The iPod Touch range (Image credit: Getty Images via @daylife)
Apple's announcement of a new 5th Generation iPod Touch (replacing the 16 GB 4th Generation iPod touch) is a smart move from Cupertino. It strengths many aspects of Apple's business, while continuing to bring in more customers and long-term revenue earning opportunities.
The price point of $229 in the US makes it the lowest priced modern iOS device to own outright. It's even more of a psychological win in the UK, with the price set at £199. That's dangerously close to an impulse buy, and ensures that the product portfolio continues to keep in step with the other iOS devices in terms of operating system capability and technical specifications.
But with some smart engineering and decisions, Apple appear to have maintained the margins on the device. By dropping the iPod Touch Loop from the packing, restricting the SKU to just one colour, and removing the 5 megapixel camera from the rear of the unit, I'd expect Apple to be turning a comfortable profit on the handset.
The lack of rear camera also makes the higher capacity iPod Touch and iPhone handsets a good trade up. Either at point of sale, or once they have used the 16 GB iPod Touch for some time there may be a desire for an iOS device with a camera. The customer might be upsold to a 32 GB iPod Touch, or they'll start considering an iPhone. That's a win for Apple in either the short or the long term.
I still think that it leaves the iPod Nano touch screen device in a curious position, sitting awkwardly between the Shuffle and the Touch. It would not surprise me to see the iPod Touch 16 GB get a price reduction come the 2013 festive season, and the Touch will start cannibalizing sales of the Nano. Which is the best result possible for Apple, because they still retain the customer, but on hardware that is far more sticky.
While the iPod Touch won't bring a huge amount of gross profit on its own, that dollar value will easily be multiplied over the years. For many customers, the iPod Touch will be their first Apple device, and Apple will be confident that Touch users will remain iOS and Apple users for a long time to come. The 16 GB unit won't be a loss leader, but it gets people in the door with Apple, and many will expect the quality of the products to do the rest.
I've talked previously about Apple's release schedule and how it has become a little more unpredictable with Tim Cook in charge, almost as if they want to keep other firms guessing what would come next. Arguably this could have been a nice story from the upcoming WDCC, but Cook has rolled out the 16 GB iPod Touch and carried on being unpredictable.
On a more practical point of view, a lower prices iOS device is likely to be welcomed in family homes where everyone wants to get their hands on a connected device. This iPod Touch is at a smart price, comes without the contract or overhead of an iPhone, and has broadly the same capability. It's the perfect device to hand over to the kids so a parent can claim back their iPad or iPhone and do some real work.
With so many devices now able to act as portable 3G or 4G hotspots, as well as buying standalone hotspots on contract, it's very easy to stay connected with an iPod Touch while travelling. As a companion device, the iPod Touch has a lot going for it, but one of the big ones for me, at least while travelling, is the low repair or replacement cost if it is damaged.
But the final reason is a simple one. People still love the iPod Touch, they are still buying them, and this new 16 GB model will ensure the continued success of the product line. And as long as Apple keeps selling the devices people want, they'll remain one of the companies at the top of the Consumer Electronics industry.
