On this iPhone day, let's not forget the real assassin in Apple's iOS line: the iPod touch, which has racked up another notch on its belt with the official death of Microsoft's standalone Zune.
There are more than 37.7 million iPod touches out there, a product so powerful that it's actually prevented the existence of competition. Think about it. If Apple can sell nearly 40 million of these, there's clearly a market. But who else is left selling non-smartphone handheld computing devices? Archos? Compared to Apple's sales figures, Archos's handhelds are a rounding error. Samsung just jumped into the game with its Android-powered Galaxy Players, and they look great, but they have to make up for years of lost time.
Before you mock, there's a powerful reason for these devices to exist: they don't charge monthly fees. Sure, they aren't as capable as smartphones. They're also an order of magnitude less expensive. AT&T's absolute cheapest iPhone plan costs $1,320 over two years. The iPod touch? Zero. Want Internet access out of the house? Consider Boingo Mobile, at $8 per month.
(And yes, before you comment: I'm talking about the U.S. and Canadian markets here. I understand market dynamics in Russia or Zimbabwe may be different.)
Microsoft's Lost Generation
The original Zune, in 2006, was a direct response to what we'd today call the iPod classic. Fair enough. But when the Zune HD came out in 2009, the future was already shifting towards smartphones and connected handhelds. The iPod touch had been out for two years already. Microsoft could have put up a credible competitor.
Unfortunately, 2009 was a really bad time for Microsoft. The company had several incoherent, disconnected mobile platforms, and the teams didn't seem to talk to each other. This was the time when Microsoft was trying to integrate the Danger folks, when Windows Mobile 7 "Photon" was just beginning to become Windows Phone 7, and when the company was developing the misbegotten Kin.
As a result, the Zune HD was part of Microsoft's vision-free, "lost generation" of mobile products. Yeah, it ran apps—but since Microsoft had no overall mobile strategy, there were no apps. And it had a browser, but since Microsoft had no overall mobile strategy, it was a lame browser. It was an evolutionary dead end. And it had to die.
The iPod touch, on the other hand, is part of a coherent, well-connected ecosystem. It runs the same OS as the iPhone; later, the iPad joined the crowd. Apple's commitment to iOS has never been questioned. the iPod touch is a device in which people can have faith.
As the Palm and Windows Mobile PDA platforms were declining, Apple seized its "personal organizer" markets and created a new one of people who want smartphone apps, games, and browsing without the monthly fee or phone contracts. And surprise! The growing awareness of smartphones, and the growing smartphone app markets, has buoyed these nouveau-PDAs beyond their predecessors' success. Palm sold 34 million Palm OS devices in 10 years. Apple has sold 37 million in four years.
Why Nobody Can Beat Apple
It blows my mind—I'm just baffled—that nobody else has bothered to compete with the iPod touch. Microsoft didn't follow up the Zune HD with a connected handheld built on the Windows Phone platform, without the phone. Google seems to have been actively trying to stop Android manufacturers from making iPod touch competitors.
The secret may actually lie within new Apple CEO Tim Cook's wheelhouse, in the dark arts of supply chain management and product sourcing. Manufacturers can build $500 mobile phones and sell them for $200 because of carrier subsidies. But a $229 handheld actually has to make a profit at $229. There's no wireless carrier buffer inflating manufacturer profits.
Apple has spent the past several years locking down supplies of components like flash memory, screens, and ARM processors and developing an extremely low-cost, nimble supply chain. It may simply be able to produce a $229 product that nobody else can comfortably match.
I don't mourn the Zune HD. I mourn what it could have been: a competitive line of connected handhelds running the elegant Windows Phone OS. I still think there's a need out there for handhelds that don't come with mandatory monthly fees. Will anyone other than Apple help fill it?