Is the iPod Touch Becoming A Threat To The iPhone?

Ed Sutherland ()

Is the iPod Touch Becoming A Threat To The iPhone?New numbers out Friday suggest Apple’s iPod Touch may become a threat to sales of the pricier iPhone. The Touch is gaining fans while the iPhone may reportedly be suffering during tight economic times.

Ads sent to the iPod Touch nearly tripled in December, compared to November, mobile ad firm AdMod announced Thursday. The Touch was served 292 million ads last month, up from 86 million in November. The Touch is now the No. 2 mobile device in the ad company’s network.

At $399, the iPod Touch is more expensive than the $299 iPhone, but the device actually costs less by avoiding monthly contract fees required by AT&T in the United States. AT&T charges between $69 and $130 per month for a required two-year iPhone contract.

Keith Bachman, a BMO Capital Markets analyst, reports Canada’s Rogers Communications sold 130,000 iPhones during the quarter ended in December, more than 100,000 fewer than were purchased over the previous three-month period. Rogers subscribers pay about $60 per month over a three-year contract.

Apple is positioning the iPod Touch as a gaming platform able to compete with Nintendo or Sony. At the App Store, gaming is the top-selling category.

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About the author

Ed Sutherland

Ed Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.

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  • flunkycarter

    is the 8GB iPod touch not $229.00? and the iPhone not $199?

  • Pumpkinshirt

    Actually, if you compare apples to apples (HA!), the touch isn’t really that much more expensive. $299 gets you the 16GB, same as the biggest iPhone. The $399 price is for the 32GB.

  • Look

    Last time I’ve checked they where both made by Apple…Dummy:) Stop looking for headlines! It’s very boring EDDIE!

  • http://www.maurobosio.it Mauro

    It’s true, and I am start wondering if the price of the iPhone is reasonable or not.
    Are the tlc chip and the camera so expensive? In Italy you can buy the iPod touch for 219 euro and the iPhone for 499 euro (8GB model). More than 2x! I think that the iPhone value is 250 euro, more or less.
    The previous model (the iPhone 2G) could be taken out from an Apple store for 270 euro. Yes, in theory you had to activate it. Anyway, I am quite sure that Apple would have never trusted the buyers so much to leave them out with something with an higher value than the price the really payed.
    Just my 2c.

  • http://trumcgowan.tumblr.com TruMcGowan

    And how long ago was this article written?

  • http://davidchartier.com David Chartier

    And does it matter? They’re both made by Apple, so what’s the point? This question is even *more* pointless now that Apple no longer has any kind of revenue sharing from AT&T plans tied to iPhones (a deal that ended with the iPhone 3G).

    The only company that loses out when Apple sells an iPod touch over an iPhone is AT&T. For Apple, it’s a win-win: it either sells an iPod touch, or it sells an iPhone.

  • Ben North

    @Look
    While they’re both made by Apple, the problem (for Apple’s balance sheet) is that they make more from iPhone sales than they do sales of the iPod Touch.

  • flunkycarter

    umm… i agree that the iPod touch could be a threat to the iPhone so I don’t understand what you’re harping on Look..

    I always wondered why there were two devices… Couldn’t you just have one device (iPhone) that you could decide NOT to activate (the phone feature) That way, you’d have all the iPhone features that are lacking on the touch… (at least the iPod touch is catching up featurewise)

  • jim

    I successfully made phone calls with my iPod Touch by using Fring and a $10 Phillips Microphone adapter from Target. For some reason Fring no longer seems to work. The calls go out and just ring.

    Not saying that I would replace my cell with a hacked Touch, but the ability to make calls with the Touch when in wifi range is pretty slick.

  • Jacob Varghese

    The Touch is a great device.
    Add GPS and a 2/3 MP camera to make it a must have device.

    GPS chip is only $5. Not sure why Apple didn’t add it.

    It’s also a perfect platform for Apple to offer a MID/netbook type of device.

    The netbook market would be dominated by Apple, if there was an ipod touch with a 8/9″ screen.

  • PacoBell

    And if Truphone for this platform takes off in a real way, we might even be able to get a workable form of VoIP-based telephony on the iPod Touch as well!

