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At Apple's (Nasdaq: AAPL) September media event this year, the company introduced iPhone OS 3.1, 30,000 ringtones from major music labels, enhanced Genius technology that does its database magic on apps, and new Genius Mixes for songs. Apple also unveiled iTunes 9, which includes the iTunes LP that adds videos, lyrics, artwork, liner notes, interviews and more to to your digital albums. Then there's Home Sharing for easy media transfers within a home, along with a redesigned iTunes Store. These are all fantastic new additions to the iPhone and iPod experience.
Obviously, when the company gets a lead in the market, it likes to just stretch its legs and run faster than ever.
On the hardware front, Apple introduced a new iPod nano that comes with a built-in video camera, mic, and speaker, all for just US$149 for the 8GB version. The iPod touch picked up a processor that's up to 50 percent faster than the second-generation iPod touch, as well as a new price-point: $199 for an 8GB model, $299 for a 32GB model, and $399 for a 64GB model.
But the iPod touch didn't get a camera, nor did it get a video camera.
What Gives?
The iPhone has a camera, and the iPhone 3GS has a nifty video camera as well. If Apple can fit a video camera into the tiny iPod nano, why can't it fit a camera into the iPod touch too? Well, first of all, the camera sensor in the iPod nano is tiny, but it only shoots video. Apparently, to get a halfway decent photo with enough resolution to be usable, along with autofocus, you need a thicker lens. Because the nano is so thin, it's not really possible at this time. Apple CEO Steve Jobs told this to The New York Times' tech guy David Pogue in a quick interview after the media event last week.
OK, that's entirely believable. But isn't the iPod touch pretty thick? Maybe. The iPod touch is still thinner than the camera-toting iPhone, and it may be thick enough to handle a decent camera. In fact, there's evidence that suggests the iPhone touch was possibly originally slated to get a camera. First, some iPod touch cases with camera holes appeared. Even better evidence is what appears to be a leaked photo of the device's internals with a spot for a camera. Acording to a report by MacRumors.com, along with some teardown photos from the curious techies at iFixit, it sure looks like there's a spot for a camera.
Other rumors have pegged a coming camera as well, but some also noted that Apple ran into some sort of manufacturing-related problem and had to forge ahead without a camera.
The Price Point Excuse
So Apple comes up with this whole song and dance around the price point, and in Apple fashion -- because Apple is so freakishly smart -- they sound pretty darn convincing. First, at the September event, Phil Schiller, Apple's marketing 
vice president, laid on the praise for the iPod touch, which he said is both the fastest growing unit in the iPod line as well as the company's most innovative product, (though I think by "product" he may have meant "iPod").
He also said the iPod touch has sold 20 million units to date, which compares to 30 million iPhones. Is that a lot? Yeah, that's freakin' lot. For reference, Apple has sold 220 million iPods, and currently owns more than 73 percent of the market in the U.S.
So back to the price-point notion: Schiller said that Apple learned something important a few years back in the iPod business, which is that when its iPod price dropped to $199, sales doubled. "$199 is a magic price point in the iPod market. With that price point we can reach more customers," he said.
Again, this sounds reasonable. We all have our own magic price points for gadgets, jeans and even milk.
And yet, cameras are pretty cheap components ... we're talking single-digit dollars here. Back in June, iSuppli reported that the cost to buy the iPhone 3G S camera module was just $9.55.
Is $199 more important to sales than an iPod touch with a camera?
Seriously? First, Apple could put a camera in if it wanted to and maintain a decent price point, especially since its core goal is to provide an easy entry point into the App Store and all the gaming titles. This is important because it gives Apple a device that isn't dependent on cellular service contracts with carriers. Second, Apple could easily fit in the video sensor from the iPod nano. Third, the video in the nano is cool, but in the touch, it's sub-par and prone to comparison to the iPhone. Jobs wouldn't let the lesser-quality video fly in the nano.
Talking to Pogue, Jobs said, "What we were focused on is just reducing the price to $199. We don't need to add new stuff. We need to get the price down where everyone can afford it."
What I don't buy is the "we need to get the price down where everyone can afford it" comment. What I do buy is this: "We don't need to add new stuff."
With so much market share (and if we are to believe that the iPod touch is now being seen as a game machine by consumers) Jobs is right: Apple has such a big lead, they don't have to add a camera to the iPod touch.
Rock and Hard Place
Still, Apple is between a rock and a hard place. Jobs certainly won't settle for a crappy camera in the iPod touch, and if they actually told the world they had a manufacturing problem, sales would most definitely stagnate while people waited for the real next-generation iPod touch. Sure, most parents aren't paying attention, but Apple gets more press than any other tech company. If Apple let the cat out of the bag, the company would lose millions of sales. No doubt about it.
Of course, this whole price-point line of excuses is even more stupid when you consider how excited Jobs was to share the video capability of the iPod nano at the media event. He gushed about how video has taken off and how YouTube streams a billion videos a day.
So Jobs thinks video is important. And the company managed to squeeze in a camera sensor, mic, and new speaker, in addition to an FM radio and a bigger screen -- and keep the price to just $149.
And yet, the camera for the touch was less important than a $199 price of entry?
I'm just not buying it.
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