Sibling Rivalry: Will iPod Touch Cannibalize iPhone Sales? Is the Pope Catholic?

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Apple may have opened a can of worms by removing all but one reason for buying an iPhone. For starters, they've given the iPhone a vasectomy, freeing of its GSM radio and carrier entanglements, and re-branded it as a standalone product even identical in appearance to its cellular sibling. On paper that seems like a sound strategy for product growth, and it is...for iPod sales. Unfortunately it's not going to do wonders for iPhone's prospects. Many consumers who otherwise might have purchased iPhones will now be offered a choice that will almost certainly lead them to buy an iPod instead.

After all, you can get everything iPhone has to offer in the same great design for just $299, sans phone functionality of course. Anecdotally I can attest to the existence of a large market for users who want an iPhone but don't necessarily want its phone aspects or the required switch in carriers. Many of those same folks bought iPhones anyway because no alternative existed...until today.

I had anticipated the release of such a product in the coming months, but I expected it no sooner than January of next year at MacWorld in San Francisco. To launch a product that so closely resembles iPhone in form and function now risks cannibalizing iPhone sales and stifling market growth for Apple's current and future handset line. My guess is this was a driving factor behind Apple's decision to simultaneously slash prices on the 8GB iPhone by two hundred dollars, removing a chronic barrier to entry and spurring sales.

The more I look at today's product announcements the more risk I see. Maybe I'm reading too much into the tea leaves but I see too much happening too soon. Unless Apple plans on cranking out more iPhones models in the next quarter, building a more robust line of mobile devices, I'm afraid iPod is going to take center stage and disrupt iPhone sales.

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There are 10 comments. Add yours.

carlos says:

yes they want to dominate the cell phone market... By January in max they will introduce a more frugal iPhone... Because if they want to dominate the market they"ll have to lower the price or have different options.. Apple is moving to quick and with no room to say wow...
Yesterdays news was a WTF rather than wow.

genius says:

Kent you are one racist motherf****r

iy says:

Not only do I feel today like a chump for shelling out $200 more for an iphone, but I suspect that in the VERY near future, I'm going to feel even worse...How long until the 8GB becomes the 'cheaper' model and the 16GB version is intro'ed?

Amy says:

iy -- Thanks! As if I wasn't feeling queasy enough about the $200, now you've brought up another very possible concern. 16GB indeed… (sigh)

iy says:

(...Sorry Amy. )
The ipod touch without wifi would have been much less likely to cannibalize iphone sales. I know there's this whole new business model of selling songs through the ipod, but it does really blur the distinctions. Why does an ipod need to SURF the WEB!!? I agree Kent, from this vantage point, it seems like an error of judgment.

CB says:

Hi guys, i am from Brazil and i would love to buy an official iPhone. But it´s not gone happen here very soon. So i am going to by the new iPod Touch and the iPhone, maybe when it arrives here.

covertlyobvious says:

Dare I go back to the whole name of the (Apple)Phone question... iPod Touch, iPod Classic... iPod Touch Phone? What's an iPhone?
Somehow the new line lacks the brilliance and definition of the previous generations. Something's amiss.
et alone the fact that Apple's market research group must really suck if they couldn't predict that a 4GB $500 dollar iPod/Phone wasn't going to sell. 68 days from cradle to grave? Duh!?

PrettyUgly says:

A Vasectomy? Sweet! Everything is better after a vasectomy. The worst part about my iPhone is being able to take pictures, browse the internet and use it as a really, really good phone.
Now everyone has the option to save a hundred bucks and not do any of that stuff.
It probably will cut into iPhone sales a bit, but honestly, I think most of them will probably regret not getting the phone. If you're not getting the phone you might as well get something with 10 times the storage space for the same price.

Mario says:

I think He (SJ) just shot himself in the foot. I would have waited a year at least before introducting the Ipod Touch