By Katie Marsal

Published: 11:55 AM EST

Sales of Apple's iPod touch, once discounted as a pricey niche product, have more than doubled over the past 12 months to rates nearly in line with the iPhone, fueled by an explosion of attractive gaming titles on the App Store that are boosting overall multi-touch device shipments into Nintendo DS territory.

Though largely overlooked in light of repeated cookie-cutter comments on the netbook space, Apple for the second time in as many months Wednesday offered data sufficient for breaking out sales of its touch-screen iPod, something it has historically avoided in an effort to limit competitors' views of its success.

Specifically, Apple said last month that it ended 2008 with 30 million multi-touch users, 17 million of which were iPhone owners, and therefore 13 million of which were iPod touch users. During the first quarter of 2009, that multi-touch audience swelled to 37 million units, according to Apple interim chief Tim Cook, driving surprising growth of a novelty product during a tough macro environment and further distancing Apple from any potential competitors.

"[O]ne of the keys behind the growth of the iPod this quarter despite the economic environment was that the iPod Touch more than doubled year-over-year," he said. "So, it was a tremendous result and as [CFO] Peter [Oppenheimer] mentioned earlier in his remarks, the sum of iPhone plus iPod Touch is now about 37 million units and so, it provides an enormous platform for developers to develop on and with [...] our recent SDK changes the developers are working on now, I think it just unleashes a whole new level of innovation that keeps Apple years ahead of everyone else."

Apple reported shipping 3.79 million iPhones during the quarter, meaning it also sold a comparable 3.21 million iPod touches when the iPhone sales data is culled from the reported 7 million increase in multi-touch users. The jump helped contribute to a near $3 sequential rise in iPod average selling prices but it more importantly puts Apple on a pace to grow its multi-touch audience by nearly 30 million users this year alone, assuming the unlikely scenario that sales of iPhone sales remain flat following the introduction of new models this spring.

Even more significant may be Apple's emergence as a leader in portable gaming, with quarterly multi-touch device sales now having nearly caught up with those of Nintendo DS, the market leader. Nintendo reported selling 31.43 million DS series handhelds during the 2008 calendar year, or an average of 7.86 million units per quarter compared to Apple's 7 million handhelds reported in its most recent quarter.



The appeal of the iPod touch as a gaming device has admittedly caught industry watchers by surprise, some of which failed to recognize the advent of the App Store as a catalyst that would help drive sales of multi-touch handhelds and not the other way around.

"We did not appreciate what role the [iPod] touch would play when Apple introduced it in September 2007," said Needham & Co. analyst Charles Wolf. "But it’s now clear that the touch has emerged as a viable game-playing platform."

Responding to Apple's second-quarter earnings, Wolf noted that the App Store closely resembles the PC paradigm, by which hardware sales are driving software sales. However, he added that "the one obvious exception is the iPod touch."

"We believe software applications are beginning to drive sales of the [iPod] touch, especially among game-addicted younger people," he said.

Apple, which will sell its 1 billionth App Store application later this afternoon, says a third of the 35,000 applications on the digital download store are games, meaning it will have sold over 300 million multi-touch games in approximately 9 months. Though its unclear how many DS titles have been sold since the platform launched in 2004, Nintendo did say last month that 83 titles had each surpassed the 1 million mark, with 7 games exceeding the 10 million mark.