Apple cuts iPod Touch prices by up to 25%

With iPod sales flagging, Cupertino slashes prices rather than dump the line

Apple today cut prices of its iPod Touch as sales of that device and others in the iPod lineup have plummeted over the past year.

The iPod Touch, which resembles an iPhone but lacks the hardware to make or take cellular phone calls, now starts at $199 for a 16GB model, 13% less than yesterday. Other models were repriced at $249 (32GB of storage) and $299 (64GB), reductions of 17% and 25%, respectively.

Apple added a rear-facing 5-megapixel camera to the low-end iPod Touch, and expanded the color selection of the 16GB model to match the hues previously available only on the higher-priced devices.

Sales of the iPod line -- once a major revenue generator -- have been falling for years. In the March quarter, the most recently reported, Apple sold 2.7 million iPods, a decrease of 51% from the same period the year before.

Revenue from iPod sales totaled $461 million, off 52% from the first calendar quarter of 2013, and accounted for just 1% of Apple's $45.6 billion in the period. The year before, the iPod generated 2.2% of all Apple sales.

As recently as the first quarter of 2011, the iPod line accounted for nearly 13% of Apple's revenue.

Some analysts have urged Apple to ditch the iPod because it's a no-growth business, but Apple has not hinted that it would follow that advice. It has, however, acknowledged the shrinking sales. "I think all of us have known for some time that iPod is a declining business," said CEO Tim Cook in January during an earnings call with Wall Street.

The iPod has fallen on hard times as customers have shifted their music libraries to other Apple devices, notably the iPhone as well as the iPad.

Apple debuted the iPod Touch nearly seven years ago, and for some time the handheld music player -- which also was able to connect to the Internet via Wi-Fi and run iOS apps -- was touted by both then-CEO Steve Jobs and industry analysts as the company's answer to growing sales of "netbooks," the cheap, small portable PCs that for a time were the darlings of the computer business.

"For Apple, the iPhone and iPod Touch are a way to provide Web-access devices to the rest of the world," said Ezra Gottheil of Technology Business Research in 2008. "And it prevents them from cannibalizing their MacBook lines."

The iPod Touch price cuts were the latest in a string of moves by Apple to make its hardware affordable to more consumers. Last week, Apple launched a new entry-level iMac priced at $1,099, 15% lower than the extant 21.5-in. all-in-one. Two months before that, Apple quietly refreshed its MacBook Air line, dropping prices by $100 on all four stock models and offering a sub-$900 Air to the public for the first time.

The current iPod Touch devices will be able to run iOS 8 when that upgrade ships this fall.

The revamped 16GB iPod Touch went on sale today in the U.S. and will be available in other markets in the next few days. The price changes for the 32GB and 64GB models took effect Thursday.

iPod Touch price cuts
Apple cut prices of the iPod Touch by between 13% and 25% today, lowering the entry-level 16GB device to $199 from $229. (Image: Apple.)

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter, at  @gkeizer, and on Google+, or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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