Inside Apple's contract with AT&T, GTA headed to iPhone

[AppleInsider]

A new report questions whether obtaining the iPhone was a good deal for AT&T; and Grand Theft Auto, one of the most successful video game franchises of all time, is coming to the iPhone this fall.

iPhone as AT&T's "sour apple"

In a look at the exclusive deal between AT&T and Apple for the iPhone in the U.S., The Wall Street Journal asks whether the exclusive contract amounted to a raw deal for the wireless carrier. Author Martin Peers notes that of 10 million iPhone activations since 2007, "only" 40 percent were new customers.

"That means only four million new customers signed up, about 5 percent of AT&T's total, or 6 percent of "postpaid" customers on costly monthly contracts," the report states. "Complicating the math is that some activations represent upgrades from earlier iPhone versions. AT&T said last month that it had about nine million iPhone customers."

Peers goes on to note that AT&T is estimated to spend roughly $400 per sold phone on subsidies, though those reports are unconfirmed. But because that estimated total is much higher than other smartphones, the report suggests that the iPhone has "depressed AT&T profit margins."

AT&T essentially said as much last month, when the company's quarterly earnings fell on the cost of the iPhone subsidy. The successful launch of the iPhone 3GS led to a 15 percent year over year decline for the wireless carrier.

In addition, Peers said, the Web-centric iPhone has placed a strain on AT&T's network. Because the performance has been so poor, he concludes that public perception has been damaged, something that "may be difficult to repair."

"Whatever value AT&T got from the device," he concluded, "it seems clear that Apple was the real beneficiary."

Rockstar to bring GTA, Beaterator to iPhone

Rockstar Games announced Monday that it would port its portable version of Grand Theft Auto: Chinatown Wars from the Nintendo DS to the iPhone. The game is expected to arrive this fall.

“Chinatown Wars is a perfect match for the iPhone and iPod touch. We are very excited to bring this incredibly ambitious version of Liberty City, with this level of detail and immersive gameplay on Apple’s new gaming platforms,” Rockstar President Sam Houser said.

Chinatown Wars is one of the best-reviewed games for Nintendo's mobile device. After lackluster sales following the title's debut, Rockstar also announced its intentions to port the title to the Sony PlayStation Portable.

Rockstar also announced that Beaterator, its rhythm game already announced for the Sony PSP, will also make its way to the iPhone and iPod touch this fall.

"The simple, pick-up-and-play nature of Beaterator lends itself so well to the Apple platforms," Houser said. "We are happy to deliver an application that allows for such unprecedented sharing and ease-of-use."

[ View this article at AppleInsider.com ]

[technohermit]

Originally Posted by AppleInsider

"That means only four million new customers signed up, about 5 percent of AT&T's total, or 6 percent of "postpaid" customers on costly monthly contracts," the report states. "Complicating the math is that some activations represent upgrades from earlier iPhone versions. AT&T said last month that it had about nine million iPhone customers."

Peers goes on to note that AT&T is estimated to spend roughly $400 per sold phone on subsidies, though those reports are unconfirmed. But because that estimated total is much higher than other smartphones, the report suggests that the iPhone has "depressed AT&T profit margins."

AT&T essentially said as much last month, when the company's quarterly earnings fell on the cost of the iPhone subsidy. The successful launch of the iPhone 3GS led to a 15 percent year over year decline for the wireless carrier.

In addition, Peers said, the Web-centric iPhone has placed a strain on AT&T's network. Because the performance has been so poor, he concludes that public perception has been damaged, something that "may be difficult to repair."

"Whatever value AT&T got from the device," he concluded, "it seems clear that Apple was the real beneficiary."

So how is 5 months of a 450 minute plan dragging down their profits? They have made their money back and more on my plan, which is 900 minutes a month. They would have made zero dollars off of me if they didn't have the iPhone. I just don't get it.

[filburt]

Sorry, AT&T isn't getting any sympathy for me.

