Aidan MalleyApple knowingly gave up as many as 1.5 million iPhone sales during the holiday quarter to establish the future of the iPod as a mobile device, according to investment note issued on Monday by Needham & Co.
"If the company is successful in this endeavor, it would provide a compelling upgrade path for the estimated 85 million people who already own iPods," Wolf says. "And it could attract new users to both the iPhone and the iPod platform as well. The company appears willing to risk the cannibalization of a significant number of iPhones to accomplish this."
Apple's decision also costs the firm a significant amount of long-term profits, the Needham researcher says, as it meant losing as much as $250 in subscriber revenue shared from AT&T over two years.
Without the iPod touch, Apple may have sold as many as 4 million iPhones in the last quarter alone, according to the research note. During observations at Apple's Fifth Avenue store, many customers were said to have considered both the iPhone and the touch on an equal footing. Some Europeans may have felt pushed into buying the iPod touch after the iPhone's 1.1.2 update made it harder to unlock the device for unsanctioned carriers, Wolf argues.
The increased support for the iPod touch may also be a calculated risk that future iPhone updates will negate any immediate hits to the current product's success. Needham predicts that Apple will release an upgraded, 3G-capable iPhone at the same price in the summer and will drop the price of the current model to $299 at the same time, also dumping current iPod touch prices to $199 and $299.
Altering prices this way would maintain the price difference between iPod and iPhone but would provide stronger incentives to buy the higher-end — and importantly, more lucrative — handheld device.
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52 Comments
Who cares if one Apple product cannibalises another?
The more concerning thing is that Apple is letting Walkman phones and the like cannibalise sales of iPod Shuffle and Nano. Where's the iPhone Nano to compete with the more run-of-the-mill mobile/mp3-player hybrids that most people use?
Given that the Touch costs significantly less and now does just about everything I want from a mobile media device, I have no iPhone envy at all. Email is more useful to me than yakking away costly minutes on a cell phone that has far less connectivity than wireless internet access provides me. I can get a Touch and a perfectly useful cellphone for when I need instant communication feedback for a lot less money than the AT&T plans required for an iPhone. Having been born with two hands, it isn't inconvenient in the slightest to reach for a phone while using my Touch. And I don't run down my Touch's battery to make calls.
If they want to really see the iPod Touch cannibalise iPhone sales, put Bluetooth in it. If I could use Bluetooth to connect to a mobile phone for data away from WiFi, I'd get one.
Connected to a basic 3G or HSDPA phone, it would out-run the iPhone too. Which is why it will never happen.
Alan.
Well this makes sense, given that the iPod platform:
a.) gives Apple better margins (they make more money per Touch than per iPhone, presumably).
b.) is headed towards iPod Touch (hence the renaming of the non-Touch, 'Classic'). As in, for all you retro fans out there
c.) is competing against itself. Not sure it's cannibalizing sales, so much as just distributing the food. What's good for the iPod is good for Apple. What's good for Apple is good for the iPhone. Hakuna matata.
Ultimately, only Apple knows how this will all play out, but my bet is that in 5 years time, the iPhone and iPod line will merge into simply 'iPod', and we'll look back on the days of iPods without touch screens with the same nostalgia as we'll look back on iPods that only had 160GB drives and couldn't even make calls.
Well this makes sense, given that the iPod platform:
a.) gives Apple better margins (they make more money per Touch than per iPhone, presumably).
b.) is headed towards iPod Touch (hence the renaming of the non-Touch, 'Classic'). As in, for all you retro fans out there
c.) is competing against itself. Not sure it's cannibalizing sales, so much as just distributing the food. What's good for the iPod is good for Apple. What's good for Apple is good for the iPhone.
Ultimately, only Apple knows how this will all play out, but my bet is that in 5 years time, the iPhone and iPod line will merge into simply 'iPod', and we'll look back on the days of iPods without touch screens with the same nostalgia as we'll look back on iPods that couldn't make calls.
Apple make far more money from the iPhone rather than the iPod Touch.
This is due to the fact that each iPhone generates money from Apple every month in payments from the Phone companies to Apple, this is not the case with the iPod Touch.
While the iPod Touch may make more money at the time of original sale than the iPhone, in the long run that will not be the case.
All this is made clear in the original story, hence the lost revenue that is stated.