Verizon soaking high end Android buyers to make up for iPhone subsidies - Page 4

Originally Posted by philip fry

I don't understand what this article is trying to convey. It costs Verizon more to sell an iPhone and an Android? The 32GB iPhone and Galaxy Nexus are the same price. And, if Verizon has to subsidize the iPhone more than others, isn't that a bad thing for consumers? Verizon has to make up that money somehow which means higher monthly service prices. Wouldn't you rather pay a little more up front to save on your month service for the next 2 years (if that was an option, obviously)? Not everyone wants an iPhonelet them choose what they want. Some people like the clean cut iPhone, others like the hard edge Android. It's a matter of choicepresent the options and let consumers choose. It's as if convincing people to buy iPhone's is for the greater good of society. Seems that websites like this keep the Android vs. iPhone saga goingreminds me of Nintendo vs. Sega. Ah, the good ol' days. When we didn't have to worry about smartphones.

(Sent from my Mac so don't chew me out for being some Android hugger).

Originally Posted by Orlando

I think the real question is how long will carriers keep subsidizing the iPhone to the current level? They must be saying to Apple "The iPhone is costing us $100 more than high end Android phones; we want to reduce your subsidy."

Originally Posted by MarquisMark

I feel like this article is just trying to push the "Android sucks, iPhone rules" view. But all I see from this is Verizon is greedy... screwing everyone it can, in any way it can.

In other words, what's new?

Originally Posted by Izzymyster

It was already mentioned but you have to remember the $299.99 price for the Galaxy Nexus includes 32GB. So really it isn't overpriced at all.

Also while the MSRP price for those phones is higher, they actually get discounted. The DRIOD RAZR was a penny on Amazon the week of Black Friday. You can get the Galaxy Nexus on Amazon for $150 (for new customers) or $250 (for upgrades), and the DRIOD RAZR is going for $169.99 right now. So they price them that high but they are discounted pretty heavily. I take it how clothing stores put high prices on the price tags to make it seem like the clothes is always a great deal, when in reality it's rare to find them for full price and your paying what people normally do.

Originally Posted by Izzymyster

It was already mentioned but you have to remember the $299.99 price for the Galaxy Nexus includes 32GB. So really it isn't overpriced at all.

Originally Posted by Corrections

Do you think Verizon isn't aware of how much it's paying in subsidies?

Do you think Verizon is too stupid to make such simple business decisions?

Originally Posted by Orlando


The full retail price of a 32GB iPhone4S is $749.99. The Galaxy Nexus (32GB) is $649.99. Both are $299.99 on Verizon so Apple is still getting a larger subsidy from Verizon.

You don't think Apple just rolled over for Verizon? Apple negotiated a very good deal, much better than companies like Samsung managed to get. I just wonder how long Apple can keep receiving higher subsidies than rival firms. The more Android grows the harder future negotiations are going to be for Apple.

Originally Posted by Postulant

Who ushered in multitouch smart phones? Gyroscopes? Artificial intelligence? Video chat? App stores as we know them today? iTunes on a phone? AirPlay? Retina displays? Antenna deisigns never before tried? iTunes match? iCloud? Photo streaming to my computer? Visual voicemail? 1 click purchasing? I can buy a brand new Mac on my phone, walk into an Apple store and have my order brought to me without ever approaching a salesman. I can send text messages to my mom's iPad or my wife's iPod touch right from my phone. I can buy a new phone today, put in my iCloud credentials and pick right up where I left off on my old phone - including app data and same in-game location etc. I can tell my phone to remind me to pick up supper when I leave work, it sets up a geo-fence around my location, and reminds me the minute I leave the area. I can take a picture on my phone and it will wirelessly sync to my computer, iPad etc. I just asked my iPhone will I need an umbrella tomorrow... It actually answered me back.

And somehow you think adding a faster processor or a bigger screen is taking us to new heights.

Originally Posted by AbsoluteDesignz

Good list but you credit apple with way too much.

Then again that's to be expected here. Where everyone feels Apple exists in a void.

Originally Posted by Michael Scrip

Maybe I'm confused on how subsidies work...

I thought Verizon bought a 32GB iPhone from Apple at full retail price... $749.

Then Verizon sells that phone to me for $299... taking a loss of $450.

BUT... Verizon will charge me $90 a month for the next 24 months... bringing them $2,160.

Which, in the end, earns Verizon $1,710 from me.

Apple makes money on the phone... Verizon makes money on the contract. Isn't that how it works?

I wasn't aware Apple was giving "deals" to the carriers. In fact... I would be shocked if Apple was getting anything less than the retail price of their phones.

Originally Posted by Hellacool

That is all Apple seems to talk about. The number one reason Apple hates Android so much. No matter what Apple does, Android keeps pulling away. I give it 5 years and the iPhone will be the Mac, very niche very little market share. Android will be everywhere and Google will be laughing.

Originally Posted by jmbarry

The only flaw in that is the phone both go 24 months. As I understand it Android phones get traded in well befor Apple phones. In other words the number of new phones seduces the Android person to trade phones more frequently. If the average Android contract is 21months, and the Apple is 24 the subsidy could actually be larger on he android phone that the Apple one. I know the churn is greater in android phones, but I am not sure of the average number of months between them.

