The PR department carefully worded its statement to lead into the world-wide figures that can't be changing so fast in Google's favor. Apple didn't get into disputing the accuracy of NPD's figures, perhaps because the figures might be accurate enough and because it's safer just to focus on what Apple knows for certain.
Glad someone else noticed that.
Apple's only response was to try to change the subject.
I can't imagine a stronger endorsement from Apple for the reliability of those numbers.
Also, you have not clue about marketing, Apple is not interested in gaining market share over devaluing the product. This is marketing 101, Apple will never allow the product to be given away, either you pay the price of you do own the product. Why give away a product when people are whiling to pay for.
There are several counties that provide the iPhone for "free" with a contract, so you must have a strange definition of the word "never"
Seems like a P.R. spin on the truth to tell a bigger truth.
the report stands on its own legs. iphone is no 3 OS on smartphones in the US. if apple is interested in gaining marketshare in the US, iPhones need to be available from more than one carrier.
We have cell manufacturers selling 50 models of phones. from the cheapest junk to high end smartphones. They sell a lot of phones, like Nokia. But like Nokia, most of those sales are of cheap, hardly profitable models. Their individual smartphones don't sell that many, but all together they sell a lot. Unfortunately, that makes for less profit.
You say this like it is a bad thing, are you saying you think people with less money than yourself, don't derserve to own a smartphone?
Or are you saying an iPhone is really five times better than a Nokia smartphone with an unsubsidised price of around ?100 ?
If you want to compare device sales, you compare each individual smart phone model to the iPhone - and the iPhone wins handily. No single Android phone comes close to iPhone sales.
OTOH, if you want to compare OS sales (which is implied by the fact that they're lumping all Android models together), then you need to include the iPod Touch and iPad, as well.
What if you want to compare the number of phones sold with iPhone OS to the number of phones sold with Android OS?
That;s easy! They had a goal of penetration into a market new to them... They miscalculated (screwed up) and overpriced their offering (the iPhone) to meet that goal.
They recognized that, and were agile enough to adjust their price so they could meet their goal...
... to do otherwise, would be, just, stupid!
.
They didn't miscalculate. It's basic business. AT&T were unsure of the product and didn't feel like subsidizing a device that diluted its control, so Apple took "the risk" and passed it on to consumers to prove the product. It sold like relative hotcakes at $600 (1M in 74 days - as fast as the $200 subsidized Droid), case proved, then reduce the price after the early adopters have been milked and then sell it subsidized is phase 3 where sales really take off. It was a great business plan, brilliantly executed. The $100 voucher was worth it alone in free advertising plus most people put those things towards larger purchases of high margin Apple products.
Actually, iPhone 3GS 8G in Japan is free, with two year contract. It's about $53/month, unlimited data (actually the limit is 300G).
iPhone 3G free in the UK on 30 pounds per month tariff with 24 months contract. iPhone 3GS free on 45 pounds tariff and 24 months contract.
In Canada, iPhone 3G is $29 on a 3 year contract (sadly 3 year contracts are the norm in Canada for smartphones). And long time customers do get iPhone 3G for free sometimes (with the contract).
So I don't know what all this talk is about Apple not discounting their phones or giving it away for free. That's probably just a USA thing. After all, why would Apple care, how much retailers are selling the iPhone for? They are getting their money regardless.
When they want to, Apple will discount their products. For whatever reason, they just aren't in that much of a competition in the US that they have to. I would not be surprised though, to see last gen iPhones going for free after the iPhone HD launch.
Apple's only response was to try to change the subject.
Yes, I recognized that rather than enter into a lengthy discussion about the myriad reasons why NPD's data are very likely inaccurate and NPD's conclusions are completely wrong, Apple chose to highlight the indisputable opportunity the iPhone presents to developers as compared to Android, Blackberry, Symbian, Palm, WinMo, yada-yada-yada. For apps, App-le is still the market leader.
Unfortunately, consumers would rather pay less for consumer goods than pay a premium to ensure the good welfare of the worker.
Sad and true. We are all guilty of this short sightedness.
Just as an curiousity, I wonder how much more these goods would cost if assembled here.
