SAN FRANCISCO - Apple Inc unveiled a smaller, cheaper version of its Web-to-TV device on
Wednesday, stepping up a battle with Google Inc and
Microsoft Corp for control of the digital living
room.

Apple co-founder Steve Jobs also rolled out a completely
overhauled lineup of iPod media players and the latest version
of iTunes, with a new logo that does away with the outdated
image of a CD.

The new Apple TV device, which accesses content from the
Internet and plays it on a TV, will sell for $99 (S$134). It is a
quarter the size of the original, which cost $229.

The 4-inch-square device allows users to rent TV shows for
99 cents and first-run films for $4.99. Earlier models, which
allowed users to only buy shows, failed to find a major
audience.

"Consumers are already terrified of hooking anything up to
their televisions, so unless you can make it crystal clear why
they should and make it super easy for them to do so, you're
limiting yourself to a niche market," said Avi Greengart,
research director for consumer devices at Current Analysis.

The biggest shift to iTunes is the introduction of a social
networking feature called Ping, which allows users to recommend
songs to followers or their chosen circle of friends.

"It's Facebook and Twitter meets iTunes. It's a social
network all about music," Jobs said at a presentation to unveil
the products on Wednesday.

But the centerpiece of the event for reporters and
investors was Apple TV, which the company introduced in 2006
but which never became a big hit.

Jobs once referred to Apple TV as a hobby, but made clear
that the company is now ready to seriously focus on marrying
the Web to TV, a combination that is also in the sights of some
of the world's most creative and deep-pocketed companies,
including Google, Microsoft and Amazon.com Inc.

"They're beginning to shift the paradigm for a very
entrenched behavior," said Altimeter analyst Michael
Gartenberg, who attended the event. "TV viewing hasn't changed
that much in 50 years. They're trying to shift that behavior
the way they shifted phone behavior."

Alongside renting TV shows and movies, Apple TV users will
be able to stream content from video rental site Netflix Inc. Netflix shares closed 7.5 percent higher on Nasdaq.
Analysts were lukewarm toward the device, although Apple's
shares rose almost 3 percent, roughly in line with a broadly
higher Nasdaq composite index.

"What they showed was an improvement from what they had
before, but it's not as far reaching as it could have been,"said analyst Daniel Ernst of Hudson Square Research.

Others doubted whether users would pay to rent TV shows on
top of their cable bill, and suggested TV networks would be
wary of allying with Apple.

"The content companies have to be careful not to destroy
any of the value to their ecosystem because the cable bundle is
really valuable and breaking apart content into individual
pieces is risky," said Laura Martin, analyst Needham & Co.

Apple said it has struck rental deals with Walt Disney Co's
DIS.N  ABC and News Corp's Fox. "We think the rest of
the studios will see the light and get on board pretty fast,"Jobs said.

Rival Google is taking a slightly different path with its
latest offering of Google TV, which allows viewers to search
and watch programs, DVR recordings and the Internet in one fell
swoop.
Some new TVs will come Google TV-ready, though plans are in
the works to market a separate stand-alone device in the fall.
Google is working with the cable and satellite distributors.

Jobs spent most of his presentation on a snazzier line of
its iPod, which dominates the music- and media-player market
with 275 million units sold, but has suffered moderating sales
in recent years. Jobs has turned his attention toward the
iPhone and more recently the iPad, which became an immediate
success when it was launched in April.

The company has revamped its product line ahead of the key
holiday sales season. Jobs called it the "biggest change in the
iPod lineup ever."

But Rodman & Renshaw LLC analyst Ashok Kumar said the new
products wouldn't stop his expectations for iPod sales to stop
growing after this year as they will be cannibalized by sales
of devices such as iPad and iPhone.

"We think this year the iPod category will peak and then
start to decline," Kumar said.

The revised iPod shuffle has been updated to include
playlists and buttons to navigate the volume, and is smaller
than the previous model. Jobs said it would play 15 hours of
music, and would come in five different colors at a price of
$49.
The nano, the next model up, now includes FM radio and can
hold 24 hours of music. It will be priced at $149 for the
8-gigabyte version or $179 for the 16-gigabyte model, Jobs
said.

A third revised iPod model, the touch, will include a front
camera and is thinner than the current model. It will be priced
from $229 to $399 depending on storage, and will be available
next week.

Apple stressed the FaceTime video chat function on the
touch, and its ability to play games with advanced graphics, a
move which puts the device in competition with existing mobile
gaming devices such as Sony Corp's PSP,
Nintendo Co's, and the soon-to-be released
Microsoft-powered phones that will run some Xbox games.