I have never seen the iPod.
When the battery dies on an iPod, do you replace the battery, or do you have to buy a new iPod?
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No. iPods can be recharged, but the battery is not easily replaceable1. When the battery eventually becomes useless, most people do buy new iPods, but that takes years. Apple offers a repair service, and paying for a professional battery repair is usually between $65 and $99 and just like cars - you can go out to third party repair services should you just want a battery exchanged inside your "closed to the consumer" iPod.
There are, colloquially, two kinds of batteries "dying". The most common meaning is that it has run out of charge and needs to be recharged. The less common meaning is that it is a useless brick and must be disposed of. What you read about iPod batteries dying probably meant the former: you seem to have construed it as the latter. (That's not a bad thing, the terms can be confusing.)
Don't worry: iPods aren't single-use. Nobody (or hopefully nobody) boys a new model every time their old one runs out of charge.
There's a difference between the battery "dying" and the battery losing its charge.
When a battery dies, it is incapable of being recharged.
When a battery "runs out of juice", you simply re-charge it and you're good to go again.
So: when an iPod's battery drains, it no longer has a charge and has thus run out of juice. Simple fix: plug it back in and recharge it.
When an iPod's battery dies, you generally get a new iPod or get the battery replaced or something like that.
One thing that adds to the confusion about this is that we sometimes say that the battery is dead, when we simply mean that it has fully discharged. We're using the word "dead" to mean "not turned on, and incapable of being turned on unless something else happens" (like the battery being recharged).
I'm guessing that perhaps there is a miscommunication here. Batteries can be recharged, but the battery itself is embedded and is not easily replaced.
I'll reference Apple's page on iPod batteries:
So, once an iPod has run out of battery life, it can be recharged. Eventually the iPod will hold less and less of a charge, and it will be at the end of its battery lifespan. At that point, you can use it as a unit for car/speaker dock use as many people opt to do, purchase a new iPod, or contact Apple support to arrange for a battery replacement.