Balanced trade is good thing... free trade(trade imbalances) there is always a winner and loser. We Americans are losing in long run, but appears good in short run. Sigh.
Is that relevant though? Sure there's lots of free apps. But as a developer you can have Google take a cut and put it on Android Market or you can sell it right off your website and pay Google nothing. So sales on Android Market and even the number of apps is not directly comparable to Apple per se.
I just want to know how many paying customers there are for apps on Android phones. I don't actually care whether the App is sold in the Market or on a website. No point selling anywhere if no one is buying, is there?
If I'm a developer, why isn't what I'm asking relevant?
If I'm an investor looking to finance a developer, why isn't what I'm asking relevant?
Is the fragmentation, carrier control over OS upgrades, limited app memory, and refunds killing the market for paid Apps? Is this true or not? Enough with words, show me the money.
But at this point, it's debatable whether AT&T is hurting or helping Apple. Time will tell whether Steve was incredibly smart or incredibly stupid for signing a 5 year deal. And that's of course assuming there is a deal and all that jazz. I could be totally wrong and be surprised to see a CDMA or AWS iPhone this summer.
No one except some clueless Syracuse News journalist actually believes the 5 year deal is still in effect. Even Nilay Patel of Engadget who dug up the Apple confirmation wrote in his article that he doubts it's in effect because the same USA Today journalist who wrote the original scoop in 2007, wrote a subsequent article about a 3-year deal, and the WSJ wrote about an 1-year extension to the 3-year deal.
Too a point. When you have $40 billion in the bank, I think it's well beyond being profitable so that they can strong and innovative.
Now don't get me wrong. I don't begrudge Apple and their success. I like Apple products. And I love the Mac I am typing on right now.
But I just find it absurd that people go on and on about Apple's profitability (people who are not stockholders that is). Don't they realize, this is their money Apple is talking about? Seriously, do people get this worked up over any other company? Are people glad to pay well over asking price for a house or car?
I really don't see the problem here. There are electronics companies far more profitable than Apple, on a percentage basis. One is Cisco. Microsoft, as a mostly software company is much more profitable than Apple, both on a percentage basis, and in dollars. There are others.
I don't think it's proper to point Apple out, when others aren't being paid attention to. It's not like Apple makes more than their share of profits.
But, there are other companies that are not doing what they should, and so make little profits for their size. That's their problem, not Apple's. Perhaps people should look to them to see what they're doing wrong.
GS are not bloodsuckers, they are in business to make a profit and there are few companies who do it better. It's easy to kick a company when they are being presented as a scapegoat by the government to gain political advantage to push through absurd, ineffectual financial regulations. Have you actually studied the regulations proposed? They are virtually meaningless. You have been played.
From everything I've seen, I would have to say that G/S committed fraud. At this point, it looks pretty definite.
Yes, we do need better, and more regulation. The past administration didn't want to, and the previous congress under Clinton didn't either. That being followed by 12 years of conservative presidencies has screwed the regulatory system. Instead of regulators keeping their thumb on business, as they are supposed to, for the public good, they've become cheerleaders for business. Shameful!
You say this like it is a bad thing, are you saying you think people with less money than yourself, don't derserve to own a smartphone?
Or are you saying an iPhone is really five times better than a Nokia smartphone with an unsubsidised price of around €100 ?
You're missing the point.
Nokia's getting pounded by the financial industry because of poor, and declining profit, AND marketshare. If this doesn't reverse itself, Nokia will soon be losing money. You think that will be good? If so, for whom?
The same thing is happening to other phone manufacturers. Motorola, Sony-Ericsson, are two big companies that are doing poorly. How long will they last?
If a company produces commodity products, prices get depressed, and they have problems. Look at what happened to Dell. They're teetering.
It's not a question of whether cheap phones should be available or not. Cheap smartphones are here. they're not as good as the more expensive models, but people will buy them. Apple sells its one year old model, which is still better than most smartphones on the market, for $99 here in the States. If some companies abroad want to sell an iPhone for little, or nothing, and suck up the cost, that's their business too.
but every company charges as MUCH as they think they can get. Some can't do that because of reputation, or product quality.
