Re-Thinking The iPod Touch And The iPad Mini

by John Kirk   |   September 17th, 2012

Last week, my colleague Steve Wildstrom asked: “Is There Room in Apple’s Lineup for an iPad Mini?” I had the very same question and I was one of the very first to say so in the article’s comment section. However, after reading more on the matter and upon further reflection, I’m re-thinking my position.

With the rumored iPad mini on the horizon, I would have said that Apple was going to de-emphasize – if not discontinue – the iPod Touch. Instead, Apple did a major upgrade. How major? In addition to significant spec bumps, they added:

– 4″ Retina display
– A5 Chip (same as in the iPhone 4S)
– iOS 6
– Siri
– Airplay Mirroring
– Shared photo streams
– Dramatically improved, 5 megapixel iSight camera with autofocus, flash, Facetime HD and Panorama.

But it was the pricing that was the most perplexing. The new Touch, which will ship some time in October, will be priced at $299 for a 32 gigabyte model and $399 for 64 GB. With the new iPad starting at $499 for a Wi-Fi-only 16 GB model and the iPad 2 priced at $399, where does the rumored iPad Mini fit in?

I’m now speculating that the Ipad Mini will be priced the same, or nearly the same, as the iPad Touch. Counter-intuitive? Yes. Un-Apple like? Maybe not.

Apple has never been afraid of cannibalizing their own products. But one thing they have always feared and avoided was category confusion. Except during times of transition, Apple is fanatical about keeping their product lines distinct.

Marketing students and fans of the book: “The Paradox of Choice”, will understand Apple’s resolve in this matter. Confusion is the enemy of sales. Apple keeps its product lines far apart so that you know, almost intuitively, which device is the one and only one that will fit your needs.

So how would that work with the new iPad Touch and the rumored iPad Mini? If they have the same price, wouldn’t that cause massive consumer confusion? Not really. Here’s why.

Apple is clearly aiming the new iPod Touch at kids. In addition to all of the features described above, the new iPod Touch comes in kid-friendly colors and with a kid-friendly carrying Loop. Further, at the event where they announced the new iPod Touch, Apple heavily emphasisezed the iPod Touch’s ability to watch movies on its wide-screen display, the 1750,00 available games and the 150 million players made available via Game Center.

Apple is positioning the iPod Touch as a device for kids.

And the iPad Mini? It’s hard to know how Apple will position it since it doesn’t yet exist. But here are a couple of things that I think will differentiate it from the iPod Touch:

– It won’t fit in your pocket
– It won’t have a Retina Display
– It will run iPad – not just iPhone – Apps
– It will be 3G, and possibly LTE, capable

I believe that Apple is going to position the iPod Touch as the device for kids and the iPad Mini (or whatever it might be called) as a personal iPad – useful for everything an iPad can do except for screen intensive Applications.

I’ve always thought of the iPod Touch as Apple’s stealth iOS weapon. Virtually without competition, it gently ushers a younger generation into the world of iOS. And once they are there, what could be more natural than for those iPod Touch children to transition into iPhone and iPad carrying teens and adults?

Apparently, Apple feels the same way. They’ve sent a strong signal that the iPod touch is here to stay. And the rumored iPad Mini? Well, we won’t be able to say for sure until it actually exists. But I no longer think that the iPod Touch and the iPad Mini have much overlap with one another. Even at the same prices, they serve two very different purposes and two very different markets.

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • Grwisher

    “But I no longer think that the iPod Touch and the iPad Mini have much overlap with one another. Even at the same prices, they serve two very different purposes and two very different markets.”

    Good Bird! :)

  • benbajarin

    That is a point I thought through last week and even though it makes sense I still struggle one specific question. Which is if the 7″ was the same price or lower, why would anyone buy the new iPod? Wouldn’t it seem logical that even if it was positioned at kids, or other market segments that they would reason they could do the same things but on a larger screen?

    The camera feature could be the one differentiator they could leave off the mini. I see them going right after the general point and shoot market with the new iPod. Its basically a camera +.

    • FalKirk

      “… if the 7″ was the same price or lower, why would anyone buy the new iPod?” – Ben

      It’s a great point, Ben. Apple must feel that there is a separate market. They’ve just upped the iPod Touch, big time. They didn’t do that for kicks.

      • Defendor

        Of course there is an even simpler, more reasonable, less speculative explanation.

