iPod Shuffle with Multi-Touch

OK, I confess. I’m bored with the current Apple rumor hegemony. Whilst I have to concede that everything is pointing towards a thick black plastic 3G iPhone, I don’t have to like it. (And for the record, those photos of the 3G iPhone doing the rounds have got to be fake - it’s hard to imagine Apple ever producing something so... well... Samsungy.)

So to take my mind off all things thick and plasticy, Mac Predictions has instead turned its attentions to the iPod Shuffle. It seems that the recent drop in price has done the trick in giving a boost to the Shuffle’s flagging sales, but at the obvious expense of Apple’s famously high margins.

There are, of course, two reasons why someone might choose a Shuffle - its price, and its size. For those who are not price sensitive, but are still drawn to the Shuffle’s diminutive form factor, there’s currently a gap in the market - especially since the new Nano has sneakily increased in size. This got Mac Predictions to thinking about what might be done to a Shuffle by adding a screen and Multi-Touch. At first this just seemed like a daft combination, until an idea so awsome, so simple, so... well, Appley, came along.

The screen is square shaped - perfect for album art, which is all it ever shows. The device is a little larger than the current shuffle, and it only has two buttons on the bottom - On/Off and Shuffle. Each time the Shuffle goes from one track to the next, it uses a neat “Push” transition (illustrated) to change album art. In shuffle mode, it transitions quickly between multiple album covers, moving in different directions to suggest shuffling. Swiping your finger from left to right across the screen cues the next track, and in the other direction it goes back to the previous track. Swiping your finger up and down controls the volume. Tapping on the screen toggles between pause and play. It’s that simple.

I love this idea so much - I hope that Apple is already working on it, or reads this blog and develops the idea, because I want to buy one!

“iPod Air” multi-touch iPod Nano [Updated]

Do you recall the rhetorical flourish with which Apple launched the iPod Nano in 2005? Steve Jobs proudly announced that whilst the iPod mini was the best selling iPod in history, today they were going to replace it. In fact, they launched a smaller model with a new enclosure and a colour display. They “replaced” it in the sense that the new model had a new name – “nano” rather than “mini”. The fact that Apple would cold-bloodedly “replace” a best seller was held as an indication of the company’s relentless pace of innovation. Despite the rhetoric, the Nano was indeed a remarkable breakthrough device, and it certainly upstaged Motorola’s Rokr handset, which was launched alongside it.

Over the following three years, Apple has consistently upgraded its iPod line in September, immediately prior to the holiday sales period. This is probably not indicative of a natural cadence in the pace of Apple’s innovation, but rather a marketing decision that holding back new iPod lines to launch for the holidays maximises hype around the product, and consequently maximises sales. Perhaps. But things are starting to look a little different now, with the economy weakening, and investors getting jittery. During the last economic downturn in the late nineties, Steve Jobs famously said that Apple’s strategy was to innovate its way out of the recession. And there’s no doubting the results that this strategy has achieved. Perhaps now is the time for a similarly bold move. One obvious candidate would be to bring a new iPod product to market now, rather than waiting for the holiday buying season. Whilst such a move may sacrifice some holiday buzz later in the year, it would be preferable to making price cuts to stimulate sales – cuts that would undermine iPod’s price positioning longer term. It would also help to ensure that the iPod line does not lose its lustre, which could potentially lead to a loss in market share.

So, perhaps it’s time to boldly “replace” a best selling iPod line again. And what better candidate than the iPod Nano itself? Whilst the Nano has retained its name for three years now, the product itself has changed substantially. The Nano is now larger than before, with a bigger display and the ability to play video. However, this screen is still relatively small, and it seems doubtful that many Nano owners get much use out of video playback in practice – it’s more of a gimmick than a useful feature. So if the Nano line were to be replaced, what should its successor be? MacPredictions thinks that the answer is twofold: replace the clickwheel interface with a multi-touch display, and with the space saved from the clickwheel, make the screen larger for a better video viewing experience, whilst retaining the device’s overall dimensions. And the name? Of course… iPod Air.

So does multi-touch on the Nano successor imply the introduction of the iPhone OS? Not necessarily. The iPod Air would be too small to support many features of the iPhone OS, including the virtual keyboard and the 20 icon home screen. Given that text entry has never been very important on iPods (and was only recently added, with the introduction of search functionality) the iPod Air can probably do away with the keyboard in favour of a more basic character picker. The 20 icon home screen could be replaced with a 9 icon screen. But this does beg the question – does Apple really want to get into the territory of supporting multiple resolutions on the iPhone OS? Application developers for other mobile devices will know what a pain it is to develop different variants of their games and apps for different devices. The hegemony of Apple’s iPhone platform is one of the attractions of its newly launched SDK.