But an unsubsidized smartphone going for €100 is not exactly state of the art. That's why the 3G now sells for less too. Are Nokia's top priced smartphones (I don't know what they go for there, but here they're as much as $700) worth the premium over their €100 model either?
People loved, Loved, LOVED America-On-Line. They loved the things that they can do on it and it's pleasantly controlled content. Fans would defend it tooth and nail. I just realized, Apple is not mimicking Microsoft, it's mimicking AOL and we all know what happened to AOL. Hopefully Apple is not as delusional and do something about it rather than talk.
AOL was the ONLY game in town when they were on TOP, there was no other company providing what they were doing... but that was way before Gurgle and FAKEBOOK came along
do your homework before you attack APPLE with ORANGES--- APPLE makes things BETTER, not WORSE like everybody else... and by the way.. you want a breath mint PhoneBreath??
Would you have Apple discontinue doing business in China? That way all those handling hazardous materials would lose their jobs & die of starvation... if you wer Chinese: Which would you choose, Which is better... worse... unethical?
.
Plus the other point that's completely wrong in the comment being responded to is that wage growth in China has been nothing short of spectacular. 10% per year plus inflation is something most staff would be very happy with as that is some of the biggest pay rises in the world.
To the original commenter, who's ripping of who now??
Nokia's getting pounded by the financial industry because of poor, and declining profit, AND marketshare. If this doesn't reverse itself, Nokia will soon be losing money. You think that will be good? If so, for whom?
You know there is a difference between the stock value of a company and their actual financial performance don't you?
Quote:
Originally Posted by melgross
If a company produces commodity products, prices get depressed, and they have problems. Look at what happened to Dell. They're teetering.
Now I perfer to think from a consumers point of view, as that is what I am, a consumer. But you can't compare Nokia to Dell, they are different companies, and even though Dell might be trying to sell a smartphone, and while Nokia may be trying to sell a laptop, they are in different markets.
Now in saying that, you do understand that the majority of the world can only afford these "commodity" products that you refer to? And there is only so far the prices of these phones will drop, Nokia won't make a loss on them, or give them away, they are not in the position of other companies to make money on services.
Quote:
Originally Posted by melgross
It's not a question of whether cheap phones should be available or not. Cheap smartphones are here. they're not as good as the more expensive models, but people will buy them. Apple sells its one year old model, which is still better than most smartphones on the market, for $99 here in the States. If some companies abroad want to sell an iPhone for little, or nothing, and suck up the cost, that's their business too.
You say they are not as good as a more expensive model, but is the iPhone really worth five times more than them?
Quote:
Originally Posted by melgross
But an unsubsidized smartphone going for ?100 is not exactly state of the art. That's why the 3G now sells for less too. Are Nokia's top priced smartphones (I don't know what they go for there, but here they're as much as $700) worth the premium over their ?100 model either?
You are comparing the subsubisided price of one Nokia phone, to a fully subsidised price of an iPhone?
The iPhone 3G unsubsidised in New Zealand is NZ$950, before taxes that is US$600, five times more expensive than the phone I mentioned, a two year old phone, and you say that is selling for less?
That;s easy! They had a goal of penetration into a market new to them... They miscalculated (screwed up) and overpriced their offering (the iPhone) to meet that goal.
Quote:
Originally Posted by jragosta
They did?
Then maybe you can explain why the iPhone's adoption rate was faster than any smartphone in history. And why it's still the #1 selling phone model 3 years after introduction.
Too bad you're looking at only one side of the equation. Without the AT&T exclusive, the iPhone might well not be where it is today. Apple's deal with AT&T meant that Apple gave some things up but got some things in return. Apple is very happy with the results (based on their quarterly earnings conference call). What do you know that Apple doesn't?
Quote:
Originally Posted by Capnbob
They didn't miscalculate. It's basic business. AT&T were unsure of the product and didn't feel like subsidizing a device that diluted its control, so Apple took "the risk" and passed it on to consumers to prove the product. It sold like relative hotcakes at $600 (1M in 74 days - as fast as the $200 subsidized Droid), case proved, then reduce the price after the early adopters have been milked and then sell it subsidized is phase 3 where sales really take off. It was a great business plan, brilliantly executed. The $100 voucher was worth it alone in free advertising plus most people put those things towards larger purchases of high margin Apple products.
