More iPhone/iPod Thoughts

I didn't pay much attention to the price discount on the iPhone yesterday. I have no interest in an iPhone since I love my Blackberry and I like being on a 3G network. But in terms of business, the $200 price cut on the iPhone is big news. The obvious analysis from every wannabe Wall Street analyst all the way up to the real guys is that the only reason you'd cut the price of the iPhone is if it is not selling. That is an obvious reason to cut the price, and that is the most likely reason. But let me play devil's advocate for a moment.

The thing that caught my attention yesterday was the iPod Touch. Let's forget about why Apple released this wonderful looking gizmo for a moment. Let's just look at its price point. It's $300 for an 8GB iPod Touch. Imagine if the iPhone was still being priced at $600 for the 8GB version. That would mean you have to pay twice as much to get cell phone features added to your iPod Touch (remember the equation iPhone - phone = iPod Touch.) That's right, $300 just for phone features. In short, the iPod Touch @ $300 would really cut into iPhone sales @ $600.

So maybe Apple should charge more for the iPod Touch? Maybe it should go for $500? Ok, that's one way to go. Keep margins high across the board. Obviously there would be lower sales of the iPod Touch, but unaffected sales of the iPhone. There's clearly some calculus that could be done here with an examination of lower or higher prices for both iPod Touch and iPhone. Looks like the lower prices won out.

Then there's the other option of just not releasing the iPod Touch at all. There's clearly an untapped market for people who like the iPhone but will have nothing to do with AT&T. I should know because I'm in that market. So not releasing the iPod Touch would definitely leave some money on the table. Again there's a clear calculus here. How much money do they lose by cutting iPhone prices vs. how much are they gaining by introducing the iPod Touch. Keep in mind that some of the losses in iPhone prices are bound to be made up by higher sales.

So maybe the iPhone sales have stunk it up, but there's more variables in play here. I personally think that iPhone sales have been better than expected and that this was the plan all along. If you look at it in terms of Apple maintaining their monopoly on MP3 sales, and thus digital music downloads, this seems to make a lot of sense. That's their cash cow, not the iPhone.

One last iPhone related thing... The launch of the iTunes Wi-Fi Music Store is very interesting to me. Is it a pure web app? Apple claimed that there would be no special apps for the iPhone, it would just be a web app device. Are they eating their own dog food here, or is there some kind of binary being downloaded to iPhones via software update and being pre-loaded on the iPod Touch.