Can we talk? I have some issues with the iPod. I think you are missing the mark with what the average consumer wants and needs in a portable audio device. I am an avid music fan, and I think I have a good perspective on what your customers are looking for. My current iPod, which is about three years old, is a fourth-generation 'pod - 20G, click wheel, no color screen. It's still trucking along, but it will soon need to be replaced. Speaking of which: kudos on the recycling program. I would normally buy any electronics from Crutchfield, but I'm going to an Apple store instead.
Here's my issue: the current iPod lineup doesn't fit my listening needs. I would guess that my iTunes library is on the high-side of average. I have just over 17G of music in my library and just over 1G of podcasts. On my iPod, I keep about 16G of stuff - nearly the whole library, but not quite.
The "small" iPod classic has 80G of memory. This is insane, nearly the same amount of memory as my MacBook. The nano, at just $50 less, has only 8G of memory. The small size is very appealing and, at just under $200, the price is perfect. However, I can't quite carry all that I want to have with me. It doesn't make sense to buy the 8G nano when for an extra $50, I can have ten times the memory. But the iPod classic seems like over-kill. Don't even get me started on the 160G model. Who has the capacity to have all of that music on one computer? Who is the target customer there? Even if that is designed to hold movies and TV shows, who has the space on a hard drive to store it at home?
The perfect iPod is only available in the iPod Touch - 32G. But, at $500, that's a little too rich for my blood. Plus, I have no desire to go online or check my email with an iPod. I just want to keep myself occupied on the commute to and from work, and on vacation.
The problem, I think, is in the plan for the nano. Just because people want something small, doesn't mean they want less capacity. If they wanted just a few songs, they'd go for a Shuffle. I want something small, that I can put in my purse without adding too much weight to what I carry around.
Here's my vision for the product line: Shuffle: 2G & 4G; Nano: 10G & 32G; Classic: 80G, & 160G; Touch - do whatever you want. The people who buy this just want an iPhone but for whatever reason don't want AT&T.