Obviously, I don't have any insider details of the initial pricing of the iPhone, the initial ATT subsidy (if any), or negotiations between Apple and ATT.
But, I have been observing Apple and Steve Jobs since 1978... and they have certain patterns of behavior.
This is my speculation based on events and my observations.
1) First, consider that:
-- Apple was entering a marketplace totally new to them.
-- Apple's stated goal was to sell a certain % of the smart phone market in its 1st year-- 10 million iPhones
-- It took over 2 months to sell the 1st million phones
-- at that run rate, Apple would not meet its goal
-- Apple's scheduling, manufacturing, pricing, profits are dependent on meeting a planned run rate
2) It is very likely, that Apple wanted a very high price on the iPhone for several reasons:
-- Apple wanted he iPhone to have a "perceived value" as close to the real value as possible
-- SJ wanted to force the industry to start selling phones based on the value of the device, rather than being buried in a subsidized plan
-- Doing this would give Apple more control over their device and force other mfgrs, devices to compete on a level playing field (Apple's playing field).
3) Apple drastically reduced prices (33%) very early in the product cycle, then offered partial refunds to most early adopters:
-- These two moves are very un-Apple. Apple likes to set a price for a new device, maintain it for a year, then replace the device with a newer/better device at the same or slightly lower price... often continuing to offer the older device at a reduced price.
-- A drastic price reduction is usually used by Apple as a last resort, meant to goose sales, because the device is not meeting sales objectives
-- Apple, very seldom offers partial-refunds. This is, in effect, saying: "we screwed up and charged you too much"
If the above observations are (mostly) true-- and I suspect they are, Apple had to do something!
So, I believe, they reduced their prices, changed their pricing model to be more in line with the industry (carrier subsidy), and ate some crow by giving refunds.
This got them back on plan (run rate) and the rest is history.
Comments
The PR department carefully worded its statement to lead into the world-wide figures that can't be changing so fast in Google's favor. Apple didn't get into disputing the accuracy of NPD's figures, perhaps because the figures might be accurate enough and because it's safer just to focus on what Apple knows for certain.
Glad someone else noticed that.
Apple's only response was to try to change the subject.
I can't imagine a stronger endorsement from Apple for the reliability of those numbers.
Also, you have not clue about marketing, Apple is not interested in gaining market share over devaluing the product. This is marketing 101, Apple will never allow the product to be given away, either you pay the price of you do own the product. Why give away a product when people are whiling to pay for.
There are several counties that provide the iPhone for "free" with a contract, so you must have a strange definition of the word "never"
Seems like a P.R. spin on the truth to tell a bigger truth.
the report stands on its own legs. iphone is no 3 OS on smartphones in the US. if apple is interested in gaining marketshare in the US, iPhones need to be available from more than one carrier.
We have cell manufacturers selling 50 models of phones. from the cheapest junk to high end smartphones. They sell a lot of phones, like Nokia. But like Nokia, most of those sales are of cheap, hardly profitable models. Their individual smartphones don't sell that many, but all together they sell a lot. Unfortunately, that makes for less profit.
You say this like it is a bad thing, are you saying you think people with less money than yourself, don't derserve to own a smartphone?
Or are you saying an iPhone is really five times better than a Nokia smartphone with an unsubsidised price of around ?100 ?
It's apples and oranges.
If you want to compare device sales, you compare each individual smart phone model to the iPhone - and the iPhone wins handily. No single Android phone comes close to iPhone sales.
OTOH, if you want to compare OS sales (which is implied by the fact that they're lumping all Android models together), then you need to include the iPod Touch and iPad, as well.
What if you want to compare the number of phones sold with iPhone OS to the number of phones sold with Android OS?
It's not really all that hard.
That;s easy! They had a goal of penetration into a market new to them... They miscalculated (screwed up) and overpriced their offering (the iPhone) to meet that goal.
They recognized that, and were agile enough to adjust their price so they could meet their goal...
... to do otherwise, would be, just, stupid!
.