But to illustrate, if a carrier is willing to pay $25 a month in subsidy, the if Apple phones last an average of 3 months more between trade in's the carrier can subsidize apple $75 more than an Android, and still get the same money.

IPhones do churn less, but how many more months iPhones are kept over Android and you will have how much more The iPhone is worth.

Originally Posted by Michael Scrip

But I'm still confused on what the subsidy has to do with Apple...

Is Verizon paying the full retail price for each iPhone to Apple? If so... Apple's involvement ends there.

Then it's up to Verizon to make money from the customer with plans and contracts.

Verizon is providing this subsidy... not Apple.

Apple still gets $649-$849 per iPhone.

Originally Posted by neverclutch

Verizon charges more for the new phones and somehow Android cost more? Wouldn't it be that Verizon cost more? Looking at other carriers, i haven't seen many Android phones above 200$ for a new contract (except for the Sky Rocket on ATT).

If you also wish to try and convince someone that Android costs more than Apple, you should really run down the multitudes of android phones purchased for 0-100$ with a contract.

The big difference, whether you are apple or android fans, is that Android manufactures (with carriers in tow) charge more for the brand new product, then drop the price once it has been in the market (see Droid Bionic for 150$). Meanwhile Apple stays the same until they release their next product line. One could make the argument that Android follows supply & demand, while Apple controls the price despite supply or demand (not trying to convince you one is better).

Talking about price for product outside of the 4s, look at the 4. Pay 100$ for a product that is 18months old or 100$ for various other phones that have come out as early as a month or two ago for free to 100$ that can do everything it can do except 'better' (excluding battery life on standby without iCloud turned on).

Originally Posted by jmbarry

I goes nobody on this thread understands business. For Verizon these two sentences sum it all up from a business point of view "Additionally, unlike new iPhone models that appear every year, Android licensees pop out new models every three to six months. This has created an upgrade cycle that forces down prices, something that is not in carrier's interests. "

Verizon's cost of support for so many models is that much higher than Apples for 2 models (4S & 4 at Verizon, 3GS is ATT only) THe training, stocking etc is so much higher for Android that they need to charge more. Plus Apple accessories are good for 2 years (3G & 3GS) (4G & 4S) so they can stock them and keep them longer. Plus the average Apple user stays as a subscriber longer. Price of the phone & subsidy are only pieces of the overall model.

$1-200 difference per phone goes quickly if you are stuck with excess models that are sold at a lower price, you can't stock the accesses as much for most android phones, because they change so frequently, and you keep your customer longer, .

If an Apple user lasts and average 3 months longer than an Android user who is flipping phones frequently, those three months are worth the $100 difference. Do the math.

Not knowing any actual figures but if the life of the contract is an average 3 months longer, they sell more accessories for the iPhone (regularly reported that that is the case) and the carrier gets stuck with less inventory, Apple is making a much, much bigger profit per phone than Android given the pricing in the Appleinsider article.

The raw economic fact is Apple phones make more per unit than do Android phones for carriers. If you work deals in a carrier you already know this, hence the differences in prices to the end users.

Originally Posted by SolipsismX

It means that the TCO for the customer is significantly higher if you wish to own an Android-based device compared to a similar iPhone. There are several take aways here.

1) Verizon will have to invest in Android updates which they may or may not do well or at all if they don't get enough sales, which Apple's limited options have guaranteed you get updates on a timely basis and for several years.

2) You end up paying more for less, which is pretty much the worst thing you can do in a sale yet for some reason people get all mixed up by these subsidizes. Take the Galaxy Nexus for instance. You get a 1.2GHz CPU with 1GB RAM compared to the 800MHz with 512MB RAM of the iPhone 4S yet AnandTech's JS engine tests aren't showing a 50% gain, they are showing them right on par. What happened to Google's JS dominance?

3) Buyers should consider the TCO. If you pay a lot of money for something it's good to know that it holds value if you want to sell it later. I take this into consideration with a house, car, and many other items. I want my TCO to be as low as possible by maximizing my enjoyment. You just aren't going to get with 500 Android-based devices released per year.

Originally Posted by neverclutch


Cell phone prices are dictated by the wholesale company (Verizon/Target/Apple). This is why you can find Target running specials for 25$ off a 4s right now or the Stratosphere being 100$ cheaper at Best Buy. To analyze the actual profit of each product would probably require a decent look at the contract between manufacture, carrier and wholesaler. Of course i'm sure each manufacture has some sort of protection in their contracts with everyone concerning holding the price at specific levels for specific time and perhaps these either expire eventually or are adjustable at a later date.

