Apple following iPod, PS2 model to sell 23m iPhones in one year
With a new price cut for the iPhone that hits the magic $199 mark, Apple is said to be following the same paths taken by the iPod and even the PlayStation 2 that triggered explosive growth and cemented both devices as champions in their fields.
In a research note, Pacific Crest's Andy Hargreaves notes that both the iPod mini and the PlayStation 2 both saw "massive acceleration" when their prices dipped below $200 for the first time, selling several times the amount they'd managed the year before.
For Apple, the change saw iPod sales grow from selling 8.3 million of the players in one year to 32 million -- or nearly four times more. If Apple's estimated six million iPhones sold in the past year matches that same change in growth rate, the Cupertino, Calif.-based company would sell over 23 million iPhones by June 2009.
"The relationship [between price and sales] is shockingly consistent," Hargreaves says. "At average prices above $200, Apple never sold more than [6 million] units in a rolling four-quarter period. At prices below $200, Apple never sold fewer than [8 million]."
The analyst also explains that this doesn't take into account the wildcard of free iPhones and heavier discounts in Germany, the UK, and other countries, which could add "several million" more iPhones to sales for every quarter and overcome rivals like Nokia, whose N95 is often given away with many plans.
The iPod's surge in sales after price drops.
Even on the more modest curve on Sony's PlayStation 2 console, the iPhone is likely to sell many more units, according to the report. When the Japanese electronics giant slashed the PS2's price to $199 in May 2002, it not only reversed a drop in sales but saw Sony's monthly sales jump 61 percent on average. A similar change would give Apple a still significant 17 million iPhone sales in 12 months.
Pacific Crest's researcher further suggests that Apple is generating more money per iPhone than already high estimates: an early prediction would have AT&T alone subsidizing as much as $350 of the cost of an iPhone to reach the $199 price point.
Regardless of Apple's income per phone, the company is also thought to have momentum on its side by launching earlier than phones based on Google's Android as well as very similar touchscreen phones from other rivals.
"We believe Apple has already established its brand as a premium name in the space, and the company appears to be continuing its recent history of introducing revolutionary products," Hargreaves asserts. "This combination should allow it to maintain a leadership position and mitigate the margin pressure that can come with increased competition."
In a research note, Pacific Crest's Andy Hargreaves notes that both the iPod mini and the PlayStation 2 both saw "massive acceleration" when their prices dipped below $200 for the first time, selling several times the amount they'd managed the year before.
For Apple, the change saw iPod sales grow from selling 8.3 million of the players in one year to 32 million -- or nearly four times more. If Apple's estimated six million iPhones sold in the past year matches that same change in growth rate, the Cupertino, Calif.-based company would sell over 23 million iPhones by June 2009.
"The relationship [between price and sales] is shockingly consistent," Hargreaves says. "At average prices above $200, Apple never sold more than [6 million] units in a rolling four-quarter period. At prices below $200, Apple never sold fewer than [8 million]."
The analyst also explains that this doesn't take into account the wildcard of free iPhones and heavier discounts in Germany, the UK, and other countries, which could add "several million" more iPhones to sales for every quarter and overcome rivals like Nokia, whose N95 is often given away with many plans.
The iPod's surge in sales after price drops.
Even on the more modest curve on Sony's PlayStation 2 console, the iPhone is likely to sell many more units, according to the report. When the Japanese electronics giant slashed the PS2's price to $199 in May 2002, it not only reversed a drop in sales but saw Sony's monthly sales jump 61 percent on average. A similar change would give Apple a still significant 17 million iPhone sales in 12 months.
Pacific Crest's researcher further suggests that Apple is generating more money per iPhone than already high estimates: an early prediction would have AT&T alone subsidizing as much as $350 of the cost of an iPhone to reach the $199 price point.
Regardless of Apple's income per phone, the company is also thought to have momentum on its side by launching earlier than phones based on Google's Android as well as very similar touchscreen phones from other rivals.
"We believe Apple has already established its brand as a premium name in the space, and the company appears to be continuing its recent history of introducing revolutionary products," Hargreaves asserts. "This combination should allow it to maintain a leadership position and mitigate the margin pressure that can come with increased competition."
