Apple Event Fails to Dazzle

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Despite the glitches, Jobs says he's pleased with iPhone sales and says that complaints over performance haven't eaten into sales. Apple says iPhone owners have downloaded 100 million programs from the App Store in just 60 days.

Users are especially fond of downloading some of the 700 games currently available at the online bazaar. This could be serious business for Apple if fans of Sony's (SNE) PSP or Nintendo's DX begin gravitating toward the iPhone instead. Aware of the opportunity, Phil Schiller, Apple product marketing vice-president, used a large chunk of the event to demonstrate how games such as Electronic Arts' (ERTS) Spore and Need for Speed work on the device. Indeed, some analysts think the relatively small iPod price cuts—widely predicted, given that Apple has said it planned to lower margins through the end of the year—were designed to push fence-sitting customers to buy an iPhone rather than an iPod. Jobs admits that cannibalization of iPod sales by the higher-priced iPhone is not anything to worry about. "I'd love it if every iPod turned into an iPhone," he says with a smile.

Jack Johnson Performs

Either way, Apple needs to expand the overall digital music market to really increase its iPod business. The new lower entry prices for a base-model iPod should help in that regard, but it remains to be seen if the refreshed lineup will attract vast numbers of new customers into the Apple fold this Christmas. Then again, Apple will undoubtedly attract more than any other company. Jokes Jupitermedia's Gartenberg: "People come to these events and say, 'That was good, but why didn't you bring John Lennon out to perform." Don't forget, though, that Apple did bring Jack Johnson—and he's the top seller on iTunes.

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Burrows is a senior writer for BusinessWeek, based in Silicon Valley .