Updated at 6:30 a.m. PST with additional details and at 7:30 a.m. with comments from Apple.
Apple doubled the capacity of the iPhone and the iPod Touch on Tuesday for an additional $100.
The iPhone once again comes in two capacities: 8GB for $399 and now 16GB for $499. Apple sold 8GB and 4GB varieties on iPhone Day, but it discontinued the 4GB model after it cut the price of the 8GB model to $399. Something like 90 percent of all early iPhone buyers opted for the 8GB version.
Apple thinks that there's still room for an 8GB iPhone in the mix, said Greg Joswiak, Apple's vice president of worldwide iPod and iPhone product marketing. The first time around, people signaled pretty clearly that they wanted more than 4GB of storage, but he thinks that there's still a "sweet spot" at 8GB of storage.
And the iPod Touch can also store more music and videos now, with 32GB of capacity for $499. That device is now available in three versions, with Apple also selling a 16GB model for $399 and an 8GB model for $299.
The new iPhone and iPod Touch appear to be unchanged from their previous incarnations, though they ship with the new software unveiled at Macworld, which provides the ability to edit the home screen and triangulate your position using Maps.
The release of that software really changed the iPod Touch into a new type of device, Joswiak said, and Apple is now playing up the iPod Touch as a "Wi-Fi mobile device," as opposed to a high-end iPod. "It becomes even more promising, once we enter the world of the SDK," he said, referring to the expected release of the software developer's kit for the iPhone and iPod Touch in late February.
Both are available immediately. This move should give something of a boost to iPhone and iPod Touch sales. Apple shipped fewer iPods than expected during the fourth quarter but still grew iPod revenue at a strong pace, suggesting that the higher-priced iPod Touch is gaining ground against the iPod Nano and Shuffle as a percentage of Apple's iPod mix.
The iPhone story is a little more complicated. The rampant unlocking of the smartphone makes it both harder and easier to understand iPhone demand: On one hand, people want the iPhone so badly, they are willing to take risks to use it on their network or in their country. On the other hand, it's almost impossible to get a true number of how many phones have been unlocked.
This time around, there's no price cut on existing models, which some prognosticators felt was necessary in order to spike iPhone demand during the leaner first and second quarters of the year.
Still, I'd imagine that most people who intended to spend $399 on an iPhone would be willing to cough up another hundred bucks to get twice as much storage. As might be expected, Joswiak concurred, saying the higher prices for twice as much storage reflects that the "value proposition remains." We'll see if the public agrees.