        They won’t be priced the same, the 8″ iPad will cost more.

        Apple will, as always, maintain healthy profit margins on it’s HW and the 8″ iPad will clearly cost MUCH more to build (5 times larger screen area) than a 4″ ipod and the price MUST be higher to reflect that.

        • FalKirk

          You may well be right, Defendor. We’ll just have to wait and see.

          • Defendor

            Yes, it might not even show up this year. There don’t seem to be anywhere near the same level of HW leaks that there were for the iP5.

          • Starman_Andromeda

            Yet, not many leaks for the iPod Touch 5, either–and look at what happened. The biggest surprise and most interesting product introduced at the keynote!

  • Defendor

    The vast majority of the media have made the same two, related mistaken responses to the 8″ iPad rumors.

    1: That it was an answer to the Zero Margin 7″ Nexus/Fire devices.
    2: That the Price would reflect the above, and start as low as $249.

    Apple never tries to compete on price with ZERO margin products and the form factors really don’t match up. Listen to Nexus fans and some chunk of them will proclaim a big advantage is that it is “pocket-able”. Which I think crazy, but you can cram it in some pockets. Something that you really can say for a 4:3 8″ tablet (if the 7.85″ rumors are true, we should stop calling this 7″). Also you can cradle a 7″ 16:10 tablet in one hand and wrap your fingers around it. Something else that won’t be true in a much wider (in portrait orientation) 4:3 8″ tablet.

    Then there is price, it is completely ludicrous that anyone ever thought, Apple would build a much larger 4:3 8″ tablet and price it competetive with smaller ZERO Margin products. It merely seems that it took new iPod pricing to wake from that fevered dream.

    So in form factor, and in pricing, the 8″ iPad was never targeted at 7″ androids.

    It is instead the new entry level iPad to replace the (temporary stopgap) iPad 2 in the lineup. It will practically contain all the parts of an iPad 2 except a smaller package/screen. I expect a $349 starting price, will maintain a reasonable margin and still be a reasonably priced entry into the iPad ecosystem.

    If kids want an iPad to play with, I don’t think an iPod is going to satisfy, but an 8″ iPad at only a few more dollars will, and have perfectly scaled applications for their smaller hands.

    • FalKirk

      ” I expect a $349 starting price…” – Defender

      It’s all speculation at this point since we don’t have any reliable information on the rumored iPad Mini but I would guess that the starting price will either be $299 for a 7.85 inch tablet without retina display or $399 for a 7.85 inch tablet with retina display.

      Feel free to disagree. It’s all just guesswork until we learn more.

      • Grwisher

        As long as we are guessing – $249 for 16GB, $299 for 32GB white or black with similar specs to the new (3rd generation) iPad.

        • Defendor

          I guess fevered dreams live on. I should never underestimate the power of wishful thinking.

          But back in reality.

          A 7.85″ 4:3 screen (as rumored) is 35% larger than a Nexus Screen. That will drive a similar increase in the cost of Screen/battery/casing.

          Couple that increase with the simple fact that Apple insists on healthy profit margins, where Google is accepting of negligible market in a desperate move to grab market share.

          Say Nexus $250 *1.2 (size increase costs) * 1.25 (Profit margin increase)
          = $375.

          There is no way that in this reality that an 8″ ipad is coming for under $300. Even $350 might be thin for an Apple Margin.

          The new $300 iPod really should have been clue that Apple wasn’t going to accept low margins.

          • Grwisher

            You might well be correct about the price, but you are absolutely right about me being a dreamer.

            However, consider the effect on margins due to (1) the projected sales of the rumored iPad mini vs. the Nexus and (2) both the rumored iPad mini and 10″ iPad will likely share many of the same components. IMHO, the sales of the Apple product will far outstrip the sales of the Google one. Higher sales mean lower component, manufacturing, marketing, distribution, etc. costs for each item sold. In addition, many of the parts of the iPad mini will likely be the same as the 10″ iPad further reducing the cost per unit and therefore contribute to greater margins for BOTH products. Apple could transfer some of the margin benefit from the 10″ iPad (thus keeping the 10″ iPad’s margins the same while increasing the margins on the mini). Therefore the margins for iPad mini at $250 will likely be much greater than Nexus at $250 just due to the economies of scale.

            Do I know that the economies of scale is enough to get the price to $249 – no, but it can certainly get it closer. In any event, it will be fun to watch.

