New iPods may be coming tomorrow. I know. iPods? Weren't they a big thing in 2006? Yes, but they fill a key niche, and prevent inexpensive Android phones from attracting future iPhone customers. They need to stay.
The iPod has been in decline for years. As Cult of Mac reported, Apple removed the iPod from its quarterly sales reports six months ago. Since 2010, meanwhile, the successful iPhone has knocked the iPod, which could once sell 20 million units in a quarter, down to a tenth of those peak sales, according to Statista.
But the iPod is critical for Apple to have a full ecosystem experience. Apple sells devices by locking people into its exclusive software ecosystem. Its hardware is nice, but there's a lot of nice hardware out there. What sells iPhones, iPads, and Macs are the operating system and app design that you can only get from Apple products.
One thing we all have to do is set aside the association between music and the iPod. Yes, I know the iPod started out as a music brand, and Apple is doing some major music initiatives with Apple Music and Beats. But while music is a feature of current iPods, it isn't the focus, and that's not going to change. The iPod's place in Apple's strategy is to be a low-cost appetizer for other iOS devices, not a "music player."
Apple knows this strategy well. When netbooks were a big deal, the iPad appeared. The iPad is an excellent tablet, but it's also Apple's response to the entry-level laptop movement. (It also has the same long replacement cycle as a laptop, which is causing Apple some sales indigestion.) The iPad helps shore up the Mac ecosystem against lower-cost entrants without Apple having to debase the Mac by creating a cheaper product.
The iPod Touch Is the Cheap iPhone
There's a new sweet spot forming in the phone market at $299 unlocked. Asus, Alcatel, and Huawei are all prodding at it, and it's developing in tandem with the death of subsidies and the growth of prepaid carriers. T-Mobile reported a 93 percent jump in its "wholesale" subscribers this quarter. Those subscribers use prepaid brands like Straight Talk and Simple Mobile, where people pay for phones up front, and the difference between a $300 phone and a $650 phone is much more obvious than it has been in the two-year contract world.
Apple is never going to make a $299 iPhone. Its brand is too strong, its sales too good, and its strategy is too successful. It's making 92 percent of the profit in the smartphone industry right now, according to the Wall Street Journal.
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But Apple does have a $299 iPhone. In fact, it has a $199 iPhone. These are models of the iPod touch, which isn't a music player; it's just an iPhone without cellular. Everyone who refers to the iPod touch as a "music player" or its consumers as "listeners" has never seen a kid with one. It's an app screen.
If you think of Apple's war against Android as a battle of the ecosystems, the iPod touch makes sure people can get locked into the Apple ecosystem at the entry level, heading off any potential threat from those $299 Android devices. Apple iPod touch owners get addicted to iOS apps, which typically have smoother, more fluid design than Android apps, and often get locked into Apple's services. They then trade up to iPhones when the cash is available.
Follow that logic, and the question isn't why Apple is still selling the iPod touch; it's why Apple hasn't updated it since 2012. The answer is probably just that it gets higher profit margins as the components age and become cheaper. But it needs to update the touch now, as the old A5 processor on board the current model just isn't a target for app developers anymore. Rumors say that it's going to have a 64-bit processor, which would definitely be good for developers, but it could also just have the A7 from the still popular iPhone 5S.
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The iPod touch also has other useful niches. It's hugely popular as an entry-level device for kids too young to carry a smartphone. Once again, it gets those kids addicted to iOS apps, and when it's time for them to get phones, they tell their parents that nothing but an iPhone will do.
What Of The Nano and Shuffle?
The iPod nano is also now a trade-up device. Audiophiles have been raging for a while about how Apple's audio quality has been going downhill, and that's because audio quality isn't the priority here. Apple is a mass-market operation; it isn't Astell & Kern. The nano has become a fitness music player, a runner's companion. Apple wants to shift those people up to Apple Watch, but the nano can be an entry-level placeholder for the fitness crowd.
That leaves the iPod shuffle. It's a real stretch to fit this product into Apple's current strategy, and Apple probably agrees; it hasn't updated the little gadget since 2010. I actually have several iPod shuffles scattered around my house unused (they were party favors from weddings, that sort of thing.) At best, the shuffle could cache Apple Music playlists. But I think the dedicated Apple music player's day is over. That's just not what the iPod is anymore, but evolution doesn't mean the end of the iPod.
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