Apple Transforms iPod Product Line
Lots of news today from the folks at 1 Infinite Loop in Cupertino. For the complete rundown, check out Engadget's Live Blog of the Steve Jobs' Special Event.
Quick Summary:
- Apple cuts 8GB iPhone to $399 (a $200 drop!)
- Discontinues 4GB iPhone
- Introduces new iPod Touch (an iPhone without the Phone) for $399/16GB and $299/8GB
- Unveils the 3rd gen Nano with a notably different form-factor + video
- Revamps the flagship iPod, now called iPod Classic with a new cover-flow interface and whopping 80GB/160GB of storage, and an all metal casing.
There's a lot to digest here. A few months ago, I wrote that the iPhone's UI was a disruptor. As far as smartphones go, Apple's touchscreen interface removed a critical constraint to consumption: complexity. And according to the latest sales figures, the iPhone indeed became the best selling smartphone. But constraints still existed: high price, and access (AT&T only). Today, however, Apple dropped the price a bold 33%. That's great for consumers, but it also increases the barrier to would-be competitors.
So is this the tipping point, that is, the moment where smartphone sales overtake traditional mobile phones? Not quite. There's still a significant access constraint because iPhones aren't on sale in Europe or Asia, and not available in North American unless you're with AT&T. Also, cheap phones are "good enough" for most. The conditions will be ripe for smartphone takeover when the sophisticated UI, price, and access hit that sweet spot. We're not there just yet.
Next, what to make of the iPod Touch? I had suspected that all iPods would eventually move to 
the new touchscreen interface, and I still stand by that prediction. It will happen eventually. What Apple is doing here is interesting, however. First, notice that the Touch is only available with flash memory limiting it to a modest 8/16GB capacity. Why the lack of mini-hard drives? It's simple product segmentation and what the disruption crowd calls "competing-against-nonconsumption".
Giving the iPod Touch hard drive storage levels would have essentially forced Apple to discontinue the "classic" flagship iPod, something Apple doesn't want to do (just yet). By boosting the iPod Classic to super-storage capacities, and improving the aesthetics with a cool metallic finish, Apple serves their customers who care about having extensive music and movie collections on-the-go, while carving out a clear segment for the Touch, which has a distinctly different, order-of-magnitude(!) less storage. The Touch also gives customers in Asia, Europe, and non AT&T Americans (all locked out of the iPhone) a chance to use and fall in love with Apple's disruptive UI.
The "competing-against-nonconsumption" strategy of the Touch is premised on there being a significant number of consumers who don't use MP3 players at all because of perceived complexity. Sure, iPods are simple to use. But the Touch UI is even simpler. You don't even have to be able to read to use it, as it's all icon and album-art driven. And for those not focused on music and movies, the ability to surf the internet with WiFi in the palm of your hand with an elegant interface is an attraction as well.
So what's next for Apple? I'm suspect the iPod Classic will not last more than 18 months, perhaps not even a year. Why? The Touch interface is just that much of a disruptor that consumers will clamor for it in the flagship iPod. Remember, Apple yanked the iPod Mini after less than two years replacing it with the sexy iPod Nano. And I look for them to do it again here.
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