They didn't miscalculate. It's basic business. AT&T were unsure of the product and didn't feel like subsidizing a device that diluted its control, so Apple took "the risk" and passed it on to consumers to prove the product. It sold like relative hotcakes at $600 (1M in 74 days - as fast as the $200 subsidized Droid), case proved, then reduce the price after the early adopters have been milked and then sell it subsidized is phase 3 where sales really take off. It was a great business plan, brilliantly executed. The $100 voucher was worth it alone in free advertising plus most people put those things towards larger purchases of high margin Apple products.
Actually, iPhone 3GS 8G in Japan is free, with two year contract. It's about $53/month, unlimited data (actually the limit is 300G).
iPhone 3G free in the UK on 30 pounds per month tariff with 24 months contract. iPhone 3GS free on 45 pounds tariff and 24 months contract.
In Canada, iPhone 3G is $29 on a 3 year contract (sadly 3 year contracts are the norm in Canada for smartphones). And long time customers do get iPhone 3G for free sometimes (with the contract).
So I don't know what all this talk is about Apple not discounting their phones or giving it away for free. That's probably just a USA thing. After all, why would Apple care, how much retailers are selling the iPhone for? They are getting their money regardless.
When they want to, Apple will discount their products. For whatever reason, they just aren't in that much of a competition in the US that they have to. I would not be surprised though, to see last gen iPhones going for free after the iPhone HD launch.
Glad someone else noticed that.
Apple's only response was to try to change the subject.
Yes, I recognized that rather than enter into a lengthy discussion about the myriad reasons why NPD's data are very likely inaccurate and NPD's conclusions are completely wrong, Apple chose to highlight the indisputable opportunity the iPhone presents to developers as compared to Android, Blackberry, Symbian, Palm, WinMo, yada-yada-yada. For apps, App-le is still the market leader.
Unfortunately, consumers would rather pay less for consumer goods than pay a premium to ensure the good welfare of the worker.
Sad and true. We are all guilty of this short sightedness.
Just as an curiousity, I wonder how much more these goods would cost if assembled here.
Balanced trade is good thing... free trade(trade imbalances) there is always a winner and loser. We Americans are losing in long run, but appears good in short run. Sigh.
Is that relevant though? Sure there's lots of free apps. But as a developer you can have Google take a cut and put it on Android Market or you can sell it right off your website and pay Google nothing. So sales on Android Market and even the number of apps is not directly comparable to Apple per se.
I just want to know how many paying customers there are for apps on Android phones. I don't actually care whether the App is sold in the Market or on a website. No point selling anywhere if no one is buying, is there?
If I'm a developer, why isn't what I'm asking relevant?
If I'm an investor looking to finance a developer, why isn't what I'm asking relevant?
Is the fragmentation, carrier control over OS upgrades, limited app memory, and refunds killing the market for paid Apps? Is this true or not? Enough with words, show me the money.
What if you want to compare the number of phones sold with iPhone OS to the number of phones sold with Android OS?
It's not really all that hard.
Well, actually it is if you only want US sales and Android handset makers and US carriers don't want to reveal them.
But at this point, it's debatable whether AT&T is hurting or helping Apple. Time will tell whether Steve was incredibly smart or incredibly stupid for signing a 5 year deal. And that's of course assuming there is a deal and all that jazz. I could be totally wrong and be surprised to see a CDMA or AWS iPhone this summer.
No one except some clueless Syracuse News journalist actually believes the 5 year deal is still in effect. Even Nilay Patel of Engadget who dug up the Apple confirmation wrote in his article that he doubts it's in effect because the same USA Today journalist who wrote the original scoop in 2007, wrote a subsequent article about a 3-year deal, and the WSJ wrote about an 1-year extension to the 3-year deal.
Too a point. When you have $40 billion in the bank, I think it's well beyond being profitable so that they can strong and innovative.
Now don't get me wrong. I don't begrudge Apple and their success. I like Apple products. And I love the Mac I am typing on right now.
But I just find it absurd that people go on and on about Apple's profitability (people who are not stockholders that is). Don't they realize, this is their money Apple is talking about? Seriously, do people get this worked up over any other company? Are people glad to pay well over asking price for a house or car?
