John Gruber weighs in (all the way in, complete with link to Think Critical) again on the smaller iPad rumor. He’s right that it should be more appropriately rounded to 8 inches rather than 7 and that the device—as anyone with real connections has described it—scales with the dimensions of the iPad and not the iPod.
My point was mainly about the marketing hole that this device could fill. For quite a while, the traditional, non-touch iPod’s place in Apple’s marketing has been essentially vacant (and maybe that’s an argument to go with iPad branding instead).
Here’s what Gruber says about marketing:
Marketing-wise, who knows what Apple would call it. I don’t think they’d use the “iPod” brand instead of the “iPad” brand, but anything is possible when it comes to Apple and naming products. But in terms of understanding what it is, if it ships, it’s an iPad, about two inches smaller diagonally.
iPod was always about music. “A thousand songs in your pocket.” But the iPod Touch is a different story. The marketing message behind it has, for almost the entire life of the product, been about playing games. Right now, Apple is selling the iPad hard as a productivity tool capable of replacing a computer for some people in some cases. Will a small iPad be as useful for content creation as the current one? Maybe. However, considering that this device is likely to be perceived as being in the same category as the Kindle Fire and Google Nexus 7, it might be that Apple will “borrow” the marketing from the iPod Touch, focusing on how well the device will play games and also the increasingly large library of iOS games.
Then there is the issue of price. Right now, the iPod Touch is the cheapest way into iOS (though the 3GS is free up front, we all know it’s not really free). In my experience as a high school teacher, the Touch is also the iOS device teenagers are most likely to have (that data plan is still a deal-breaker for parents, though I see more and more smartphones all the time).
Here’s why I think Apple could sell it for $199. If Google can sell the 1280 × 800 pixel Nexus 7 for $199 and break even on it, I think Apple could produce a 1024 × 768 7.85-inch iPad for a break-even price of, say, $150. Charge $199 and that’s a decent (but, admittedly, low by Apple’s astounding standards) 25 percent margin.
If Apple does hit this price point, the iPod Mini vs. iPod-style battle happens not between this new smaller iPad and the original, but between the small iPad and the iPod Touch. At $199, the number of people who will choose the iPod gets pretty small. So if Apple intends to do what it has demonstrated in the past: cannibalize a product of its own with something new—as 3.5 inch iOS devices did to the traditional iPod—it stands to reason that it might intentionally cannibalize the iPod Touch.
Now imagine the iPod Touch goes away. iOS devices at 3.5 are now all carrier-subsidized and tied to the subscription model which pays Apple a percentage throughout the contract life. The lowest margin device, the Touch, is gone, replaced by the not-so-high-as-usual, but still pretty good 25% of the new smaller iPad.
Even if it doesn’t replace it in name, it is hard to see this small iPad doing anything other than taking the psychological and financial place of the current iPod Touch.