Apple is perpetuating a “virtuous cycle,” as Gene Munster put it in a recent research note, to keep users on the iPod Touch — an improved version of the lock-in provided by the old iTunes/iPod music ecosystem. Users buy the iPod Touch; download apps; developers promote their apps (and the iPod Touch platform), which leads to more consumers buying the iPod Touch. Even better (for Apple), customers can only purchase apps through the company, leading to even more device lock-in.
iPod sales might be dropping, but Apple says half of new purchases of the device are to customers who have never owned one before. I’m willing to bet that many of those customers are interested in Apple’s new Wi-Fi platform. And then, in an even more impressive version of the iPod halo, iPod Touch owners could look to Apple when it’s time to buy their next computer. A virtuous cycle indeed.