08.25.08 at 4:21 am }

iTunes – 7s to open on 2.16 Core2Duo with 2Gb RAM. Size of library seems largely irrelevant. As a comparison – Mail is pretty much instant, OmniWeb is also around 6 seconds. Keynote – 12 seconds.

I’m guessing these timings may actually have more to do with the load on other system as much as anything else as that seems v.slow for Keynote.

On the classic – as a video player it is limited by screen size. I don’t see a Classic/Touch hybrid quite yet (it makes more sense to just grow Touch capacity) – and I am sure you can draw a graph of size/demand.

Having switched from a 20Gb iPod to an 8Gb one but with a 45Gb music collection on my Mac, I’m now well aware that you don’t actually need everything available at any time, so much as enough available. I’m thinking music only here – add a reasonable 8-10h of video as well and 16Gb is the lower limit.

Which is to say – I don’t see a significant market for a large storage iPod but I can see a logic to putting in as much as possible at the given price points (so if a larger HD is available at the relevant size, the classic would get one – by definition, classic purchasers want as much storage as they can get).

There is one caveat to this – I still see room for a lossless storage device with higher quality audio circuitry but that is very niche, and possibly a market Apple don’t care about

39 Rumor-mill: iPod Touch to Get GPS?! + iPod Nano Case Leaks?! | The iPhone Blog { 08.25.08 at 7:55 am }

[...] that suggest maybe they are — or merely that even the Chinese read Kevin Rose’s blog? Roughly Drafted, on the other hand points out that a new aspect ration for the screen might cause problems for [...]

40 Rumor-mill: iPod Touch to Get GPS?! + iPod Nano Case Leaks?! | iPhone The Solution 3G { 08.25.08 at 8:05 am }

[...] that suggest maybe they are — or merely that even the Chinese read Kevin Rose’s blog? Roughly Drafted, on the other hand points out that a new aspect ration for the screen might cause problems for [...]

41 John Muir { 08.25.08 at 9:40 am }

@ JulesLt

Bingo! Apple have never cared about tailoring the iPod for that niche. Indeed: I expect most of the people in that niche wouldn’t ever accept an iPod anyway, no matter how it hypothetically fit their needs, as the brand simply symbolises what they think is wrong with music. (I know one of them!)

As for the Classic: if 1.8″ hard drives keep getting bigger fast enough, there’s room for the model as Apple’s unofficially slowest selling iPod. That means at least double the size of the largest flash model. But if and when flash closes that gap (or Apple decide the Classic just isn’t moving fast enough to warrant not swapping its production to iPhones / touches), the past tense implicit in its name will finally catch up with it.

At Apple: “classic” = get it now, it’s your last warning, because we’re going to kill it.

42 dominiej { 08.25.08 at 2:46 pm }

@ danieleran

If you’d took the time to read the article on ZuneBoards (like you expect everyone to read your long-winded rants), you would have read a member of the Zune Team, Cesar Menendez (http://www.zuneinsider.com), mentions there’s going to be more coming “in the way of hardware,software and pricing.” And he’s not talking about the 120Gb, he mentions that earlier in his message and simply confirms its existence.

Further, I see you DO remember the 3G nano fiasco concerning games, so why couldn’t Apple do the same with a newly remodled widescreen version? Your attempt to dismiss such a RUMOR with this trite argument is a bit of a stretch…

43 danieleran { 08.25.08 at 4:21 pm }

@ dominiej: There’s no info on the Zune fansite. I actually did look. What I have found however, is word from the horses mouth of Microsoft executives that the “Zune 3″ won’t be launched until late 2009. So the team can float a software update to make the software less bad, or spin the specs up a notch, and dial down the prices slightly, but you’re not doing to see anything dramatic coming from an effort that only sold 2 million units across two years.

44 Rumor-mill: iPod Touch to Get GPS?! + iPod Nano Case Leaks?! - iPhone Newswire { 08.25.08 at 8:32 pm }

[...] that suggest maybe they are — or merely that even the Chinese read Kevin Rose’s blog? Roughly Drafted, on the other hand points out that a new aspect ration for the screen might cause problems for [...]

45 LunaticSX { 08.27.08 at 6:56 pm }

“Plus, existing iPod Games wouldn’t work in the widescreen orientation; both the display and the controls would be messed up. On top of that, regular video playback would be forced to play back wide, and/or look bad because its stretched.”