          • Defendor

            If that were true, then why is the 4″ iPod (also sharing many iPad 2 components) with a screen, battery and casing only 1/4 the size of a projected iPad mini cost $300 ???? Do you think making the screen/battery/case 4 TIMES larger is going to reduce the price?

            Think about that, some of the most expensive components on the iPad are going to be 4 times larger, and almost certainly at least twice as expensive. It makes no sense at all, that a 4″ and 8″ device , both from Apple will be priced the same, when one has expensive components that are going to cost multiples of the other.

            Also economies of scale are a big deal when you are talking about small numbers, from small players, but I think we can safely say you hit diminishing returns once you get to the 10 Million+ unit mark, that the Nexus will sell.

            Just about any reasonable angle you examine this from points to an 8″ iPad costing a fair bit more than 4″ iPod.

          • benbajarin

            The biggest hurdle in my mind are the technology tradeoffs that would need to be made to hit a lower price point. My concern is that those tradeoffs would potentially make it un-competitive in light of even lower cost products like the new Kindle HD.

            So I am sort of with the line of thinking that it would replace the iPad 2 in the lineup at $399. There has been little that has come out that is able to shake me from landing here.

          • Defendor

            My view is that is essentially a slight shrink on an iPad 2 (with 32 nm A5). As such it needs to compare favorably to current iPad 2 pricing, so it should be under $399 Entry.

            I think it wrong approach to worry about a spec waving constest with Amazon, but if you are, I will point out that even an A5 is more powerful than that what is in the new 7″ Fire HD. Also read some Fire HD reviews. Lagging software is widely reported.

            Regardless of specs, the iPad mini will almost certainly provide a better experience.

          • steve_wildstrom

            The components that might cost significantly more in an iPad Mini than in the touch are the display (though even that is not clear; that iPhone Retina display is expensive) and the larger battery. We don;t know what processor they’d use–the A5X that’s in the iPad or the A6 from the new iPhone (the Touch uses the older A5.) Other components are mostly the same.

          • Defendor

            We both believe it will have 1024×768 resolution, so why put a fat expensive A5X die in it? Spec waving contest? That doesn’t seem like Apple. All it really needs is an A5 to provide a good experience.

            This is the inexpensive, Entry iPad, it doesn’t need bleeding edge components.

            As far as display costs, there is a premium for going to high dpi, but LCDs are multi-layer and most of the layers are not affected by DPI at all. They will all scale directly with area regardless of DPI. So bigger backlighting, bigger polarizer sheets, bigger light spreader, bigger touch screen glass/sensors. We are talking 4 TIMES larger area here, there is no doubt the much bigger screen is going to cost much more.

            Even my target of $350 may be low.

          • Grwisher

            Regarding: “If that were true, then why is the 4″ iPod (also sharing many iPad 2 components) with a screen, battery and casing only 1/4 the size of a projected iPad mini cost $300 ???? Do you think making the screen/battery/case 4 TIMES larger is going to reduce the price?”
            What costs more – an Ultrabook or a regular bulky notebook? Sometimes it costs more to make things smaller. In addition, the Touch will not sell at near the numbers as the mini – again economies of scale.

            Regarding: “but I think we can safely say you hit diminishing returns once you get to the 10 Million+ unit mark, that the Nexus will sell.”
            Yes, without doubt, there are diminishing returns over 10 Million and and over 20 Million, and over 100 Million, etc. It is also important to know if Google is going to order all 10 Million+ at once or in batches over time (is the 10 Million+ number a published number? – just asking).

            We may have a difference of opinion as to how important are the economies of scale and that may be the basis for the differences in our guesses. I look at producing a brand new product, the Nexus, from scratch for a limited number of units to be produced to be much more expensive per unit as opposed to Apple with over 2 years of experience in producing millions of iPads. Apple has the suppliers, manufacturing facilities, marketing, distribution etc. already in place.

            Maybe as an AAPL investor I am too hopeful that Apple can come in and crush the competition with mind blowing prices. The only competition to the iPad, right now, is in the smaller sizes. IMHO, a knockout punch here would be devastating to the competition and would make the iPad the next PC for the next 20 years. I can dream, can’t I?