I really don't see the problem here. There are electronics companies far more profitable than Apple, on a percentage basis. One is Cisco. Microsoft, as a mostly software company is much more profitable than Apple, both on a percentage basis, and in dollars. There are others.
I don't think it's proper to point Apple out, when others aren't being paid attention to. It's not like Apple makes more than their share of profits.
But, there are other companies that are not doing what they should, and so make little profits for their size. That's their problem, not Apple's. Perhaps people should look to them to see what they're doing wrong.
GS are not bloodsuckers, they are in business to make a profit and there are few companies who do it better. It's easy to kick a company when they are being presented as a scapegoat by the government to gain political advantage to push through absurd, ineffectual financial regulations. Have you actually studied the regulations proposed? They are virtually meaningless. You have been played.
From everything I've seen, I would have to say that G/S committed fraud. At this point, it looks pretty definite.
Yes, we do need better, and more regulation. The past administration didn't want to, and the previous congress under Clinton didn't either. That being followed by 12 years of conservative presidencies has screwed the regulatory system. Instead of regulators keeping their thumb on business, as they are supposed to, for the public good, they've become cheerleaders for business. Shameful!
Apple is like "comprehensive car insurance policy" from rental car company. you got to be very cautious of what is promised.
Still much better than anyone else.
You say this like it is a bad thing, are you saying you think people with less money than yourself, don't derserve to own a smartphone?
Or are you saying an iPhone is really five times better than a Nokia smartphone with an unsubsidised price of around €100 ?
You're missing the point.
Nokia's getting pounded by the financial industry because of poor, and declining profit, AND marketshare. If this doesn't reverse itself, Nokia will soon be losing money. You think that will be good? If so, for whom?
The same thing is happening to other phone manufacturers. Motorola, Sony-Ericsson, are two big companies that are doing poorly. How long will they last?
If a company produces commodity products, prices get depressed, and they have problems. Look at what happened to Dell. They're teetering.
It's not a question of whether cheap phones should be available or not. Cheap smartphones are here. they're not as good as the more expensive models, but people will buy them. Apple sells its one year old model, which is still better than most smartphones on the market, for $99 here in the States. If some companies abroad want to sell an iPhone for little, or nothing, and suck up the cost, that's their business too.
but every company charges as MUCH as they think they can get. Some can't do that because of reputation, or product quality.
But an unsubsidized smartphone going for €100 is not exactly state of the art. That's why the 3G now sells for less too. Are Nokia's top priced smartphones (I don't know what they go for there, but here they're as much as $700) worth the premium over their €100 model either?
People loved, Loved, LOVED America-On-Line. They loved the things that they can do on it and it's pleasantly controlled content. Fans would defend it tooth and nail. I just realized, Apple is not mimicking Microsoft, it's mimicking AOL and we all know what happened to AOL. Hopefully Apple is not as delusional and do something about it rather than talk.
AOL was the ONLY game in town when they were on TOP, there was no other company providing what they were doing... but that was way before Gurgle and FAKEBOOK came along
do your homework before you attack APPLE with ORANGES--- APPLE makes things BETTER, not WORSE like everybody else... and by the way.. you want a breath mint PhoneBreath??
BB
Would you have Apple discontinue doing business in China? That way all those handling hazardous materials would lose their jobs & die of starvation... if you wer Chinese: Which would you choose, Which is better... worse... unethical?
.
Plus the other point that's completely wrong in the comment being responded to is that wage growth in China has been nothing short of spectacular. 10% per year plus inflation is something most staff would be very happy with as that is some of the biggest pay rises in the world.
To the original commenter, who's ripping of who now??
Nokia's getting pounded by the financial industry because of poor, and declining profit, AND marketshare. If this doesn't reverse itself, Nokia will soon be losing money. You think that will be good? If so, for whom?
You know there is a difference between the stock value of a company and their actual financial performance don't you?
If a company produces commodity products, prices get depressed, and they have problems. Look at what happened to Dell. They're teetering.
Now I perfer to think from a consumers point of view, as that is what I am, a consumer. But you can't compare Nokia to Dell, they are different companies, and even though Dell might be trying to sell a smartphone, and while Nokia may be trying to sell a laptop, they are in different markets.
