Apple shuffles things up

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Apple’s iPod shuffle is a pretty straight-forward device, so it stands to reason that Tuesday’s shuffle update contained not a single twist or turn. Apple knocked $30 off the price of the 1GB shuffle, which now sells for $49, while rolling out a $69 model that doubles the capacity to 2GB. Other than the altered price tag and expanded capacity, you’ve got a feature-for-feature replica of the second-generation shuffle Apple first introduced in the fall of 2006.

So what’s the take-away here, other than the fact that if you were mulling the purchase of shuffle and held out for whatever reason, you’re a lucky so-and-so. Two things, from this vantage point: 1) Apple really wants to sell some more shuffles; and 2) the cost of adding more flash-based storage isn’t prohibitive these days.

Addressing that first point, we saw after Apple released its quarterly earnings last month how important iPod sales figures are to Apple’s perceived financial health. So the way to keep those sales rolling, especially in a market where seemingly everyone who’s likely to own an iPod has bought several by now, is to introduce new models. That gets tricky for the shuffle, a slimmed-down player whose appeal lies largely in its ability to cram as much music in as tiny a space as possible. So in lieu of new features, you can offer two changes—one of which is a lower price tag to appeal to the remaining holdouts or people looking for a low-cost secondary iPod.

The other thing you can do is bolster capacity in a way that doesn’t impact the shuffle’s appealing 1.62-by-1.07-by-0.41-inch design. And that’s where the second point about the cost of adding more flash-based storage comes in. Apple is unlikely to up the capacity on a low-cost item like the shuffle unless it knows it can do so and still maintain a healthy gross margin on each shuffle it sells. Therefore, it’s a pretty safe bet that the cost of 2GB flash drives probably works out in Apple’s favor.

A more interesting storage bump-as-product-update occurred two weeks ago when Apple introduced the 16GB iPhone. The higher-capacity sells for $499, or the same price you would have paid for an 8GB phone seven months ago. And yet, news of the update was greeted with complaints, mostly centered around the lack of 3G networking support.

People shouldn’t be surprised that this month’s iPhone hardware update delivered a capacity boost and little else. Apple is simply following the same m.o. it used when rolling out the iPod a little more than six years ago.

I refer you to this iPod timeline showing how Apple’s music player evolved over time. Specifically, note how the first iPod update came roughly six months after the original iPod’s introduction. And that March 2002 update introduced a new model that was twice the capacity of the original offering for an extra $100. Sound familiar? Like the-same-thing-that-happened-two-weeks-ago familiar?

It wasn’t until the summer of 2002 that Apple rolled out revamped iPod hardware, adding more capacity as well as a touch wheel and a door for protecting the device’s FireWire port. Will history repeat itself in the spring or summer of 2008? I’d say the chances are better than average, especially with AT&T expanding its 3G network throughout the year.

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