Analysts expect Apple CEO Steve Jobs to unveil smaller, cheaper, iPods at Macworld San Francisco in January.

Rob Enderle, principal of market research firm the Enderle Group, told Reuters: "Odds are it's a Flash-memory-based player, something to position against the low-cost offerings from Creative and Rio."

Mac rumour site Think Secret suggests that in addition to the lower-cost iPods,
expected to cost $100 (£63) and hold up to 800 songs, Apple will introduce different coloured cases. It is also expected that iLife will be enhanced.

Reuters says the digital hub concept that Apple has been pushing for the last two years "is a vision of the convergence of home computing and entertainment".
Regarding this Creative Strategies analyst Tim Bajarin said: "He's been proven basically correct that the Mac has evolved to become much more important as a productivity and creativity tool."

Bajarin added: "One of the things we'll be looking for is how does Steve embellish on and extend the Mac into the living room, because Microsoft is already there with the Media Centre PC. I'm anxious to see how Apple builds upon iPods' functionality, expanding beyond storing music, photographs and voice recordings."