Comments
I'm still sticking to my prediction of 60 million total sold by end 2009
Still, though, that $199 price point is a big, big deal. They will sell many iPhones in '08 - easily over 10M. And once a ultra-thin, lightweight iPhone nano comes out ('09?), they will *really* do well.
If all the stars are in alignment, I can easily imagine 20MM units in the last half of the year.
so it doens't make sense, maybe when these numbers start coming in will the stock price come up
also i can't wait for the apps store to open that will be another indicator.
also, these analysts don't have any accountability they can say a billion and what lose their jobs? no because its about reading the story next to the ads selling right next to the story
why even list this anyway, why don't we just post updated numbers
here's mine
50 million by the end of 2008 because they will have a iphone nano and announce a $100, price point now give me a raise.
now don't fire me, its my analyst part of me saying this.
The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.
Yeah and the PS2 come with games costing around $30.00 to $50.00 each some a little less and some a little more and a visit to the iTunes store, for those that don't have a huge library of songs to rip, but can easily purchase from Apple while only spending .99¢ a song, while not much, a few songs within a few visits each month and hello, what's this on my credit card bill?!
It's all relative... I don't have have an iPod but then again I don't listen to much music. I mean I have a few songs from a few artists I enjoy every now and then but music is not that big a part of my daily routine, even while driving, no music on the radio. I don't have a PS2 or 3, X-Box 360 or even a Wii, so I don't have a lot of $40.00 games around the house. I am, one day, interested in getting an iPhone and when I do, the App store will have matured, and I will have solved all three of my dilemmas.
ok all this celebrating higher and higher sales, the extra cost of the plans has to have some influence, but if other smartphones have the same extra cellular cost then maybe....but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....
There hasn't been a retail sale of an iPhone for over a month and supplies were constrained longer than that. Once the sales start coming in we start seeing the market react.
but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....
My personal opinion is that it has more to do with the fact that every other day there's another high-profile article about what Apple would (or wouldn't) be able to do without Steve Jobs than anything to do with actual sales or profits which seem to be healthy.
The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.
Still, though, that $199 price point is a big, big deal.
Excellent point Hobbes - Neither of the two products had the added commitment nor did these products had to bed tie to a particular service, in this case AT&T in the US -- which is excellent in some areas and downright horrid in others.
The outrageous predictions on the sales of the iPhone are predicated on the fact that this phone will be purchased all over the world, thus effectively expanding the market base, but ignoring the fact that the US market is cornered by AT&T, and their ridiculous practices. Of course Apple can't resolve the problems of their partners and this was discussed last year in the same manner, but I have had the phone for a year now and I can tell you that the only thing more frustrating about the phone other than AT&T, is AT&T customer support.
My questions for AT&T are this:
1. If a person can only activate the phone in store, and there is a line of 100 people outside the store the first day, how many people inside the store does it take to activate all those phones. In my experience, working with a sales rep in AT&T is no less than a 20 minute affair. (Activating at home was less than 10 minutes).
2. Last year AT&T reps had zero knowledge about the iPhone and its features - same thing this year? With an influx of a less savvy and less techy user base, this will have to be a home run, else the complaints about service and support will go through the roof.
3. AT&T is notorious for dropped calls and straight to voicemail calls. I've missed many an important phone call this way, but hey, I think we've all learned to live this.
4. Making changes to a plan with the iPhone can only be done in store or over the phone, no online support has been available for the iPhone.
When people are switching over to a new carrier, these things will be very prevalent and will affect the residual sales. I hope AT&T is as responsive to issues as Apple, else Apple will feel the pain second hand.
between now and sales day one, they have to get at home activation to work.... for the very few that want to jailbreak a phone for another carrier many many many more will have to be in line waiting.
hey even at the apple store they have a better solution, sales people with portable gizmo's all you needed was a credit card and an apple bag.
My personal opinion is that it has more to do with the fact that every other day there's another high-profile article about what Apple would (or wouldn't) be able to do without Steve Jobs than anything to do with actual sales or profits which seem to be healthy.