All iPhone users are paying $30/month to AT&T on 3G data plan. And many aren't getting reliable 3G (and often, not even 2G) coverage. Perhaps that is intended to offset heavier users in well covered areas, but to me, that is close to extortion.

Perhaps it is difficult to cover the needs of every iPhone users, but at the end of the day, many users are paying for service that isn't being fulfilled. Meanwhile, AT&T salesrep frequently adds features that subscribers did not ask for, which given the format of the bill, is difficult to notice.

[mkral]

If it was such a bad deal, AT&T wouldn't have extended the contract last year & tried to do it again this year. Verizon also seems pretty interested in getting the iphone. Seems like the carriers don't mind the arrangement at all.

[Tulkas]

boohoo, poor AT&T. Four million new subs is nothing to sneeze at in an industry where customers do not change providers often. Locking them all into two year, extremely lucrative and expensive contracts probably helped cushion the 'blow' of 'only' signing 4 million new customers. That their network was unable to handle the flood of users, simply shows that any poor perception they received was well earned by them and them alone. Apple provides them with a devices that gets them more attention, more new customers and contract locks and it is somehow Apple and the iPhones fault that they couldn't deal with it? What was Apple suppose to do to make it a better deal? Release a more crippled iPhone that users would not want or use and that AT&T could then handle?

A more honest and accurate report would have said that Apple gave AT&T a golden opportunity with the iPhone exclusivity and AT&T did everything they could to blow it.

[samab]

Originally Posted by Tulkas

A more honest and accurate report would have said that Apple gave AT&T a golden opportunity with the iPhone exclusivity and AT&T did everything they could to blow it.

More and more reports will come out every couple of weeks from now on --- saying the same thing --- for the rest of the world's carriers' carrying the iphone.

No iphone carrier is making much money on the iphone --- and that's honest and accurate.

[LE Studios]

Rockstar is slow now they want to make games for iPhone and iPod Touch.

[Zoolook]

"Whatever value AT&T got from the device," he concluded, "it seems clear that Apple was the real beneficiary."

My heart bleeds. Basically you're saying the people at Apple are a lot smarter than those as AT&T, which is stating the obvious.

Maybe AT&T should do something about their pathetic network, rather than bitching about their profits. It's interesting that AT&T and Apple are both valued at about $150bn now, but in June 2007 AT&T was valued at about 240bn and Apple was valued at about 120bn - it's clear who is moving in the right directiob.

[samab]

Originally Posted by Zoolook

Maybe AT&T should do something about their pathetic network, rather than bitching about their profits.

Maybe if instead of using that money on iphone subsidy --- AT&T spent that money on network improvements --- then you would get a much better network.

[Cory Bauer]

Originally Posted by AppleInsider

Author Martin Peers notes that of 10 million iPhone activations since 2007, "only" 40 percent were new customers.

"Only" indeed. I bet most corporations would kill to have a product that could guarantee 40% sales toward new customers. If they want to sell more iPhones and 2-year contracts (with a built in $30/mo mandatory data plan) they would need to improve their god-awful network and coverage. The only reason I can tolerate them is because talking is the least used feature of my iPhone.

[macslut]

Originally Posted by AppleInsider

Author Martin Peers notes that of 10 million iPhone activations since 2007, "only" 40 percent were new customers.

That's somewhat misleading. I was an existing AT&T customer, but my bill more than doubled when I got the iPhone because I added services (like data and SMS) to my account. Also, it doesn't take retention into account. There's no way I'd still be an AT&T customer today if it wasn't for the iPhone.

Still 40% is a pretty high number in of itself.

[digitalclips]

Originally Posted by mkral

If it was such a bad deal, AT&T wouldn't have extended the contract last year & tried to do it again this year. Verizon also seems pretty interested in getting the iphone. Seems like the carriers don't mind the arrangement at all.

Exactly my thoughts ...

[zenwaves]

'nuff said.