Now in saying that, you do understand that the majority of the world can only afford these "commodity" products that you refer to? And there is only so far the prices of these phones will drop, Nokia won't make a loss on them, or give them away, they are not in the position of other companies to make money on services.
It's not a question of whether cheap phones should be available or not. Cheap smartphones are here. they're not as good as the more expensive models, but people will buy them. Apple sells its one year old model, which is still better than most smartphones on the market, for $99 here in the States. If some companies abroad want to sell an iPhone for little, or nothing, and suck up the cost, that's their business too.
You say they are not as good as a more expensive model, but is the iPhone really worth five times more than them?
But an unsubsidized smartphone going for ?100 is not exactly state of the art. That's why the 3G now sells for less too. Are Nokia's top priced smartphones (I don't know what they go for there, but here they're as much as $700) worth the premium over their ?100 model either?
You are comparing the subsubisided price of one Nokia phone, to a fully subsidised price of an iPhone?
The iPhone 3G unsubsidised in New Zealand is NZ$950, before taxes that is US$600, five times more expensive than the phone I mentioned, a two year old phone, and you say that is selling for less?
That;s easy! They had a goal of penetration into a market new to them... They miscalculated (screwed up) and overpriced their offering (the iPhone) to meet that goal.
They did?
Then maybe you can explain why the iPhone's adoption rate was faster than any smartphone in history. And why it's still the #1 selling phone model 3 years after introduction.
Too bad you're looking at only one side of the equation. Without the AT&T exclusive, the iPhone might well not be where it is today. Apple's deal with AT&T meant that Apple gave some things up but got some things in return. Apple is very happy with the results (based on their quarterly earnings conference call). What do you know that Apple doesn't?
They didn't miscalculate. It's basic business. AT&T were unsure of the product and didn't feel like subsidizing a device that diluted its control, so Apple took "the risk" and passed it on to consumers to prove the product. It sold like relative hotcakes at $600 (1M in 74 days - as fast as the $200 subsidized Droid), case proved, then reduce the price after the early adopters have been milked and then sell it subsidized is phase 3 where sales really take off. It was a great business plan, brilliantly executed. The $100 voucher was worth it alone in free advertising plus most people put those things towards larger purchases of high margin Apple products.
Obviously, I don't have any insider details of the initial pricing of the iPhone, the initial ATT subsidy (if any), or negotiations between Apple and ATT.
But, I have been observing Apple and Steve Jobs since 1978... and they have certain patterns of behavior.
This is my speculation based on events and my observations.
1) First, consider that:
-- Apple was entering a marketplace totally new to them.
-- Apple's stated goal was to sell a certain % of the smart phone market in its 1st year-- 10 million iPhones
-- It took over 2 months to sell the 1st million phones
-- at that run rate, Apple would not meet its goal
-- Apple's scheduling, manufacturing, pricing, profits are dependent on meeting a planned run rate
2) It is very likely, that Apple wanted a very high price on the iPhone for several reasons:
-- Apple wanted he iPhone to have a "perceived value" as close to the real value as possible
-- SJ wanted to force the industry to start selling phones based on the value of the device, rather than being buried in a subsidized plan
-- Doing this would give Apple more control over their device and force other mfgrs, devices to compete on a level playing field (Apple's playing field).
3) Apple drastically reduced prices (33%) very early in the product cycle, then offered partial refunds to most early adopters:
-- These two moves are very un-Apple. Apple likes to set a price for a new device, maintain it for a year, then replace the device with a newer/better device at the same or slightly lower price... often continuing to offer the older device at a reduced price.
-- A drastic price reduction is usually used by Apple as a last resort, meant to goose sales, because the device is not meeting sales objectives
-- Apple, very seldom offers partial-refunds. This is, in effect, saying: "we screwed up and charged you too much"
If the above observations are (mostly) true-- and I suspect they are, Apple had to do something!
So, I believe, they reduced their prices, changed their pricing model to be more in line with the industry (carrier subsidy), and ate some crow by giving refunds.
This got them back on plan (run rate) and the rest is history.
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