Originally Posted by Postulant

Who ushered in multitouch smart phones? Gyroscopes? Artificial intelligence? Video chat? App stores as we know them today? iTunes on a phone? AirPlay? Retina displays? Antenna deisigns never before tried? iTunes match? iCloud? Photo streaming to my computer? Visual voicemail? 1 click purchasing? I can buy a brand new Mac on my phone, walk into an Apple store and have my order brought to me without ever approaching a salesman. I can send text messages to my mom's iPad or my wife's iPod touch right from my phone. I can buy a new phone today, put in my iCloud credentials and pick right up where I left off on my old phone - including app data and same in-game location etc. I can tell my phone to remind me to pick up supper when I leave work, it sets up a geo-fence around my location, and reminds me the minute I leave the area. I can take a picture on my phone and it will wirelessly sync to my computer, iPad etc. I just asked my iPhone will I need an umbrella tomorrow... It actually answered me back.

And somehow you think adding a faster processor or a bigger screen is taking us to new heights.

Originally Posted by Michael Scrip

If Verizon and Target want to offer a $25 discount to entice someone to sign a contract... I understand that. They'll both eat a little bit of their profit to get people in the door.

But I can't imagine Apple providing a discount to Verizon and Target.

The only thing Apple makes money on is the hardware sale... why would they reduce their price?

Originally Posted by neverclutch

PS: I just easily accessed every song in my library on my mp3 player, smart phone, tablet and computer seamlessly all by logging into Google Music without purchasing or downloading a single song or program and have been doing so for quite a few months.

Originally Posted by SolipsismX

You need to reevaluate your definition of niche.

Originally Posted by cnocbui

Anyone else see the visual slight of hand here? Lets correct part of it shall, we:

a picture

Originally Posted by hill60

So are iPads and iPod touch's in the "Other" are they?

They run iOS, which is important from a developer standpoint, which seems to be one of the main arguments relating to the importance of "marketshare" as a metric.

Originally Posted by MacBook Pro

"While Android is consistently being positioned as a threat to Apple in comparison to Microsoft's Windows from the 1990s..."

I disagree with these comparisons. While Microsoft may have participated in some dubious practices their business model wasn't blatantly illegal, immoral or unethical.

Originally Posted by knightlie

I think you're completely wrong. Perhaps not overtly illegal, but to not see Microsoft as immoral and unethical requires living in a cave for the last twenty to thirty years.

Originally Posted by neverclutch


Precisely, so the price of the phone to consumer isn't dictated by manufacture necessarily, but by wholesaler (see confusion in previous posts). The point of this is that you can't determine the profitability of the iPhone based on the costs of the phones from the carriers.

Originally Posted by Gatorguy

The charts, both the original and modified, only referenced smartphones. "Other" would be the niche players.

FWIW, all the talk of marketshare ignores whether all those devices sold at some point in history are still in use. Obviously not all of them are. Maybe 90%? 75%? With Android's sales surge being relatively new, are there more Android than iOS products being used now? Who knows?

In a nutshell none of us have any solid idea how many iOS/Android/Blackberry electronics are active.

Originally Posted by hill60

The chart also ignores Prepaid subscribers and those outside the United States.

Apple knows exactly how many iOS devices are connecting to iTunes.

Originally Posted by Hellacool

The difference though is that Nokia really did not have much compitition when it used this strategy. Android has massive compition and yet still sells phones at crazy prices. They must be doing something right.

Originally Posted by cnocbui

Anyone else see the visual slight of hand here? Lets correct part of it shall, we:

Originally Posted by knightlie

They are - they're producing lowest-common-denominator junk. See: Microsoft. I've yet to see any innovation in Android that hasn't been copied from Apple. If you have, feel free to list these features and enlighten us.

Originally Posted by Jetz

This is a new twist: Android is more expensive. But wasn't the party line that Android buyers were cheap? So are we to now assume that Verizon iPhone users are the folks from the poor house who can't afford high-end Android devices?

This whole article is moronic. The total cost of ownership includes not just the cost of the device, but the cost of service as well.

I don't know about elsewhere, but here in Canada, the carriers rape anybody desirous of an iPhone compared to other device users. $100 off the phone doesn't compare to the extra $10-$20 per month that most iPhone users will pay over the life of their 3-year contract.

This is also a huge reason that Blackberries are still popular in Canada. Blackberries aren't just cheap to acquire. The plans are usually significantly cheaper than iPhones or Androids.

Sadly, there's evidence everyday that average folks just suck at basic budgeting. Looking at the shiny object and ignoring the multi-year contract behind it, is a huge part of the reason why consumers all over have such massive debts today.

Originally Posted by SolipsismX

Actually, it is, when you compared the retail price of the device to the iPhone. You're paying $299 for a device that retails for $649 which means you are only getting a $350 subsidized from Verizon when sign that two year contract. On top of that, if you want to sell that phone in a year or two for the next model you're going to be getting a lot less for it than other phones on the market because it won't retain its value for various reasons. That makes the TCO quite high. Compare that to an iPhone where you're only paying $299 up front for a device retailing for $749 and with a high resale value that can easily mean you can get a brand new iPhone YoY without having to pay a single penny out of pocket YoY. TCO is an important factor to consider when talking about price.

Originally Posted by jmbarry

Not knowing any actual figures but if the life of the contract is an average 3 months longer,

Originally Posted by Hellacool

I think I own the market share in quotes, I love stiring up the fanboys with facts and watch them stir and cry with defense. Drop the bomb and run. Thanks for the fun, on to my next post.