Apple slashed the price of its popular top-of-the-line iPhone to $399 Wednesday and introduced a new line of iPod media players aimed at dramatically boosting its holiday business.
Apple CEO Steve Jobs told USA TODAY that he expects finally to have digital music from the Beatles available via Apple's iTunes store by the middle of 2008. And he announced an alliance with coffee retailer Starbucks to sell music.
Jobs said Apple expects to ship the 1 millionth iPhone - which just launched in June - by the end of the month. "We want to put the pedal to the metal," he said. "A holiday season is approaching."
The heavily hyped iPhone originally sold for $499 with 4 gigabytes of storage and $599 with 8GB. Apple is eliminating the smaller model. The quick price cut angered some early buyers.
But it "will really accelerate sales," says Van Baker, an analyst with market tracker Gartner. "Apple skimmed the cream from the market in the initial months, and now they're getting really aggressive."
The new iPod Touch is a direct clone of the iPhone, minus the phone and built-in camera. The unit sells for $299 with 8GB of memory or $399 with 16GB, and has the acclaimed 3.5-inch touch-screen from the iPhone and Wi-Fi wireless Internet capability.
Jobs also introduced a new version of the small Nano with added video functionality, multiple colors and more capacity. In refreshing the iPod line, Apple has either dramatically lowered prices or given products substantially more storage. The 80GB iPod was $349; now a similar model is $249. The iPod Nano with 2GB was $149, now it has 4GB.
When iPhone and iPod Touch customers enter a Starbucks, they will be able to access iTunes from the in-store Wi-Fi network for free. Stores in Seattle, New York and San Francisco will get it this year. Starbucks expects most of the United States' major markets to have it by the end of 2008. "The No. 1 question we get from our customers is what song is that?" Starbucks Chairman Howard Schultz said.
Apple introduced a new version of its iTunes software Wednesday that lets customers custom-make ringtones for the iPhone with songs they've purchased. The tones are available for 99 cents on top of the 99-cent song purchase. The company also said it has sold 3 billion songs, 95 million TV shows and 110 million iPods to date.
Apple competitor Microsoft, which has been struggling to get a foothold in digital music, said Wednesday it would cut the price of its underperforming Zune music player by $50, to $199 from $249. The Zune has 30GB of storage.
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