Court Documents Reveal Apple's Surprise Blockbuster: iPod Touch

Posted by jsrief on August 11, 2012 08:05 pm 36

This is a post I just put up on an Apple blog a couple of friends and I are running. The link to the original post is here. I would welcome your thoughts and feedback!

New and interesting data continues to roll out of the Apple v. Samsung trial on an almost daily basis. On Thursday, a particularly fascinating series of charts were released, documenting US sales numbers and revenue by device for both Apple and Samsung. There are many interesting data points here (Samsung’s bestselling smartphone in the US was the Galaxy Prevail?), but the most interesting to me was the unbelievable prevalence of Apple’s dark horse – the iPod Touch.

I don’t think anyone is surprised that the iPod Touch is popular. It’s always been an amazing little device that grants most of the functionality of the iPhone for around $200 without a two-year contract. What I think is surprising here is how insanely well it has sold. To date (to be specific, through June 30), Apple has sold 46,551,000 iPod Touches in the US. That compares to 85,956,000 iPhones and 34,002,000 iPads. For timeframe comparison, the iPod Touch and the original iPhone have been for sale for roughly the same amount of time (the iPhone launched in Q2 2007, while the iPod Touch launched in Q3 of the same year), while the iPad obviously runs at a significant disadvantage, not having launched until Q2 2010. The most amazing data here stems from the time periods around the truly blockbuster launches of the iPhone 3GS and the iPhone 4. In 2009 (the year the 3GS launched), Apple sold more iPod Touches than iPhones. The iPhone had its best year up to that time, selling an unbelievable 10,186,000 devices, but the iPod bested Apple’s flagship device by more than 400,000 units, ending the year with 10,633,000 sold. In the year the iPhone truly matured and came into its own – 2010, with the launch of the 4 – the iPod nearly pulled off the same feat again. With the mid-year iPhone redesign and the price-drop of the 3GS, iPhone sales set a new record, jumping to 14,123,000. The iPod Touch lagged less than a million units behind, logging 13,278,000 sales of its own.

2011 is the year when a great amount of disparity begins to emerge. The launch of the iPhone 4S in the final quarter of 2011 netted more units sold for Apple than the previous entire year. By the end of September, the existing iPhone models had already broken 2010′s record on their own, even without a fresh product, hitting 17,300,000 units before the iPhone 4S was even announced. With the release of the “disappointing” 4S in October, Apple went on to sell 15,073,000 more units in the less than three months remaining in 2011. The iPod Touch performed well in Q4 2011 as well, netting a 300% increase over the previous quarter, but it apparently couldn’t match the appeal of a now-free 3GS and a $99 iPhone 4 (on contract), underselling the iPhone by almost 10 million units for the quarter, and over 20 million units for the full year. It’s also obviously very possible that the iPad was taking a big bite out of the iPod Touch’s sales at this point, as it raked in almost 16 million sales in 2011.

So, why hasn’t Apple focused on the iPod Touch more if it’s such an enormous success? The answer is simple – revenue. While the rockstar iPhone has generated $50,703,000,000 in revenue in the US alone since its introduction (yes, that is an eleven digit number), the out-of-the-limelight iPod Touch has generated a mere 20 percent of the that – a little over $10 billion. Knowing that Apple keeps very healthy profit margins on each of its product lines, its very clear that the iPhone is simply a far more profitable product. In roughly five years, it’s sold roughly twice as many units as the iPod Touch, while generating five times the revenue (and, presumably, similarly outrageous multiples of profit). My guess here is that Apple sees the iPod Touch as a gateway drug to an iPhone or iPad purchase (“Wouldn’t it be great if this had cellular connectivity? a bigger screen?”), similar to the way in which the iPhone allegedly helps sell Macs.