Red Herring is running an article on whether or not the iPhone can relieve iPod margin squeezes. In this article they state:
The analyst attributed the decline in iPod revenue to the popularity of lower-cost Nanos and $79 Shuffles.
Basically analysts are saying that the larger capacity iPods are losing out to the lower capacity as well as lower priced Nanos. This does not surprise me in the slightest. Most of the people I know do not have large music collections and only have a few gigabytes of music on their computers and do not require larger capacity iPods. Those buying the larger capacity iPods (iPod with Video) are those that are specifically looking to use the video aspects of those iPods.
Most people do not need the 30 or even 80 gigabytes of space for music and can get away with a 4GB or 8GB sized iPod Nano. I will say that when I recommend people get an iPod, I usually advise them to get the 30 or 80 gig models because of the ability to use the device as an external hard drive to transport data back and forth between computers. Also, I think that people learn how much they like the ability of having their music in an “on demand” like state, they will rip more of their music to their computer rather than just the tracks they like. Music can quickly take up a large amount of space the more you rip to your computer and most people learn real quick that they have more music than they thought and need a larger capacity iPod.