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.