No way. They would have to seriously drop the price of the iPod Touch.
My guess is that an updated iPod Touch is coming in October at this price point.
Well, they already have dropped the price of the iPod touch to $199.
We have the "new" iPad at $499, iPad 2 at $399.... iPod Touch at $199. When the iPod Touch gets it's refresh in the fall, it will stand up better to a 7" iPad in specs... so now we're talking the only really different component between the two is the screen. The iPad is basically a big iPod touch with slightly better specs. iPod's are still the #1 MP3 player, but they're selling 70% less of the in a year than during their heyday due to smart phones. Throwing a 7" iPad out there at $100 more is a good way to keep customer tied to Apple's echo system, and generate higher revenue. That $100 would more than make up for a larger display.
What I call bunkus on is that it will have the same specs as theNewiPad. I bet they drop the rear camera. (And who needs it or uses it anyway?) It also would not need the same level of processing power to drive the smaller display, so I doubt it will have the same chip, which is always a cost savings, and I bet they come in wi-fi only.
Personally, I see them shooting for $299. $199, $299, $399, $499, $599... $100 space between each size/model of iPod Touch/iPad going up. I won't cry if its less
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People are saying that the problem with an 8GB model is that the retina display files take up much more space and thus you'd run out of the 8GB fast. While I agree 100% there, the point of this product would not be to be a smaller iPad (2 or 3) but to be a Kindle killer. Thus the target audience would be people who read and students. ePub files are small, most of them only a few hundred kB at the most. This would make perfect sense than, why would you need more? My wife has an iPad2 and hundreds of books on it; and no more than a dozen or so apps. This is the target audience, readers! And they get all the other features and can install a few good apps.
For me, I could see myself getting one at the $199 or $249 price. Getting my kids one wouldn't be as costly either. With schools adopting ebooks, it would be very helpful for them as well.
I used to hate the idea of a 7" iPad, but have really warmed up to it after thinking about how I could use one. Maybe a $199 7" iPad2, and a $299 7" iPad3?
Well, it's most likely not 7" but 7.9" based on all sources and rumors, and that would create a resolution that wouldn't be evil to app developers in getting their apps ready. A 7" would be chaos for developers... especially if the iPhone 5/6 (whatever they shall name it) is 4" and I think it will be.
They're not going to price is at the same price as an iPod touch. $249 is the lowest I'd see them go, and I bet more like $299. But to your point about the storage space, even going after the readers market... people will still download lots and lots of apps... and that still takes up lots and lots of space.
What they really needed to do was have the app store be smart and install a resolution appropriate version for your device rather than having developers bundle 2 graphic sets into one app that most people don't even need. As it is, most developers have gotten away from having an iPhone and iPad version and just do a universal... and that added extra size to an app before the retina issue.
However, Amazon's defense for 8G was that customers have free cloud storage... well, so does Apple with iCloud. All you iTunes store purchases are there for re-download at the tap of a finger. Traveling wouldn't be so great because one or two movies would tap you out. This is when I wish they'd put in a micro sd slot, but we know they will never do that.