Why Apple didn’t put a camera in the iPod Touch

Thu, Sep 10, 2009

Analysis, Featured, News

The lack of a camera in the new iPod Touch models has generated a considerable amount of disappointment in the blogosphere, with some folks going so far as to claim that Apple is getting lazy and insulting its consumers.

But there’s a method to Apple’s madness, and it’s called business.   Despite what Jesus Diaz of Gizmodo may want to believe, or expect, Apple doesn’t adjust it’s product roadmap to fit within every single Apple rumor that pops up in the months preceding an Apple event.  Granted, credible reports about a new iPod Touch model equipped with a built-in camera have been floating around since April, and I myself was hoping to pick one up as soon as it was announced – but that’s simply not how things panned out.  So yeah, it’s disappointing that Apple’s iPod Touch announcement didn’t live up to people’s expectations, but when those expectations are the amalgamation of Internet rumors, anonymous tipsters, and bloggers who think that their idea of an ideal feature set should be written in stone, what else do you expect?

The reality of the situation is that Apple has a lot of balls in play, and its desire to sell as many iPod Touches as possible is tempered by a number of other considerations, interests, and products.

The iPod Touch may be Apple’s flagship iPod, but there’s no question that Apple’s flagship product is the iPhone.  Apple already dominates the MP3 player market, and despite the impending arrival of the Zune HD, it doesn’t seem like Apple will be ceding away any significant portion of its commanding marketshare anytime soon.  On the flipside, the smartphone market is still in its infancy, and while Apple has exceeded expectations with the iPhone, it faces stiff and serious competition from companies like RIM, and to a lesser extent Palm and an assortment of Android devices.  In order to ensure that the iPhone continues to grow, Apple needs to make sure that the iPhone remains more attractive and feature-rich device than the iPod Touch.

One of the key selling points for the recently released iPhone 3GS was its ability to record video, and the idea that that functionality was coming to the iPod Touch got everybody amped up about yesterday’s iPod announcements.  After all, a Touch with camera functionality all but puts the device on a level playing field with the iPhone, only without a $60/month commitment to AT&T.  In that respect, such a move would arguably make the iPod Touch a much more attractive buy than the iPhone, and would only serve to cannibalize the iPhone sales that Apple isn’t willing to sacrifice at this point.

Apple’s strategy vis-a-vis the iPhone and iPod Touch is to always keep the iPhone just 1 step ahead of the iPod Touch.  By the time the Touch gets a camera (presumably next year), the iPhone will probably have some new feature that users will be hoping migrates its way over to the iPod Touch.  And so the cycle will continue.

Meanwhile, Apple did add a video camera to the iPod Nano, with the obvious question being, “Why the Nano but not the Touch?” But again, the answer is simply that the Nano doesn’t compete with the iPhone.  While Apple undoubtedly wants to increase iPhone sales, that doesn’t mean that it’s content with watching iPod sales dwindle down slowly but surely.  Apple’s iPod Nano margins may not be through the roof, but its sales volume more than makes up for that fact, and even with over 70% of the MP3 player market, Apple still needs to add features to its lesser iPod models to, at the very minimum, keep sales steady.  The inclusion of a video camera, in this respect, fits the bill 100%, and instantaneously makes the iPod Nano an attractive purchase for those who simply have no need for a wi-fi enabled and app store capable iPod Touch.  From a business perspective, Apple’s decision making here is spot-on.  The iPod Touch didn’t undergo any revolutionary upgrade, and with the app store at its disposal, it didn’t really need to.  The iPod Touch, essentially, doesn’t need a camera to push units out the door.  At the same time, in a market already saturated with iPods, Apple needed a compelling new feature to get customers back on board the iPod Nano bandwagon, and the inclusion of a video camera at a price point of $149 does just that.  Moreover, it also allows Apple to target people who simply aren’t willing to shell out $200 for an MP3 player in the form of an iPod Touch.

Apple’s announcements yesterday will work to make the iPod Nano a hot ticket item this holiday season, and while the iPod Touch didn’t receive any special treatment this time around, the growing popularity of the iTunes App Store will make the iPod Touch an attractive item this holiday season as well.  Consumers have different needs and budgets, and Apple’s moves yesterday address that reality.

Growing the app store installed base

After yesterday’s media event, David Pogue of the New York Times sat down with Steve Jobs and asked him straight up why Apple didn’t include a camera in the iPod Touch.  Jobs responded:

Originally, we weren’t exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine. Because a lot of the games were free on the store. Customers started to tell us, “You don’t know what you’ve got here — it’s a great game machine, with the multitouch screen, the accelerometer, and so on.”

We started to market it that way, and it just took off. And now what we really see is it’s the lowest-cost way to the App Store, and that’s the big draw. So what we were focused on is just reducing the price to $199. We don’t need to add new stuff — we need to get the price down where everyone can afford it.