I hope the rumor is true that the new massive building being built by Apple is where their new human cloning device will be ...
my solution----buy the contract in the store and get a "iphone card" take it home to "finish" the activation. less time less hassle. and those lines will turn many off, but then ALL phone activation at the time of "iphone sales" will be hit, because you can't get to a sales rep.....number 315 you can go to the next "wait" line...something like getting into disney world.....a line to get to a line to get to a line to the line for the monorail. i'd laugh but the few att stores don't have the floor space to handle the people what next "iphone beepers" and 2 hr waits......that will be the challenge....that's going to be the story line for at least the first 2 weeks, and sales potential is "another wait in the line"
between now and sales day one, they have to get at home activation to work.... for the very few that want to jailbreak a phone for another carrier many many many more will have to be in line waiting.
hey even at the apple store they have a better solution, sales people with portable gizmo's all you needed was a credit card and an apple bag.
I think they have activation working properly. I assume they are better prepared this year for the influx of activations.
What I think will happen in Apple and AT&T stores is the formation of two lines. One is for new customers to AT&T who need to go through the full contract process to get the handset. The other line is for current AT&T customers who will only need to show proof of who they are, verify the data on the account and let the CSR record the IMEI on the iPhone box. Then they can activate via iTunes at will within the next 30 days.
The relationship [between price and sales] is shockingly consistent
Wow, can someone please give this analyst an Adam Smith Award for Most Insight?
Read that sentence again. What amazing insight. People, what he is saying here is that when prices go down, it has the effect of {drum roll, please} making sales go up.
FAAAAATHUUUUUUUUUUUUUUMMMMMMMMM! {That was the sound of my brain falling on the ground}
This guy gets paid to say these things. He should get paid way more than he's getting right now. I mean, with insight such as this it's no wonder we're all just a bunch of idiots following supremely intelligent people such as this guy.
I hope the rumor is true that the new massive building being built by Apple is where their new human cloning device will be ...
I think that was on the planet Kamino.
Forget at&t. I'd rather pay the $600 to activate the iPhone on my own network.
The suspected $600 price is only to bypass the contract, you're still locked into AT&T until a ambitious hacker unlocks it.
Though, I don't think Apple will care as much, except to give lip service to AT&T, as they are getting their money for the device upfront. AT&T will still care, but they may be less concerned as they know they are they are the only HSDPA for the iPhone.
You may say, "sure, that's just a phone..." ...Except come early next year, all these telecom companies are going to be selling Macs too. Except these Macs are, well, you know, the tablet, handheld, etc. etc. etc. Everywhere sells iPods. Almost everywhere will now have iPhones available (mainly through telecom and releated companies' retail presence). In 2009, the Mac may more clearly be some kind of phone and a phone some kind of Mac. Of course, in 2009, and towards the end of 2008, the upsell "cream" is to move as many people as possible (a percentage of iPhone 3G customers) onto a MacBook, MacBook Pro, MacTouch, iMac. Because an iPhone clearly goes much better with a nice Mac at home. AppleTV too.
I realised this Master Plan of Steve's walking home from an Apple Store just then. It's incredibly brilliant. Forget a $100 laptop, get a $199 Mac.
Do you all know that Apple, Inc. is going to double its retail stores globally in one month's time, and triple their retail presence globally by the end of the year?
If they offered a Mac Tablet with UMTS that would rock and I can see the mobile carrier's selling that, but I don't think it's going to happen.
As for the number of outlets selling the iPhone worldwide, I wonder what that count will be. Over 50,000?
It is the real ultimate genius of leverage. The marketing, financial, etc. *strength* of the service providers and related companies, all leverage to spread our favourite fruit far and wide to the far reaches of the Earth. Many Macs in Madagascar. Who would've thunk it?
As much as I think the Apple Premium and Apple Authorized Reseller programs are important, it is the telcos and related entities that are the next big, huge, Apple Reseller. Many of them, would've no idea, that if the iPhone 3G is so fricking awesome, just wait until you fire up Leopard... Or Snow Leopard.