A top IT analyst believes hopes for an ultra-cheap iPod are "unrealistic".

Forrester Research analyst Josh Bernoff told Reuters: "Pricing on hard-drive players is still ruled by manufacturing costs – a fact that is preventing Apple and others from pricing portable devices more cheaply."

Bernoff said: "What we really need is a $199, 500-song player. Then the floodgates will open. But this is a productive move forward. The iPod Mini will open up the market to plenty of new users."

But, according to the report, some observers are concerned that Apple's asking price for the Mini "freezes out many casual music fans who otherwise would be interested in buying the device".

A major-label technology executive said: "I'm disappointed with the price point, I had hoped that pre-announcement rumors of a $100 retail price would prove to be true."

However, early demand for the Mini has been high, according to Apple. More than 100,000 pre-orders for the iPod mini have been received to date.

Apple senior VP of worldwide product marketing Philip Schiller said: "The response to the Mini iPod has been off the charts."

The report emphasizes that Apple is positioning the mini as a better alternative to high-end, flash media-based products. "Apple's argument is that for consumers considering pricier flash-based devices, the Mini, which is of rival size and holds much more music, is only about $50 more."

According to critics, the problem is that rival devices with storage capacities that mirror a standard iPod can be had for the same price as a Mini.