Originally Posted by Blastdoor
Repeating over and over again that it isn't a hole isn't much of an argument.
The reality is you made it sound like there was nothing there. There is a product there and I acknowledged that you may not agree with what they put in or took out. You now go on about what they took out. The product is still there. That's not a hole.
It is a hole because in the old lineup you could buy an iPod for $150 that had a camera and the ability to play video and that was very small. That product fit nicely in between the low-end shuffle and the high end Touch. Now there is nothing between the shuffle and the Touch. There is no iPod with a camera and ability to play video for $150. That's a hole.
It isn't a all a hole. In my view Apple is clearly aiming this Nano at a different market. All the teens used to get by with an iPod Nano. A few years ago that was all I saw were kids with Nanos. Now everyone in that age group wants an iPod Touch. This very Christmas I saw my own sons and all the nieces and nephews sitting in a row with their iPod Touches. I have no doubt that scene played out thousands of times this last season. The reality is kids will get their parents to bump up to an iPod Touch.
That means Apple needed another reason to keep the Nano. iPod sales as a whole are declining. It's pretty clear they've gone after high end athletes/runners who think nothing of dropping $100 on a good pair of shoes and fashion conscious folks who think nothing of dropping $100 on a pair of jeans. Go to any sort of running event and see how many clip on iPods are there. Sure some people still have Nanos with arm bands but again, when they upgrade, they are already in the ecosystem, it's no different in terms of price than what they pay for shorts, shirts and shoes and it saves weight and is more convenient than what they had before. Those are compelling reasons to purchase.
And there is no argument for not having a 16 GB Touch except as a way of getting people to pay the extra $$ for the 32 GB Touch. That's an argument for Apple's bottom line in a world without iPod competitors. But now there is a (possibly credible) iPod competitor which exposes this hole in Aople's lineup.
You were given a very valid rationale and that is profit margin. The iPod Touch at $229 might even be only a break even product to loss leader. The tear downs on the iPad put the cost of components at a little over $250. The iPhone 4 was $168-ish. The iPod Touch, I couldn't find but it'd probably be safe to say $130-ish just for parts. Apple has an obligation to protect their margins. Apple is ahead of the game here. The bar was raised through the roof with the latest iPod.
The botto line here is that Apple created these holes in their lineup to pressure people who would have happily bought a 16 GB nano into buying the 32 GB iPod Touch. If Apple were the only game in town that would at least be a profit-maximizing thing to do (even though it would also be kind of a d!ck move). But since Apple isn't the only game in town this is something that might boost the bottom line in the short run but which will push some people to competitors in the long run (admittedly I don't know how many -- i hope it isn't very many, since I own a lot of Apple stock)
Then they are doing them a favor. If you were the one teen who was sitting amidst all the other cousins this Christmas season and they are playing with their Touches, messaging each other with Kik, shooting video of each other and uploading it to YouTube right there or editing it on the Touch, challenging each other to games, etc. you'd stick your lower lip out and beg your parents to return it for an iPod Touch. You'd be as left out as a kid can be and the purchase would be a bad experience. Apple is very smart about moving their products and the customer expectation on when it is an appropriate time. The old iPod nano was a nice solution and the last one was the pinnacle of it's respective time. However the whole social networking and infrastructure around the iPod Touch just makes it a better product, for only a few dollars more by a magnitude of order. You're basically going from an MP3 player to a minicomputer for just a few dollars more. iPod Touch has Netflix, games, HD video, video editing, cameras, video conferencing, you name it for just a few bucks more. The Nano of old can't stand up to it even at a lower price and Apple knows that too. It is why they went for the high end fashion/running market instead. For us low end athletes, the shuffle is still there.
I can pretty much guarantee based off the Samsung pricing in other areas that this thing won't beat Apple pricing. They haven't in a single area yet.
One more point. It is increasingly clear that Apple is killing Nintendo and Sony in portable gaming. If you as a parent have to get the teen a $159 Nano and a $169 DS or $169-199 PSP, then you are actually ahead of the game with the low end iPod Touch and still spending less even with the 32 gig iPod Touch. Before you had two devices, one with very expensive games to worry about or keep track of and now you only have one that does more than either of the two prior devices did. Its a win all around, especially for Apple.