If the A5 makes mobile gaming awesome, why isn't it in the iPod touch?

When Apple introduced the iPhone 4S on Tuesday, the company took great pains to show off the A5 processors' ability to make games "really scream," claiming twice the computing performance and seven times the graphics performance of the iPhone 4's A4 processor. But Apple did virtually nothing to the iPod touch, arguably one of the most popular mobile gaming devices on the market, except slap on a coat of white paint and knock $30 off the entry level price.

If the A5 is so awesome for gaming, why then didn't Apple upgrade the iPod touch's A4 processor?

In previous years, Apple really pushed the gaming abilities of the iPod touch. When it introduced the third-generation touch in 2009, it didn't have a camera, but then-CEO Steve Jobs explained that the touch was really more of a low-cost mobile gaming device:

Originally, we weren't exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine. We started to market it that way, and it just took off. And now what we really see is it's the lowest-cost way to the App Store, and that's the big draw. So what we were focused on is just reducing the price to $199. We don't need to add new stuff. We need to get the price down where everyone can afford it.

That didn't stop Apple from bumping the price up $30 one year later when it introduced the fourth-generation iPod touch. That device finally come with a (barely usable) built-in camera; it also had a front-facing camera for FaceTime video chats, a sharp 326ppi Retina display, and Apple's then-blazing-fast A4 processor.

Again, Apple touted the iPod touch as a killer mobile gaming platform. During the usual media event in which the new iPods were unveiled for the 2010 holiday season, Jobs bragged that the iPod touch outsold the mobile gaming devices from Nintendo's and Sony combined, making it the most popular portable gaming device in the world. With its updated hardware, the iPod touch really lived up to hype.

Epic Games president Mike Capps shows of the "eye-melting graphics" in Infinity Blade 2 on the iPhone 4S.

Jacqui Cheng

 

This year's Touch, however, will see none of the advantages of Apple's new A5 processor, which powers both the iPad 2 and the upcoming iPhone 4S. Apple invited Epic Games' president Mike Capps to demo Infinity Blade 2's use of dynamic light rays to render life-like effects on the iPhone 4S; the iPod touch got a white version and a slight price drop. Apple still says the iPod touch "totally rules" at games, but if you want "eye-melting graphics," you're going to have to move up to the iPhone 4S.

Apple has a whole page dedicated to detailing some of the 100,000 games available for the iPod touch, including a number of "games for gamers" like Chaos Rings, Real Racing 2, Street Fighter IV Volt, andMadden NFL 12. Even Infinity Blade 2 will be available for iPod touch users. But if you want it to look as good as it did during Capps' demo, note that it will "only run like this on the iPhone 4S."

In our view, Apple is talking the gaming talk when it comes to the iPod touch, but its hardware just isn't walking the walk. We think that's unfortunate, but looking at cold, hard numbers might explain why.

First, consider what is happening to the overall handheld gaming market. Nintendo's newest 3DS made a poor showing at retail, forcing the company to slash prices ahead of the holiday season. Sony's PSP Go went pretty much nowhere, and its Vita won't be out in the US anytime soon. Frankly, the iPod touch's competition in mobile gaming isn't all that strong, at least for this holiday season. And at $199 to start, it still offers a very good value relative to the 3DS or whatever PSP hardware is out there.

Next, take a look at Apple's sales trends over the last few years. Its iPod business peaked in 2009, and sales have been slowing since. The iPod touch makes up at least half of all iPods sold, but it's half of a diminishing market. Apple says the iPod touch is growing, and we don't doubt it. But even if it became 100 percent of all iPods sold, that would still be far fewer sales than the iPhone—its trend line is angling upward, and already surpasses the iPod in unit sales.

Finally, look at where Apple makes its money. Apple raked in about $12 billion for iPhone sales alone—that's almost half of the company's revenue. The iPod touch, at best, is responsible for about five percent. Apple is merely putting more resources into the product that generates a far larger percentage of its revenue and profits.

Though the reality of the business means Apple could sit back and probably sell about 8-10 million iPod touches over the December quarter, we think the chance to bring "eye-melting graphics" to those users is a missed opportunity for both Apple and the gamers who help support the iOS platform.