Whilst there are certainly drawbacks to introducing a second screen size to the iPhone OS line, the benefits are so substantial that MacPredictions believes Apple is likely to do it anyway. The physical dimensions of the iPhone and iPod Touch lines are limited by the physical requirements of the interface – the icons must be large enough to touch with one’s fingers. And yet, the iPhone is quite a large devise, and some customers will always prefer something smaller. The huge popularity of the Nano is also indicative of the appeal of smaller devices. So in order to roll multi-touch out across the entire product line, and in order to introduce the much anticipated “iPhone Nano” at some point, Apple will have no option but to develop a variant of the iPhone OS interface designed for smaller devices.

Update

Coincidentally enough, 9to5Mac published a story today entitled "iPod Air" pointing out that someone had registered the domain name ipodair.com. For a brief moment, it seemed like the whole MacBook Air thing was happening again, but sadly it turns out that Apple were not the registrants of the domain (even though it's currently re-directing to Apple's iTunes page). Previously, Arn from MacRumors registered the macbookair.com domain in advance of the svelte laptop's announcement. This triggered a defensive registration of similar domains by Apple. However, ipodair.com was registered in January, and Apple does not appear to have reacted by registering any variants. Perhaps they're just playing it cool for the time being.

Are Apple shifting focus from iPhone to iPod Touch?

A few weeks ago, Mac Predictions speculated that iPhone wasn’t doing so well in the UK. That was based upon anecdotal observations at the time. Since then, more tangible evidence has emerged that iPhone sales are not meeting expectations. Admittedly, falling short of target by 10k isn’t the end of the world, but the discrepancy between Apple’s figures for units sold and AT&T’s numbers seems to indicate mounting channel inventory - another bad sign.

It feels counterintuitive that a such a popular device is not selling as well as expected. How can this be? The answer probably lies in Apple’s pricing model - by preventing the networks from subsidizing the handset, whilst taking a share of the networks' billing revenue, Apple is effectively double-dipping. The result is both a high up-front cost for the handset itself, and an expensive ongoing cost for the contract. Apple have chosen higher margins over higher unit sales - an unusual strategy for a company trying to launch an entirely new platform.

More typically, companies launching new platforms will initially sell the product at a loss, in order to gain market penetration. Then, as the component costs come down over time, their margins increase, and, providing that the platform is a success, they ultimately are rewarded with higher volume and higher margins in the longer term. By pursuing a high margin at the beginning of the platform’s life cycle, Apple may be compromising the iPhone’s potential to achieve critical mass.

As any economist will tell you, where supply is unlimited and demand is elastic, a business should set price to marginal cost in order to maximize sales. In other words if lower prices will result in more sales, and Apple has plenty of iPhones to sell, they should price each iPhone at the cost to them of making the next one. As it stands, supply does not appear to be limited (since channel inventory seems to be on the increase) and elasticity must surely be there (after all, iPhone is the most hyped handset in history). This leaves Mac Predictions suspecting that Apple is missing a trick in not going for all-out market domination of their new platform. By allowing their rate of sales to be artificially slow, they’re giving their competitors precious time to copy the iPhone’s innovations and catch up.

There is, of course, one problem with all this. Apple appears to have misjudged the market, believing that they could start off at a high price only to drop it later if it proved to be deterring sales. Sounds good in theory, but this didn’t take into account the PR damage that could be inflicted by vocal early adopters who felt betrayed. After the negative response to Apple’s previous price drop, their room for maneuver is limited. In the light of this, it’s unfortunate that Apple chose to price the UK iPhone at a 10% premium over the newly dropped US price. (The difference is even greater when you factor in the UK’s sales tax).

Apple seems pretty sanguine about the situation - willing, perhaps, to ride-out the lower than expected sales in the short term, in anticipation of the opportunity to drop prices and introduce a 16GB model when the iPhone reaches it’s one year anniversary this summer. After a year, early adopters’ moans will be easier to ignore. In the meantime, press coverage arising from the launch of 3rd party apps in February should add a bit of short-term sales sizzle.

Where iPhone sales did not meet expectations, iPod Touch sales appear to have exceeded them. So what started out as something of a baby brother to iPhone has now become the “first Mainstream WiFi Mobile Platform”. Or so Peter Oppenheimer, Apple’s CFO, dubbed it in a recent Quarterly Earnings Call. What’s all the more remarkable, is that Oppenheimer argued that iPod Touch is more than “just a music and video player”. This is a very significant shift, since in the past, Steve Jobs has stressed that whatever new features they add to iPod, it’s really all about the music. Also indicative of a shift in direction for iPod Touch, is the introduction of the new “January Software Upgrade”, which adds key applications previously only available to iPhone users, such as Mail and Maps. Since early adopter moaning and contractual commitments to the networks are limiting Apple’s room for maneuver in aggressive iPhone pricing, could they now be focusing on iPod Touch instead as their vehicle for early market domination? If so, we can expect to see iPod Touch increasingly positioned as a competitor to iPhone - maybe even with its own iChat application. Time will tell.