The iPhone has no problem playing back video in aspect ratios that don’t match its screen. They simply get letterboxed, or you can double-tap the screen to zoom in and cut off the edges. There’s no reason a widescreen Nano couldn’t do the same thing.

In the same way, games could continue to work in portrait orientation with letterboxing.

Kevin Rose added info on iTunes 8 when he was on the This Week in Tech podcast on Sunday. He said it was going to add “similar music” features, a la Pandora and Last.fm. His source for the iTunes 8 info was different from his source for the widescreen Nano info, BTW. He also e-mailed all the photos he had received to Leo Laporte, with identifying data kept in. Laporte said that that data was convincing (and then he deleted the photos, as requested).

“Apple also needs to add remote functionality for controlling Apple TV to iTunes”

Why? Just because it’s theorectically possible? You should know better. There’s no compelling reason for controlling a set top box from a computer on a desktop or even a laptop on a couch, as opposed to from a handheld device (iPhone, iPod touch) you’re likely to already have in your pocket.

“Apple also really needs to deliver some sort of central media server, possibly tacked onto Apple TV.”

What, like Windows Home Server? Come on. The Apple home ecosystem is all about peer sharing, not server-client. iTunes, iPhoto, AppleTV, etc. all detect other peers within the same network and allow sharing.

A better idea along these lines would be simply better synchronization between multiple computers’ media libraries. All that would be needed would be ways to classify which data should be synchronized. This can be done with playlists, just like synchnonizing an iPod or iPhone. I’m sure Apple doesn’t want to get into a fight with the music labels and studios about file sharing, though, or they would have done it already. As it is that’s why you can’t copy music from shared libraries. (Note that iPhoto CAN copy photos from shared galleries, though!)

46 applewine { 08.28.08 at 2:17 am }

It would be a VERY SMART MOVE for Apple to allow the AppleTV to use iPhone apps…as it is now the AppleTV is a great product, but it’s ability to use the Internet is limited to iTunes and crummy YouTube videos…I could see the provided remote allowing a user to navigate an iPhone- like screen full of fun apps!

47 Rumor-mill: iPod Touch to Get GPS?! + iPod Nano Case Leaks?! { 08.29.08 at 10:03 pm }

[...] that suggest maybe they are — or merely that even the Chinese read Kevin Rose’s blog? Roughly Drafted, on the other hand points out that a new aspect ration for the screen might cause problems for [...]

48 Two Decades of Portable Macs: 1989 - 2009 — RoughlyDrafted Magazine { 08.30.08 at 2:45 am }

[...] What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 The Macintosh Portable and Outbound. [...]

49 The iPod Power Behind Apple’s Big Mac Push — RoughlyDrafted Magazine { 08.31.08 at 6:03 am }

[...] in this Series: What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 Two Decades of Portable Macs: 1989 – 2009 The iPod Power Behind Apple’s Big Mac Push The [...]

50 A Product Transition: Giving MacBooks the iPhone Touch — RoughlyDrafted Magazine { 09.01.08 at 7:03 am }

[...] in this Series: What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 Two Decades of Portable Macs: 1989 – 2009 (updated) The iPod Power Behind Apple’s Big Mac Push A [...]

51 Video Report: Will The New iPod Nano REALLY Look Like Zune? — RoughlyDrafted Magazine { 09.07.08 at 4:00 am }

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52 Video Report: Does Apple’s History Bode Well For An iPod Touch Price Drop? — RoughlyDrafted Magazine { 09.07.08 at 4:01 am }

[...] Daniel Eran Dilger Part two of my interview with Talking Head TV, looking at the likelihood of an iPod touch price drop. 2008 iPod Event What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 [...]

53 iPhone Blogga » Blog Archive » Rumor-mill: iPod Touch to Get GPS?! + iPod Nano Case Leaks?! { 09.25.08 at 6:11 pm }

[...] that suggest maybe they are — or merely that even the Chinese read Kevin Rose’s blog? Roughly Drafted, on the other hand points out that a new aspect ration for the screen might cause problems for [...]

54 Rebrickulous: Cutting Through The MacBook Rumors — RoughlyDrafted Magazine { 10.09.08 at 2:09 am }

[...] in this Series: What’s Next from Apple: New iPods Sept 22, iPhone OS 2.1, iTunes 8.0 Two Decades of Portable Macs: 1989 – 2009 The iPod Power Behind Apple’s Big Mac Push A Product [...]

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