            But let me point our one other thing about this Nexus deal. Most of these reference design products put out by Google are one shot offerings. How much more leverage, with regard to unit cost, do you think Apple can apply on all of their vendors? These vendors know Apple will be ordering millions of components, year in an year out, as opposed to Google’s one shot offering.

          • Starman_Andromeda

            But not likely that an 8″ would cost $250, while the IPT 5 costs $300 and $400!!

            Almost certainly we’re looking at $300-350 for the entry-level iPad Mini. And, to another poster in this thread, they’ll never release a non-Retina and Retina at the same time! Instead, they differentiation will be amount of memory, 32 gb vs. 64 gb. Next year, they’ll upgrade the IPM to the retina display to induce another round of upgrading!

  • dettrick moatz

    The iPad mini doesn’t have any overlap because it doesn’t make any sense with Apple’s style. Making a non-retina iPad would just be backwards, a waste of time.

    Watch Steve Jobs/Tim Cook interviews: they aren’t going to make products that aren’t the best they can make.

  • http://pulse.yahoo.com/_PV5QSDYKYJUUTEEYHA2B7SLFAM Mike

    Most likely the iPad2 will be discontinued. The iPad mini will replace the iPad2 as the low end, smaller screen but upgraded internals. I bet it will come in at $379 for a 32GB model.

    • Defendor

      I agree. iPad 2 was a stopgap, Though I suspect we will get a $349 16GB 8″ iPad with the 32GB for $399.

    • Gary McCray

      Maybe, but with the Fire HD and Nexus available now with superior hardware specs,

      if Apple prices the Mini that high they will lose ninety percent of their total potential market.

      It depends on whether they want the 7″ market or just want to compete with themselves for their own IPad.

      A $350.00 or more IPad Mini is the only mistake Apple can make that is as big as not coming out with the Mini at all.

  • steve_wildstrom

    It’s very likely that the iPad Mini will have a resolution of 1024×768 to maintain app compatibility with the existing 9.7″ models. If it’s a 7.8″ display, that would put the pixel density somewhere between the iPad 2 and the new iPad–sort of retina-ish.

    • Gary McCray

      I pretty much agree, the easiest (no brainer) software compatibility is just to keep the same total screen resolution as the IPad 2.

      I’m not sure they would even have to write any new software.

      It does put them at a small deficeit in comparison to the Nexus and Fire HD, but then again its an IPad so who cares.

  • Gary McCray

    You may be right, an over priced pocket phone (oops, not a phone), game thingy may have a market.
    But the IPad Mini can take over an existing and waiting to explode market from Amazon, Google and even Microsoft.
    It has to do it this Christmas and the smart money is that it will cost no more than the Touch, because if it does, it will lose at least ninety percent of its immediate sales potential.
    Most Minis are going to be sold to new Apple customers in addition to many existing ones.
    If they cost more than $50.00 or at worst more than $100.00 more than the Fire HD or Nexus 7 they will lose most of that market.
    So the Entry Touch price is the most they can charge for a Mini without seriously killing their own market.
    Priced right, my guess is that sales of the Mini will exceed all IPods ever sold within the first 2 or 3 months.

  • filecat13

    Taking S_A’s point a little off track, I was utterly surprised by the iPod Touch. I thought “Well, this event is over,” and Boom, out comes the iPod lineup. I felt like Ben, that this is a frickin’ camera replacement, plus a personal gaming device, a movie player, an Internet and email device. For those who obtusely claim the iPad is not a productive device but simply a consumption device, I’d say, well here we have the iPod Touch being a supreme consumption device that also has some productivity up its sleeve. If you need more useable productivity, then there’s an iPad for both productivity and consumption, and if you’re going to do some heavy lifting, you’ve got Macs.

    I’ve got a 27″ iMac, 13.3″ MacBook Air, original iPod, and iPhone 4S, and I never feel like I have devices tripping all over each other. I use each every day, and sometimes together when the overlap increases my abilities (iMac to build a complex Keynote presentation, MB Air to present it, iPhone or iPad remote to present it, for example), and if I ever gave up my iPhone for another brand, the next thing I’d do is buy the new iPod Touch for all my iOS games and apps. Win, win, win for me and Apple keeps an adult customer.

  • bregalad

    Apple is probably counting on the size difference to keep too many people from comparing the iPad mini to the iPod touch. Those who do will be greeted by these explanations:
    Yes you get a larger screen, but it’s not retina and it doesn’t fit in your pocket.
    Yes you get the same camera, but you aren’t going to replace your point and shoot with a tablet.
    The touch offers twice as much flash (please ignore the fact that the retail price difference between 16GB of flash and 32GB is about $10).

