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TheStreet Open House

Can Apple Stop Defending Its iPod Cash Grab?

PORTLAND, Ore. (TheStreet) –- For some reason, Apple  (AAPL - Get Report) is giving us a new iPod this year.

Our own Chris Ciaccia used analyst input to posit that the iPod still lives because parents need a way for children to fiddle around with the Internet before they reach cellphone age, recently acquired Beats Electronics needs a music-dominated device for its next step and Apple as a whole needs to keep people tied into its ecosystem as pressure from Amazon, Google and others mounts.

More likely, the folks in Cupertino wisely realize that getting some money out of a high-margin product is better than getting none. It's a cash grab and it's unnecessary.

According to Apple, the new 16-gigabyte iPod Touch will come in five different colors -- a throwback to when Apple products looked like a rainbow instead of an ivory checkerboard -- and include a front-facing camera to make it even more similar to the iPhone and iPad mini. That low-end model goes for $199 ($30 less than its last asking price), with a 32GB iPod Touch going for $249 (a $50 cut from the last generation) and 64GB model for $299 (another $50 price drop).

Great. There's yet another device that people won't listen to their iTunes playlists on or download iTunes music to. The number of music download purchases dropped for the first time in 2013, according to Nielsen, and has just continued to plummet in the first half of 2014 as playlists collect dust.

Apple attempted to snap out of it with help from iTunes Radio -- and its failing attempt to use streaming to sell music downloads -- but it discovered the streaming audience doesn't care about buying music. Only about 2% of iTunes Radio listeners ever hit the “buy” button to download a song. Even as a streaming service, iTunes Radio falls short. Its 8% market trails ClearChannel's iHeartRadio (9%), which is basically terrestrial radio streamed to other sources, and Pandora  (P - Get Report) (31%).

Though Apple's purchase of Beats Music seemed to be more about headphone hardware than streaming, Apple picked up a streaming service as part of the deal. Beats is small -- with user numbers struggling to reach the 1 million mark even after a partnership with 110-million user service provider AT&T -- but it has the respect of music mainstays like Dr. Dre and Nine Inch Nails frontman Trent Reznor.

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