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Apple unveiled a smaller, cheaper version of its web-to-TV device, stepping up a battle with Google 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overhauled lineup of iPod media players and the latest version of iTunes, with a new logo that does away with the outdated image of a CD.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 $138. It is a quarter the size of the original, which cost $321.
The 4-inch-square device allows users to rent TV shows for $1.39 (99 US 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% higher on Nasdaq.
Analysts were lukewarm toward the device, though some saw it as only a small, initial step in a much more ambitious plan.
Apple's shares rose almost 3%, 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 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. For a comparison of Apple and Google's TV offerings, see.
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.