    However, $300 or $400 is a heck of a lot of money for a kids’ toy. I know people who could afford that, but none who could justify it. Apple has addressed that concern by keeping the 2010 model around for yet another year at lower price points, but it’s starting to look positively ancient.

  • Ed Lehmann

    I use my Touch to keep all of my music, contacts, to do’s, photos, drop box files etc. in my pocket. I don’t want to pay the iPhone monthly fees as I don’t phone much and I can live without internet everywhere. I use a Trac Phone as my inexpensive cell phone. The Touch is perfect as my pocket computer.

  • anti-data-plan

    A different angle…..
    Ipod touch at $300 is about providing a cheap phone and a smartphone at the same time. Think about it. Spend $40-$70 a month for your kids smartphone, or $10-30 a month for a dumb phone. It adds up to a lot pretty soon. Or zero a month ($300 up front), for a iPod touch that is close enough.

    Apple hasn’t really played this card yet, but I expect them to position the ipod touch as a zero cost smartphone. Use wifi at your school, home, work (teenagers), coffee shop or mcdonalds to make voice calls (or messaging, or video calls). Not great for soccer practice pickups unless a free wifi is close, but good enough for a lot of people.

    Apple has been VERY reticent to allow microphones on the iPods. They didn’t want to allow voice calls, and detract from the hugely profitable phone market, where they get $700 a pop(indirectly from your cell phone monthly bill (US)). But now the adult smartphone market is mature, and adults are used to their data bills thins look different. They want to hook the kids young. But parents don’t want to spend the monthly fee for a smartphone.

    I claim Apple will soon support audio/video call on the ipod touch, and it is positioned as a low cost smartphone for youth (paid by parents who want connectivity). Notice that it has a microphone and speaker. You might need to use it in conference or video mode, or hold the phone upside down, but any 10 year old will learn that in a heartbeat to get an ipod touch.

    They may also provide bluetooth connectivity to a dumb phone, for voice calls from anywhere (yes you carry two phones), but the phone is a low cost plan, and can be shared among kids. It probably will have address book integration (maybe twitter etc too).

    Also, look for Lightning to hook the kids. Imagine, connect a small dongle (or just a cable to your hdtv, for gaming. Now anyone can join….. IF THEY OWN an IPOD TOUCH. (cable for video to tv, wifi for communication between iPods). This is a huge hit, maybe not this Christmas, but next for sure.

    • http://twitter.com/Chris_Is_Boring Chris L

      the current iPod Touch can already do facetime

  • jim8151

    I only quickly browsed through the many comments here, so forgive me if someone else mentioned this. I think the Apple approach to an iPad Mini would be like the MacBook Air. When the Air came out, it wasn’t really less expensive than the lower-end MacBook Pros. Instead it brought an incredibly thin and light form factor with minimal performance tradeoffs. And, make no mistake, it ate into MacBook Pro sales. Similarly, the iPad Mini will bring an incredibly thin and light form factor with minimal performance tradeoffs, and it will be priced in a way that will enable Apple to maintain its margins. So, something like this would make sense:

    iPad Mini – Retina display – 16GB – $299 (LTE version $429)
    iPad Mini – Retina display – 32 GB – $399 (LTE version $529)
    iPad Mini – Retina display – 64 GB – $499 (LTE version $629)

    This is the conservative Apple approach that we’ve come to know and love. If they wanted to hit it out of the ballpark, reducing all those prices by $50 might just do it.

  • NDM

    I have long thought the iTouch to be the best product Apple has ever produced and wondered why anyone would ever want to lug around an iPad that you cannot put into your pocket. On trips I easily carry my iTouch in addition to my iPhone because it holds about 300 music albums, 30+ movies, 10 books and many games and goes right into my pants or jacket pocket. Lots of movies can be nicely viewed on its relatively diminutive screen. At home, I use it to check quickly on emails and the news. The iPad is just too darn big — if I were to get something that size it would be an Air so I also could benefit from its really strong “productivity” capabilities.

  • joan

    i am 77 yrs old and would very much like an ipad mini, the ipad is too big and the iphone too expensive and the touch too small. i have an apple lap top, so that is to be my next purchase.