[ghostface147]

Officially, summer ends in late September. They still have a couple of weeks to get their butts in motion. It does seem, however, that I am in the minority that is satisfied with AT&T. Reception here in Houston is very good for me.

[wplate]

The real bad deal for AT&T will come when their exclusivity expires and all of those iPhone customers bolt for better carriers. It seems rare to speak with an iPhone user who doesn't despise AT&T. I left AT&T years ago but came back for the iPhone, but I'll leave again as soon as Apple partners with Verizon.

[monstrosity]

Originally Posted by mkral

If it was such a bad deal, AT&T wouldn't have extended the contract last year & tried to do it again this year. Verizon also seems pretty interested in getting the iphone. Seems like the carriers don't mind the arrangement at all.

Exactly.

[Bageljoey]

Originally Posted by ghostface147

It does seem, however, that I am in the minority that is satisfied with AT&T. Reception here in Houston is very good for me.

Yeah, I have been quite happy with my service too. Doesn't earn you many friends round here to say that, though.

[pubguy]

Let's not forget, of that 40% new iPhone users, how many were Family Plans bringing more than one phone to the table. Personally, I went for the iPhone and AT&T got 3 additional non-iPhone accounts out of my switch, so the number of overall new subscribers is higher than the iPhone only portion.

[samab]

Originally Posted by pubguy

Let's not forget, of that 40% new iPhone users, how many were Family Plans bringing more than one phone to the table. Personally, I went for the iPhone and AT&T got 3 additional non-iPhone accounts out of my switch, so the number of overall new subscribers is higher than the iPhone only portion.

It just means that the exodus will be even more massive the minute Verizon gets to sell the iphone.

[cycomiko]

Joy! GTA to the iPod means that getting drunk and running over hookers will be easier than ever.

[gsteeno]

According to ATT, they had ~ 64MM subscribers at the end of 2Q07 when the iPhone launched. At the end of 2Q09, they have ~ 80MM. According to my math, the iPhone alone represents 4MM/16MM = 25% of all new subscribers over the last 2 years.

And what's not calculated is how many previous subscribers upgraded from a voice-only plan to ones with data, like myself.

Color me naive, but it sounds like a pretty sweet deal for ATT.

[Magic_Al]

Originally Posted by LE Studios

Rockstar is slow now they want to make games for iPhone and iPod Touch.

More likely they were waiting to see if iApps would really take off as a game platform before they invested in it.

Rockstar Games has never done a game for Mac and the only Mac game Rockstar parent Take-Two has is Rune, afaik

[elliots11]

Originally Posted by wplate

The real bad deal for AT&T will come when their exclusivity expires and all of those iPhone customers bolt for better carriers. It seems rare to speak with an iPhone user who doesn't despise AT&T. I left AT&T years ago but came back for the iPhone, but I'll leave again as soon as Apple partners with Verizon.

That's my story, too. I'll never forgive AT&T for how they've treated me previously, and the only reason we went with them again is because of the iPhone and service is better where I live than Tmobile was. Once the other carriers get it, someone out there will have iPhone at a lower price for service. When they do, and if they have good service in my area, I'm jumping from AT&T. I'm keeping my fingers crossed that there's a CDMA compatible Verizon iPhone.

I knew from the beginning that the iPhone on AT&T would only magnify their many flaws, and I'm satisfied to see that it has and is hurting their image. I'm surprised to see they haven't been screwing around on billing though, as that's what they did previously with us.

[The Other Steve]

#1 - First of all, I may not have been a new costumer to AT&T but if someone else had it instead, I would have taken our 5 family phones (and other friends and family) over to whoever did get it. AT&T would have lost a fortune. Instead, they are making one.

#2 - I've been a pre-iPhone customer and know first hand what their cell network was like.
Apple didn't create AT&T's bad network, Apple just put a spotlight on it.

#3- So what The Wall Street Journal is saying is Apple gave AT&T a raw deal because it brought AT&T too many customers?!?!?

