UPDATE 3-Macworld fizzles with no Jobs or Apple surprises

(Adds analyst comment on music industry, other details)

By Gabriel Madway and Yinka Adegoke

SAN FRANCISCO/NEW YORK Jan 6 (Reuters) - Apple Inc (AAPL.O) announced plans to drop copy protection from songs sold over the Internet and debuted a slim, big-screen laptop, but with no dramatic products or master pitchman Steve Jobs, the company's final Macworld performance disappointed Wall Street.

Apple shares slid by as much as 2.3 percent, lagging the Nasdaq's .IXIC 1.5 percent gain and reflecting frustration over the lack of news from the trade conference that had introduced the iPhone to the world.

Investors remain hopeful the firm, expected to focus on marketing this year rather than shuffling out groundbreaking products in the midst of a global economic downturn, will in coming months unveil new desktop products or modifications to its best-selling iPhone.

"There were some innovative products, but no true blockbusters," said Robert Francello, head of equity trading for the Apex Capital hedge fund in San Francisco. "People were bullish going into it, and now they're kind of taking money off the table."

Apple said its iTunes music store, the world's biggest digital music retailer with sales of 6 billion songs since 2003, will offer its 10 million-song library free of digital rights management -- or copy-protection -- by the end of the quarter, for between 69 cents and $1.29 apiece.

Songs will also be available straight to iPhones over the air, instead of through a computer.

The agreement, struck with labels including Vivendi's (VIV.PA) Universal Music Group, Sony Corp's (6758.T) Sony BMG, Warner Music Group WMG.N and EMI, brings iTunes in line with rival sites such as Amazon.com (AMZN.O) and Napster and will heighten competition in an already-tough marketplace, analysts say. [ID:nN06431393]

Copy protection was designed to prevent fans from illegally sharing digital downloads, but it also prevents or slows legitimate buyers from moving their own songs between devices.

The widened price range -- a departure from Apple's rigid 99 cent-a-song system -- could wind up boosting revenue for the major music labels, who had worried Apple was becoming too powerful.

"The vast majority of music is purchased by teen-age girls and they tend to buy popular music, and they buy it when it first comes out. So that's going to be the $1.29 music. From that perspective, the music labels are likely to make a little bit more money," said Gartner research analyst Van Baker.

He said Apple will also do well with its 69-cent catalogue, "because that's even more of an impulse purchase than the 99-cent catalogue. So there's a lot of people out there that will backfill their libraries."

MACWORLD - A BUST?

Apple decided not use Macworld to launch any major new product, as it had in past years, when it introduced such industry-changing devices as the iPhone.

In years past, the company's Macworld product launches had produced so much buzz that they managed to overshadow events at the far larger Consumer Electronics Show. The 2009 CES show kicks off this week in Las Vegas.

Despite hopes that Jobs would make a cameo or the company had some major product ready to unveil, Tuesday's event produced few surprises. Apple announced 17-inch laptop priced at $2,799 that is the lightest and slimmest in its class -- which analysts say is an attempt by the company to stay near the lead of the industry -- as well as tweaks to software for home movies and photographs.

"Apple didn't leave a lot to get excited about in its last Macworld," agreed Gene Munster at Piper Jaffray, adding he expected to see new desktop computer models and possibly improvements to the iPhone in coming months.

Macworld culminated with singer Tony Bennett crooning "The Best is Yet to Come" and "I Left My Heart in San Francisco" in a farewell of sorts to Apple, which will no longer attend the cultural event owned by IDG World Expo and thronged annually by Mac-faithful.

Jobs, a fixture at past events, was nowhere in sight. Last month, the company said its chief executive and salesman extraordinaire would not deliver the Macworld address. That raised fresh concerns about the cancer survivor's health and signaled to many Apple-watchers that the company had no plans to launch a major product at Macworld.

But Jobs' announcement on Monday that a hormone imbalance -- not a recurrence of cancer -- was responsible for his noticeable weight loss, managed to allay some investor fears and prompt broker upgrades, though other questions about the company's future persist. [ID:nN05200877].

Although Apple's results continue to impress -- it posted a 27 percent revenue increase in the September quarter -- and its 3G iPhone has been a bona fide hit, concerns remain over the company's 2009 prospects, with consumers reluctant to spend in a tough economy, especially given the premium prices Apple charges.

With consumers flocking to low-cost PCs like netbooks, which Apple has dismissed, many analysts hope to see some new product catalyst in the near term to bolster the company's sales in a recession. (Additional reporting by David Lawsky and Deepa Seetharaman; Writing by Edwin Chan, editing by Matthew Lewis)