Jobs response is telling.  As companies continue to churn out devices that can rival the iPhone and iPod Touch in functionality, the differentiating factor for consumers, if it’s not already, may soon be which platform has the best app store.  Jobs and Apple COO Tim Cook have even said that they view the iPhone more as a software platform than hardware.  In that respect, keeping the iPod Touch at an attractive price point outweighs the need to add a new feature like a video camera that can simply be added at a later date.

For the time being, Apple is more concerned with increasing the iPhone/iPod Touch installed base which will only serve to attract a larger percentage of mobile software developers down the line.  And as Phil Schiller expressed during his presentation, Apple has found that $199 is the magic number that really sends sales through the roof.  This sentiment was echoed by Apple VP of iPhone and iPod Marketing Greg Joswiak who told the San Francisco Gate that Apple’s goals for the iPod Touch are that it be a great iPod, a great mobile computer, and a great gaming device.  A camera, Joswiak stated, “wouldn’t necessarily fit into those goals.”


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11 Comments For This Post

  1. CapnVan Says:

    Keep in mind that after every Apple announcement, three kinds of blogger slink into the foreground: the infants, the cheapskates, and the clueless.

    The infants are the ones who didn’t get everything they wanted. “I want” is their mantra, and just like the children they’re channeling, they assume that they’re important enough to get everything they want. When they don’t, they scream, wail, and gnash their teeth until someone pays attention to them. As Bart Simpson so eloquently put it, “We need another Vietnam to thin out their ranks a little.”

    How many times have you seen people protesting that they would have been happy to pay more for high end items like a camera and GPS in their iTouch? Those are the cheapskates. Point out to them that they get all those features in the iPhone, and it will never matter. They don’t need a phone. They don’t like AT&T. Point out that you can buy the iPhone direct from AT&T without a contract. “Oh, well that’s too expensive.” “So you want the high end features, but you don’t want to pay for them?” That’s called a cheapskate.

    And, then there’s the clueless. The ones who say things like “AT&T sucks.” AT&T *does* suck. Here’s a clue – so does every other mobile operator the world over. The ones who say, “Well, I don’t use my iTouch for games.” As if that were some kind of secret marketing formulation that applies to the other 30 million users. Etc.

  2. Tim Nash Says:

    How best to grow the iPhone/iTouch platform user base?

    For handheld gaming an 8Gb or even 4Gb iTouch is enough. If Apple wants to compete more effectively against the DSi ( the PSP looks as though it is on life support), it needs to get the price of the iTouch down to $169 or even better $149.

    Adding a camera to an iTouch lets more people buy simple cellphones. This would allow Apple to keep the low cost range for gaming and have a more expensive 16/32/64Gb range with cameras. The latter will hit competitors like Nokia far more than the iPhone, which has the advantage of an effective web browser available all the time there is a decent network connection.More background on this in http://lowendmac.com/nash/09tn/year-of-the-ipod-touch.html

    I believe Apple decided to compete in the cheap video camera market this Christmas and with the 3GS launch didn’t have the time for a major iTouch update.

  3. Sykes Says:

    To CapnVan, I don’t think you can get the latest iPhone model from AT&T without contract. Not at all. You used to be able to do that with the original iPhone. Not anymore with the latest model.

  4. Constable Odo Says:

    Apple’s grand scheme of things. I’m fairly certain they have a product roadmap planned well ahead of time (although there may be alternative roadmaps in case the industry changes drastically). I still believe Apple has done enough surveys to know what features sell and still retain their high margins. Right now Apple is still unable to keep up with demand for the iPhone and they don’t need a similar product taking away sales. The iPhone and the Nano are not similar enough to eat into one another’s sales whereas a 64 GB Touch with video recording and WiFi might give some people pause about not buying a higher margin iPhone. Apple just has to keep balancing it’s iPod lineup to give each model features that don’t necessarily overlap the other. It’s probably a very delicate game to play.

    If I was merely a buyer of their products I might have a beef about that, but as an investor, I’m glad Apple is doing it. Apple stock is still rising, they’re still gaining smartphone market share and their cash reserve is constantly growing. What’s for me to complain about? I could easily afford to buy their whole iPod lineup and get all the features. To me the perfect iPod device would be to have every feature the iPhone has, but replace the 3G chip with more memory and a bigger battery. It’s not likely to happen because that’s not Apple’s way. Apple is running a finely-tuned business, not a charity.

    Apple’s iPod lineup sales are going to continue strongly in the upcoming holiday quarter regardless of what a few people are complaining about the Touch lacking expected features. The Nano is going to just kill any other mp3 player in sales in that price range and likely even much lower-priced devices. Foxconn will barely be able to keep up with demand for the Nano. Guaranteed, it should be the most highly gifted and happily-received device for Christmas and holidays.

