I agree that the extension of battery life was the most important improvement to the iPod.
However, I believe that Apple IS responding strategically to Sony.
1) The price cuts and new iPods are coming a month away from Sony’s release of the NW-HD1.
2) They currently have 50% market share of hardware. The rest of the 50% is fairly fragmented. Sony may be the only “real threat” in this market.
3) Sony’s threat is twofold: Not only with hardware (the NW-HD1), but also with SonyConnect.
4) In order for Apple to keep its market share, it needs to convince current iPod owners and potential mp3-player owners that it has the best product line (the need for continuous innovation) and best software. I would not be surprised to see an 8GB or 10GB mini-iPod around Thanksgiving. BTW, if anyone knows if a new mini is coming out soon, please share details.
5) This industry is about standards. If Apple can keep iPod and iTunes as THE standard (i.e. fend off Napster, SonyConnect, etc. - there will be severe competition), it will be able to reap huge profits in the future, especially with fewer people purchasing CDs (especially for just 1 or 2 songs). If Apple can successfully ward off SonyConnect from gaining a critical mass, it will continue to dominate the music downoad industry.
6) Sony has a huge stake in this as well. With owning Columbia Records, it simply isn’t going to give up and walk away any time soon. Prepare for a series of improvements in all products throughout the industry in the next several years (heck, just look at the past couple years). The devices will be smaller, have color displays, store more songs, have better sound quality (and hopefully come with better earphones as well), etc.
Hopefully, Sony will give up its ATRAC3 stubbornness. As it stands, ATRAC3-only is Sony’s fatal flaw, which has been pointed out in the media.
In any case, it is a great time to be a consumer in this market, with all the competition that’s out there.