Yes, I meant the 1.8" drives. 2.5" drives was what Creative and Rio were using with their readers.
The hook for the iPhone was "an iPod inside a phone".
The idea was consumers could take their music everywhere they took their phone--one device, not two.
Behind closed doors, the hook for AT&T was the data plans.
At the time the Telcos were heavily invested in digital bandwidth and customer use was low. Apple promised higher consumer use for iTunes downloads. They delivered, too. Way more bandwidth consumption than AT&T dreamed of.
The hook for the iPad was "a bigger iPod touch".
The hook for the Apple TV was "iTunes for the living room". (Which, since iTunes has been targetting mobility customers for ten years, explains its minimal success. Only real numbers I've seen recently were 400K units sold in Dec'12.)
(And why a "TV with iTunes" hasn't materialized.)
If you look at their progression everything they've done in gadgets has been strictly evolutionary, one step at a time.
First the iPod. Then a larger capacity iPod. Then a smaller iPod. Then an even smaller iPod. Then an iPod in a Phone. Then apps for the iPod in the phone. Then an iPod that ran the phone apps. Then a way bigger iPod. Followed by a slightly smaller "bigger iPod".
No "bet the firm"/"annoy the installed base" moves.
They really have played it safe and delivered big profits. The stock market loves safe almost as much as big profits but they bid the stock up beyond what safe and evolutionary can rationally deliver and now they're clamoring for a Hail Mary pass to save their portfolios.
To be brutally frank, Apple's well-earned success over the last decade has been built on three things:
Sir Jonathan Ives' designs
Tim Cooks Logistics and negotiation skills
Steve Jobs' hucksterism.
The huksterism and hype overshadowed the truly meaningful work the other two men (and the software coders and hardware engineers) have done.
Now, because the hucksterism is gone, suddenly Apple is broken?
No. The illusion is gone but what we're seeing is what was there all along: a well-run competent company, built on incremental improvements, not a house of technological miracles.