    Back to the Touch… There still was the rumor that the camera modules for the Touch were failing and stopped the Touch from having a video recorder. It’s just food for thought. One never knows what to believe and nearly anything is possible.

  5. CapnVan Says:

    Sykes – don’t join the ranks of the clueless. Go read the iPhone FAQ on AT&T’s site. You can purchase an iPhone 3GS with no commitment from $599 and up.

  6. CapnVan Says:

    @Tim Nash: While your points may have validity, I think you’re ignoring one of the most important maxims at Jobs’ Apple.

    They do not do multiple options. One of the first things Jobs did when he came back to Apple was pare down the number of different Macs that were being made. And for a mobile phone vendor, they have almost no options. Take a look at the number of models Nokia offers.

    They may be missing potential markets in keeping their product lines “tight”. But that is the Jobs way, and they’ve been doing remarkably well following it so far. Don’t expect it to change.

  7. baaker Says:

    The ghostly Apple tablet will have a camera, or cameras, so Steve et al have made sure the current touch won’t immediately compete for this functionality.

    Leaving FireWire off the unibody MacBook was perceived in the marketplace as an error, as is and will be the missing camera on the touch. Look for a quiet, camera-enabled touch hardware update after the tablet rolls out…

  8. Tim Nash Says:

    You seem to be using the maxim to make artificial distinctions. OS-X on ARM is Apple’s mobile platform. That already covers the iPhone and iPod Touch. Of the iTouch range only the 8Gb is seriously aimed at handheld gaming – the others are too expensive. A gamer range needs a cheaper model. A 16/32/64Gb range with a camera would be a separate range and marketed as such.

  9. CapnVan Says:

    @Tim Nash: Sorry, I’m not trying to draw any particular distinctions, but rather comment on how Apple tends to position itself in the market. I don’t see them using the 8 gig model as a pure “gaming platform,” in the way the DS or PSP are and likely will be.

    The DS and PSP’s are game platforms that can do a few other things. The iTouch isn’t being marketed as a game platform – it’s being marketed as 3 things: “A great iPod. A great pocket computer. A great portable game player.” IOW, it’s not be marketed directly against products like the DS or PSP. It’s being marketed as a better alternative.

    Parents and young people with their own money are intended to look at the PSP or DS, and then compare it with the iTouch. They want a portable gaming platform, but they also want a portable music player. As I understand it, the DS and PSP can combine both, but not as seamlessly as the iTouch. Then you add in the ability to use the iTouch as a “real” pocket computer. And you look at the price, which may be higher than the PSP and DS, but when you consider the total value, is still under the magic $200 number Apple has apparently determined. Is it worth, in other words, an extra $50 to get the whole solution in one seamless package? Apple’s betting that a lot of buyers will go for it come Christmas time.

    Which is why you see the 8/32/64 gig option, with no 16 gig. They needed to keep the introductory price under $200. But they’re also marketing to the higher end consumer who’s primarily interested in replacing an older iPod, who doesn’t need 100 gigs of storage. And the gadget freak who *has* to have the latest and greatest. Etc. They’ve got a number of markets that they’re trying to hit.

    But the key is that ultimately, they offer one solution for all of those markets. It’s just that the capabilities vary at each price point. They’re *all* the iPod Touch. When you look at the iMac line, they’re all marketed in the same way – it’s just that the more you pay, the more you get. Look at their store website -it’s very clean in the way that they intend consumers to make their decisions. You want a Mac – select one of these 6 model lines. You select one. OK, now select one of these 4 models. Etc.

    In short, you’re suggesting that they should split the iTouch line in two, one low-end, one high-end. I think their marketing strategy remains positioning the iPod Touch as a “high-end,” desirable “luxury” item, rather than a mass-market item like the DS (whose kid doesn’t have some kind of PSP-type thing?) At the same time, if they can hold onto a low-end *within that range* that can steal sales away from PSP & DS, and grow the market for iPhone OS devices, all the better.

  10. jsk Says:

    Why does everyone assume that the only reason people choose a Touch over an iPhone is because they’re cheapskates.

    Here’s the thing: GSM doesn’t cover everywhere in the US. Not even remotely. Where I live it’s practically non-existent (but CDMA coverage is superb). What’s the point to agreeing to all that expense for the iPhone if you can’t use it as a phone?

  11. Rune Jensen Says:

    Branding the iPod Touch as a gaming machine is exactly the reason they can’t make it a multi-capable pocket device, since
    1) it’s probably not what the users want… They’ll just buy an iPhone or an iPod Nano if they need a camera and
    2) It would definitely make it too expensive. To compete with other gaming machines, Apple has to keep the price low, since it still needs a lot of hardware improvements in order to be technically as good as e.g. Sony’s smaller gaming devices. The accelerometer and other features, do a good job, but people might not consider the iPod Touch it was too expensive. They would just go for one of Apple’s competitors.

    @jsk : Good point. I’d never go with it either.

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