Nanosegmentation
As John Gruber and Dan Benjamin discussed in yesterday’s episode of The Talk Show (sponsored by Instapaper!), the new iPod Nano is closer to a Shuffle with a screen in both design and versatility than previous Nanos, which have always been more like little iPod Classics.
I still see a lot of Nanos in use on mass transit, but I bet I won’t see nearly as many of the new ones as the previous generations. In previous generations, the Shuffle and Classic were the edge-case products, while the Nano and Touch uncomfortably shared the spotlight as the mainstream iPods.
The new Nano is clearly shifted more to the Shuffle’s edge of the market, leaving the $229 Touch — now even smaller and much better than the previous $199 entry — more clearly positioned as the mainstream iPod that most buyers should leave the store with. (Or at least enter the store thinking they’ll buy, before they’re convinced that the $299 32 GB model is a much better deal and get that one.)
It’s not that they made the Nano worse — it’s more like they discontinued the Nano and expanded the Shuffle line with a new model, leaving a vacuum in the middle that will drive many more buyers to get the Touch and expand the iOS installed base.
With that goal in mind, it makes sense why Apple would tolerate so many trade-offs to make the iPod Touch much smaller and less expensive: it needs to compete with the old Nano.