Why Apple come up with iPod Touch

After watching the keynote by Steve Jobs about the new iPod product line, it may be interesting to examine why Apple has decided to roll out a product, iPod Touch with all the features without the phone function. Even worse, they increased the storage space to 16GB which is not a lot by today's standards. Do note that the iPod Classic has a storage space ten times larger. With a wi-fi antenna on your iPod touch, you can immediate connect to the internet via network. I can foresee a few days or weeks, some smart hacker will put a URL where you can login and do a skype phone call to your friends. Guess what, if you have such a function on your iPod Touch, you get a iPhone but US$200 cheaper. It's surprising because Apple is not worried about that. So, here are some of my own guesses to why they have decided to move away from the iPhone to a purchasing device called iPod Touch.

• Telcos are even harder to negotiate with: Lately, Apple is having a hard time negotiating with NBC on extending the contract of video & music downloads. The big media content providers want to get a higher cut in the profits and Apple is trying to keep the price low. So, there are two ways how this whole thing can go. The rest of the big media providers will move away from Apple ITunes Store and go straight to the other online stores and integrate with the other competitors of Apple, for e.g., Microsoft Zune. So, what has all this got to do with the point? If you think that the media providers are hard to deal with, the telecommunications companies are even harder. Hence, putting a wi-fi on the iPod Touch is to slap AT&T on the face. Of course, you have not heard that the prices of iPhone are now heading down with the emergence of this new gadget. I have a feeling that Apple must be having a hard time trying to negotiate with our local telcos from Singnet to M1. That's why till now, iPhone has not landed anywhere else. One possible reason is that the rest of the world are using 3G whereas US are still way behind with their GSM 2.5.
• The Long Tail Dominating the Music Market and not the Content Providers: The strategy that Apple take onto the new partnership with Starbucks is to make iTunes stronger and also address customers' need. Ever walk into a Starbucks cafe in the US and UK and you hear music that you want to buy. I know that Singapore don't give that kind of service yet. For the whole US market, it took them two years to conclude the deal. The whole operation to make all the Starbucks cafes in US providing that service with the iPod Touch will take them another two years. The whole key for iTunes Store is not in how much music you can sell. Tomorrow, Universal and NBC may leave, but they will come back if they realize that the sales are continuing to grow with the iTunes store (if you remember Chris Anderson's the Long Tail effect).
• Adoption and Competition from other Phone makers: After Apple announced the sudden price cut, a lot of customers felt that they were being feeling taken by the company. With aggressive competition from Nokia, Samsung and other looming players, Apple is now fighting a price war, and that will cause them some pain in the short term. The key for Apple is to push the other phone makers on price, but one would wonder how many other customers they lost in the process.

It's going to be exciting to watch this space. So, one more thing, why is it that iPod Touch don't have 30GB at least? Well, the new iPod Touch is actually quite small, compare to the traditional iPod Classic. One likely reason is that the flash drive market is still dominant and it will take some time for Apple to transition the users from the traditional iPod click wheel to the touch screen.

Honestly, I will prefer to purchase a iPod Touch with at least 40GB, given that my own one is running of space. So, I will be seeing my friends running around with a touch pad iPod.

Comments

[Raghav]

Ipod touch with wifi doesnt make it capable of working with skype.. you would need a mic.. touch doesnt have that yet..

Smart move from Apple to send a warning message to Telco's.. as not much of a thing for Apple to put in a mic. Think about it.

[Gerry Kent]

Flash memory is expensive.A larger amount of storage would be cost prohibitive until flash prices drop considerably.