Wow!

[tundraBuggy]

Here is the bottom line for me: When the iPhone customers started crippling the network....AT&T responded with "The iPhone is a mini-computer, therefore tethering and MMS and limitations of 3G access to sling and VOIP are prohibited" AT&T took a real hard-ass corporate stance on the issues.

If I were running their marketing department I would have stated a completely different position...something like this, "Wow, the iPhone has been an overwhelming success for Apple and AT&T, we at AT&T are doing everything possible to give iPhone users the best experience possible. Please be patient as we strive to make the best network even better.

There's nothing wrong with a little humility, had AT&T taken the above position...I would have waited excitedly instead of begrudging them as I do now....yes, public perception is bad for AT&T, they need to clean house in marketing and get some Pros in there.

[fraklinc]

I think AT&T got more than what they where hoping for, remember it's only 4 million but that's 4 million people paying for AT&T bullshit 3G service which i thing it's a lot o people paying for a service they hardly even get.

[darwiniandude]

I hope the port is well optimized for the iPhone. Gangstar by Gameloft is a very well done GTA ripoff.

GTA will do well on the iPhone.

As for 'lackluster' sales of the DS version, the DS is primarily bought by parents for children. The PSP for example has higher end more serious titles but most DS titles are aimed at a younger demographic. What parent is going to by Grand Theft Auto Chinatown Wars for their young children? Not too many IMO.

[Pixel19]

Yep, I was one of the gullible souls who eagerly purchased a 3G thinking they'll get 3G to my area pretty soon after I purchased it in July of last year. Yes, I'm still waiting and paying a $10 surcharge for a network that I rarely get to use.
I'll be first in line at the Verizon store for my new phone next year.

[Eriamjh]

Sell at a loss and make it up on volume? AT&T, thou art pretty stupid.

[Robre]

Originally Posted by technohermit

So how is 5 months of a 450 minute plan dragging down their profits? They have made their money back and more on my plan, which is 900 minutes a month. They would have made zero dollars off of me if they didn't have the iPhone. I just don't get it.

You are right. The WSJ isn't the Journal anymore - smart as it was. It's just Wall Street now. Short term thinking to a point of stupidity. ATT got me with a 2 year contract. But they - let's say - this "reporter" looks at 3 months after the iPhone launch. What a joke. It's like calling every bank stupid that gives people a credit, be it for a TV or a car, or a house - only looking at the returns of the first three months after the purchase. It's sad to see the WSJ sink to just a low level of reporting.

[Psych_guy]

Originally Posted by Pixel19

Yep, I was one of the gullible souls who eagerly purchased a 3G thinking they'll get 3G to my area pretty soon after I purchased it in July of last year. Yes, I'm still waiting and paying a $10 surcharge for a network that I rarely get to use.
I'll be first in line at the Verizon store for my new phone next year.

Just thought I'd be contrarian and add that I've never had a problem with AT&T here in the SF Bay Area. The iPhone experience has been a love affair since day one and have never thought about changing.

If you're gullible that's on you. I waited until 3G was up and running in my area BEFORE I bought the phone. The only downside was that I'm not eligible for the 3GS upgrade until March, but at least I can't cry I'm gullible.

With so many of you whiny babies claiming you'll be FIRST in line at the Verizon store, when, if, maybe, who knows if, the iPhone gets there, I'd pay to see the ensuing whine-fest when you don't get your phone first so you could stick in AT&T's eye.

[Robre]

Originally Posted by fraklinc

I think AT&T got more than what they where hoping for, remember it's only 4 million but that's 4 million people paying for AT&T bullshit 3G service which i thing it's a lot o people paying for a service they hardly even get.

It's probably true - without the iPhone Verizon would have ATT by the ropes right now.

[ghostface147]

I also wonder if other carriers would be under the same network strain if the iPhone was on their networks. I think the carriers would be surprised how great their networks really aren't. Then again we also have an older cell network overall in America.