  • http://appbeacon.com AppBeacon

    @David Chartier

    “Apple no longer has any kind of revenue sharing from AT&T plans tied to iPhones”

    They don’t really need it anymore. Now they have all the recurrning revenue they want via the App Store.

    As others have pointed out, it’s no big deal if the iPod Touch is taking market share from the iPhone. I personally don’t think it is. What I think we’re seeing instead is the adoption of the Touch as a gaming platform.

    A more interesting comparison would be the sales of Ninteno DSs and similar gaming consoles against the iPod touch.

  • Guinness

    Can I have an HTC Diamond Pro please? I sure miss cut & paste!

  • pete

    wow. you’ve got some dumb commenters on here. “what does it matter?” god!

  • Allison

    I don’t see that you’ve made a case for the idea that the iPod Touch is a threat to the iPhone. They serve different audiences, and Apple is doing quite well with both devices. However, the iPod Touch could present a threat to AT&T if people are sticking with their current carriers and settling for the Touch for its iPhone-like features.

  • Lucas

    @flunkycarter

    you have to look at the full price. See when you buy an iphone it is really $399 and $499 retail. If you are new to ATT or if you have an upgrade available on your contract then like with any phone, they will pony up a chunk of money, sometimes the full cost of the phone, in exchange for you sticking with them for the contract period. They have justified ETFs by saying that you are paying off the phone cost a little each month and if you break your contract early, you haven’t paid for your phone. which is why the courts have validated ETFs so long as the fee is not more than the full retail of the phone (or at least the part the carrier paid) and is pro-rated for the months completed.

    ATT, if you qualify, pays $200 of the money you should be paying (on top of another $200 that everyone gets which is why the no contract is $599/699). You pay them back that part over your contract. and not even all of it since the ETF is $175.

    So you get the ‘phone’ for free in exchange for your contract in effective just got a 8GB ipod touch for $199 or the 16GB for $299. so for those bottom folks, they made off pretty well. the higher at least break even.

    the only catch is that you can’t buy the phone without activation. if you don’t want to activate a line then you buy a touch. at least that is your only choice in the US. other countries might have other rules.

  • CaryMG

    I absolutely agre with Jacob.
    An Apple netbook — an iPad i-P-a-d — would dominate the way iPods — i=P=o-d — control the MP3 market.

  • http://www.atdm.co.uk/harmon-karmon-soundsticks/ MacMan30

    I’m a UK Mac user and as much I’d love an iPhone I’m sticking with the iPod Touch for the foreseeable future.

    The reason for this is I don’t want to have to sign up to a contract for a phone so tend to stick with Pay As You Go options, as it stands to get an iPhone on a Pay As You Go package will cost £342.50 for the 8GB version and £391.45 for the 16GB version. You can get a decent spec non-Apple phone on a Pay As You Go package for £100-150.

  • http://none Bitchomper

    The real question is, how are sales of the Newton going?

  • BillM

    A threat it is! It is a threat to ATT. Every Touch sold marks a person who would buy an iPhone if only 1) ATT had a better network and 2) they charged a more reasonable rate for cell phone and data service. The more ATT ignores these issues, the more sales they lose. If they can read the meaning of Touch sales, they will invest in their network, lower rates, and make mucho mas dinero on increased numbers of customers for data services.
    Either way Apple wins.

  • Lucas

    @BillM. sorry but that is just poor logic. unless you go and survey every person that bought a touch and ask them why they didn’t buy an iphone you can’t really say that they would have if only, x, y and/or z.

    i mean I bought 3 ipod touch units this holiday season and it wasn’t because ATT has crap prices. It’s because there’s no way that I’m going to give two 5 year olds and a 9 year old a cell phone. but I was willing to give them something for watching movies on the plane and something to play carefully selected games on.

    so ATT could make service free on the iphone and I still would have bought those 3 touches.

  • Paul

    I believe the reason we haven’t seen a 32GB Iphone is that Apple would lose sales for the Touch. Unfortunately it seems like they are trying to keep two distinct markets for both products. When the Touch goes to 64GB it would not surprise me if Apple keeps the Iphone at 16GB for a long, long, time.