Apple Unveils New Video iPod

Apple Computer (Nasdaq: AAPL - news) on Wednesday announced a new iPod that can play video, confirming suspicions that the company was working on such a product. The announcement was made by

Steve Jobs during a much-anticipated news conference, which was so shrouded in secrecy that it had sparked a multitude of predictions from Apple enthusiasts.

In conjunction with the announcement about the new video iPod, Apple updated its online iTunes service to let consumers purchase and download music videos, short films and television shows for $1.99 each. The company said there are more than 2,000 music videos available now for download.

For the new video offerings on iTunes, Pixar (Nasdaq: PIXR - news) will offer short films and Disney will offer shows such as Desperate Housewives. Apple said customers now can buy and download the shows from iTunes the day after they air on TV, and watch them on their Macs or put them on the new video-capable iPod.

Video Star

The video iPod has a 2.5-inch screen and will come with 30 GB or 60 GB of memory. The higher-memory option will retail at $399, while the smaller-memory model will cost $299.

The announcement comes only a month after Apple released the iPod Nano, a diminutive music player that attributes its pencil-thin size to the use of a flash-memory chip instead of a hard disk drive.

Speculation over whether the company would produce a video iPod became especially acute when users began to see how video-friendly the Nano's color screen appeared.

Logical Step

"It makes perfect sense that this would be the big announcement, because it's the next evolution for the iPod," said Yankee Group analyst Mike Goodman. "Also, nothing else but something this big would have warranted the dog-and-pony show Apple put on for it."

It remains to be seen how the video iPod will do with consumers, but Goodman noted that Apple wasted no time in creating extensive services to go with the new device. Much as the iPod was released first and followed by iTunes music services, the video iPod now has accompanying online video services designed to boost its appeal.

"What we're seeing right now is most likely stage one, with other details to come in the near future," said Goodman.

The creation of a video iPod is one more step ahead of potential competitors, and its release so soon after the Nano shows how quickly Apple has to keep innovating to keep its formidable market share, Goodman noted.

Apple also unveiled a new iMac G5 computer at the media event. The new iMac has remote-control capabilities, allowing users to access music, movies and photos wirelessly. The iMac also has a built-in iSight video camera and will provide video-conferencing capabilities right out of the box using Apple's iChat AV software.