I just read the blurb on Venture Hacks about Steve Jobs and customer development. I find it interesting that he/Apple justified not having a camera as a way to help bring costs down because the iPod Touch turns out to be the cheapest way into the App Store.
The App Store has such a great selection of games and very cheaply. When you start running the numbers, $199 for the Touch plus < $5/ea games looks fantastic compared to a DS at $129 + $30/ea. The App Store has effectively broken the game publishing model because 1) the games are very entertaining, 2) they are super cheap, 3) there are thousands of developers vs. a handful of game companies, 4) games are often quick to pick up and put down, 5) there is a really nice API for web and ad-hoc connectivity. Plus, there’s no extra cartridges or discs to shuttle around with you—the Touch slides so easily into your pocket/purse…
By saying that the Touch is a “pocket computer” it helps elevate the product to a status above the a kid-oriented gaming machine like a PSP or DS. Moms and execs don’t mind carrying the Touch (or iPhone). And by saying “there’s an app for that” what you’re really doing is focusing on the software aspect: a near-limitless way to expand the enjoyment of your product experience. You don’t have to say “it’s the cheapest way to get an awesome catalog of cheap software” because it’s intuited.
But I wonder if the additional $10 to add a camera wouldn’t be worth it? By not having a cam it does help to differentiate the Touch from the iPhone—if you want a pocket cam and the App Store experience you buy the phone. Psychologically, the fact the Touch is < $200 is probably a good price point. I would like to see it about $139 though, and to make up for the revenue difference maybe sell some sort of subscription service?