[BenRoethig]

Best way for AT&T to make this discussion moot is by giving the same amount of attention to infrastructure that Verizion, Sprint, and just about about everyone else does. I don't mind the deal I'm getting, but I do mind that my friends and family with Verizon and U.S. Celluar get 3G data where I can't even make a phone call.

[samab]

Originally Posted by ghostface147

I also wonder if other carriers would be under the same network strain if the iPhone was on their networks. I think the carriers would be surprised how great their networks really aren't. Then again we also have an older cell network overall in America.

AT&T's 3G network ain't bad when compared with the rest of the world --- the world's largest regular priced iphone data allowance per month, and the world's third fastest 3G iphone speed.

The rest of the world got suckered into PR advertising about how their networks are 7.2 mbps or 14.4 mbps --- but their real life iphone 3G speed is slower than AT&T's.

[ghostface147]

Originally Posted by samab

AT&T's 3G network ain't bad when compared with the rest of the world --- the world's largest regular priced iphone data allowance per month, and the world's third fastest 3G iphone speed.

I'd like to see some hard proof of that claim sir. The world is a very big place and I find it very difficult to believe that AT&T, which has it's own well documented spotty 3G coverage here in the States, is the 3rd best in the world. The world is covered by roughly 30% of land and the rest is covered not by AT&T, but by Troy Polamalu.

[samab]

Originally Posted by ghostface147

I'd like to see some hard proof of that claim sir. The world is a very big place and I find it very difficult to believe that AT&T, which has it's own well documented spotty 3G coverage here in the States, is the 3rd best in the world. The world is covered by roughly 30% of land and the rest is covered not by AT&T, but by Troy Polamalu.

Wired.com did a survey of 3G iphone speed --- AT&T came out to tie for third in 3G iphone speed.

It's just that AT&T is compared with THE NETWORK in the US (Verizon).

[Imhotep397]

This is rubbish...AT&T locks iPhone users in for two to five years on average and they are all paying on average $100 per month for connection services at 9 MILLION users. That's a hell of a lot of dough that no one else has had access to that's why AT&T was willing to eat the subsidy to double the number of subscribers to AT&T services. AT&T has benefited quite nicely from selling the iPhone.

[samab]

Originally Posted by Imhotep397

This is rubbish...AT&T locks iPhone users in for two to five years on average and they are all paying on average $100 per month for connection services at 9 MILLION users. That's a hell of a lot of dough that no one else has had access to that's why AT&T was willing to eat the subsidy to double the number of subscribers to AT&T services. AT&T has benefited quite nicely from selling the iPhone.

Unfortunately, AT&T is being compared with Verizon Wireless and VZW is pulling massive profit margins without selling the iphone.

[aaarrrgggh]

Originally Posted by Psych_guy

Just thought I'd be contrarian and add that I've never had a problem with AT&T here in the SF Bay Area. The iPhone experience has been a love affair since day one and have never thought about changing.

I don't know what it is, but two weeks ago I was in the East Bay and could not get any data until about my 10th reboot of the device. It happens to me in LA occasionally, but not like this. The voicemail delay of an hour to a few days drives me nuts.

But, to the point of the article, AT&T blew their golden chance. Had they used the iPhone to leverage femtocell sales (or even picocells) they could have had a large percentage of their users pay money to upgrade the network with the distributed cell sites you put in your home or office. They could have even used it as a chance to market their u-verse service in markets they have it, or ADSL where they don't. They could have created a company town like no other.

They also should have been smarter about how they explained the subsidies to Wall Street. It is odd that AAPL distributes revenue over 2 years, but T takes the subsidy hit all in one quarter, especially given the rush of upgrades when the new model is introduced.

Maybe AT&T didn't really want the iPhone to do any better than it has, or it would alienate other manufacturers and put Apple in too strong of a bargaining position.

Whatever their logic... they haven't accomplished much for themselves!