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Apple’s Refreshed iPod Touch Is a Throwback to the $200 iPhone—Minus Its Phone

Remember the good old days when you could buy an iPhone for $200 with the help of a carrier subsidy? Wipe away (most of) your tears. Apple just introduced a $200 iOS device you can use to call your friends. Or, at least, the ones who are also iOS users.

Apple on Tuesday unveiled a new iPod Touch that comes with a more powerful A10 Fusion processor and a Group FaceTime feature that makes it possible to video chat with multiple people at the same time. Like the previous model, the new iPod Touch has a familiar iPhone-like design, complete with a touchscreen. But unlike the iPhone, you can’t pop in your cellular carrier’s SIM card and use it to place calls.

The iPod Touch Apple announced on Tuesday is the first iPod revamp from the company since 2015. And although there had been rumors from time to time that said Apple was considering upgrading the iPod Touch, they never came to fruition. Those dashed hopes—coupled with the simple reality that iPods and music players in general just don’t appeal to consumers the way they did in the early 2000s—made many industry watchers guess that the iPod was all but dead.

But the iPod Touch is dead no more. The updated specs on the pocket jukebox “suggests that Apple will keep making iPod Touch devices for the foreseeable future,” Consumer Intelligence Research Partners (CIRP) co-partner Josh Lowitz told Fortune.

But why now? Apple moved iPods into its financial catch-all “Others” division years ago, illustrating its decline. And with smartphones shipping with all of the features you’d get from a music player, many people—myself included—can’t help but look at the iPod as an unnecessary device.

Apple obviously doesn’t see it that way. And the company’s vice president of product marketing Greg Joswiak provided a sound reason for keeping the iPod around on Tuesday, when he said that at a starting price of $199, the new iPod Touch is Apple’s “most affordable iOS device.”

Apple’s top-of-the-line iPhone XS starts at $999. If you opt for its “budget-friendly” iPhone XR, you’ll need to shell out $749. If you don’t mind buying a handset that was released three years ago—and is far less powerful than current iPhones—you can go with an iPhone 7, but you’ll still need to plunk down at least $449.

So that new $200 iPod Touch? It’s a surprisingly strong value for the price. Though the design is outdated, its A10 Fusion chip is the same processor you’d get in a far more expensive iPhone 7. And Apple’s decision to bundle Group FaceTime and augmented reality features in the device means it can just about do everything an iPhone can—except for getting a dial tone—for less than half the price.

A Bottom Line Booster?

Keeping the iPod Touch kicking also makes sense for Apple’s bottom line, said Wedbush analyst Dan Ives. He said that the iPod Touch has “a core following of consumers in some pockets of international markets,” including countries across Asia, Oceania, and Europe. Offering a new version in those markets, especially, helps to attract more Apple consumers and eventually get them to buy higher-ticket items like the iPhone, Ives said.

CIRP’s Lowitz sees the iPod’s re-entry into the market as a clear move to bolster Apple’s flagging profits. During its fiscal second quarter ended March 30, Apple posted an $11.6 billion profit. That was down from $13.8 billion during the same period in 2018, due in no small part to sluggish performance in the company’s iPhone division. Apple’s iPod can’t make up for that shortfall on its own—but it’s a start.

“Given the form factor (similar to iPhone SE) and processor (same as iPhone 7) decisions Apple is making for the iPod Touch, it seems like they are serving it as modestly as possible,” Lowitz said, suggesting the iPod Touch’s manufacturing cost isn’t a heavy haul for Apple. He added that the iPod Touch’s relatively low manufacturing cost means every sale should generate a nice profit for the company.

Neither Ives nor Lowitz ventured a prediction on how many iPod Touch units Apple could sell. But Lowitz said the iPod Touch could attract a niche audience that doesn’t require a phone. It’ll “target new gaming subscribers, home controllers, legacy iTunes customers, or others with specific needs that are best met by a separate device,” he said.

So, does this mean the future is bright for iPod? Let’s not get crazy.

“There will be a nail in this coffin as Apple tries to move existing iPod Touch users to a next-generation product in 2020,” Ives said.