Apple IPhone Price Cut Shows Rare Misstep,Aggressive Tactics

[MacBytes]

http://www.macbytes.com/images/bytessig.gif (http://www.macbytes.com)

Category: Opinion/Interviews
Link: Apple IPhone Price Cut Shows Rare Misstep,Aggressive Tactics (http://www.macbytes.com/link.php?sid=20070906010837)
Description:: none

Posted on MacBytes.com (http://www.macbytes.com)
Approved by Mudbug

[EvilDoc]

I think i boils down to basic numbers, the iPhone sold very well in the last few months. The only thing holding it back from selling more was the price. Steve and his cronies sat down and said probably said "how can we sell even more" and some one raised there hand and set lets drop the price. Everyone who bought a phone between now and launch fueled this. Moral of the story is never by a launch product, never. Btw im still shocked any bought it to begin with for $600 bucks...

[nagromme]

Btw im still shocked any bought it to begin with for $600 bucks...

At $600 it was still cheaper than the competition. Cheaper than some in intial cost, cheaper than the rest in 2-year cost. Those less-capable, harder-to-use devices that people thought were at least "cheap," in fact never were: they carried a hefty monthly price that you keep paying, and paying, and paying...

See chart:
http://roughlydrafted.com/RD/RDM.Tech.Q3.07/28CE05EF-2E0F-4912-A62A-CBAB41E0D305.html

Initial cost (only half the story):

Nokia N95: $875
iPhone: $599 (iPhone in the middle of the pack)
Moto Q: $150

Cost after 2 years (counting monthly plan and flash upgrade to match iPhone storage):

Nokia N95: $2875
iPhone: $2056 (iPhone is cheapest)
Moto Q: $2270

[shadowfax]

what a crappy article--very decidedly pointing to the price cuts as a sign of weakness. That would be the case if we were dealing with Microsoft, who only seem to cut prices on devices they sell when they're in dire straits. Apple is a long, long, long way from dire straits in any market. The mp3 market is still growing, and while their share is somewhat stagnant, they are still very decidedly dominant in the market.

to me these releases indicate Apple's utter dominance of the mp3 player market--they're pulling tighter on what was already a death grip. As for the iPhone, I think they are making a bid to skyrocket sales--reel in the people that are thinking about it, but want to wait for Rev. B. $200 cuts will probably teeter a lot of them. I am certainly going to get one pretty soon...

We shall see, we shall see.

edit: I expect to see apple continue in it's mediocre position, stock-wise, till the end of the quarter, when they release their financial results, which will probably show some impressive revenues/profits, as well as impressive sales figures for the iPhone. I would expect to see them at well over 1 million.

[chatin]

I would bet, the iPhone will be a free product upon signing up for the two year agreement. The subscription is more valuable than the hardware!

[mcmarks]

I fail to see this as a sign of weakness. I would be very surprised if this maneuver wasn't planned from the beginning. The idea is to establish product momentum and that is exactly what Apple is doing. Initial sales were very good despite a high price. Now that we've taken care of the initial buyers, lowering the price will sustain the product sales momentum. What this really indicates to me, is that margins at the higher prices were probably astronomical and now they will be more in line with the rest of the iPod line.

[net26]

if you calculate how much revenue apple generates from the 10% deal with att, you can see that the $200 price cut means NOTHING to them. I think the only reason they're not giving them away is because of the Apple brand name and the phones exclusivity (and that people would treat the product like cr@p if it was free). even if they make exactly nothing on the hardware, they make huge bucks on the service plans (they probably still make quite a lot on the handsets, even at $399). once they sell close to a million iphones, that would calculate to about (1000k users x $60 average plan x 10%) 6m A MONTH (or 72m a year) FROM A DEVICE THEY SOLD YOU WITH A PROFIT!!! I really wouldn't be surprised if they started just handing them out... and kill motorola, nokia, sonyericsson and the like within a year. when you think about it, Steves plan to get a chunk of the service plan pie was just plain visionary. I think other handset manufacturers are going to try to follow his lead, but in the end wont be able to produce a product as iconic as the iphone. tough luck

n

[mainstreetmark]

I'm just relieved this thread hasn't degraded to a bunch of people who are "mad" at Apple for reducing prices on something they already, willingly, bought.

"Here's your new iPhone. Sorry about the line. Oh, and we do sincerely promise it will always be this exact price."

[pilotError]

I would venture to guess that AT&T is subsidizing the iPhone to get a huge surge in subscriptions. They didn't do so bad in the first 3 months.

I don't know if its a weakness, but its more of an affordable item now, especially for the younger age brackets (16 - 21). I have a few nieces and nephews in that age bracket that would love an iPhone, but the parents won't swing for it because it was so expensive.

Certainly not anymore. I would think that Apple may be looking for the crossover (halo) to get the Mac into that demographic as well. Build up mindshare with the younger generation and have Apple fans for life.

[PlaceofDis]

I would bet, the iPhone will be a free product upon signing up for the two year agreement. The subscription is more valuable than the hardware!

its not subsidized, so i doubt very much that'll ever happen, although AT&T would like it.

if you calculate how much revenue apple generates from the 10% deal with att,

n

no one knows just how much apple is getting from the revenue sharing, i'd say 10% is a bit on the high end since its a new concept.

I'm just relieved this thread hasn't degraded to a bunch of people who are "mad" at Apple for reducing prices on something they already, willingly, bought.

"Here's your new iPhone. Sorry about the line. Oh, and we do sincerely promise it will always be this exact price."

then why bring it up yourself?

I would venture to guess that AT&T is subsidizing the iPhone to get a huge surge in subscriptions. They didn't do so bad in the first 3 months.

I don't know if its a weakness, but its more of an affordable item now, especially for the younger age brackets (16 - 21). I have a few nieces and nephews in that age bracket that would love an iPhone, but the parents won't swing for it because it was so expensive.

Certainly not anymore. I would think that Apple may be looking for the crossover (halo) to get the Mac into that demographic as well. Build up mindshare with the younger generation and have Apple fans for life.

again, its not 'subsidized' as in the usual terms. Apple isn't selling the phones to them, and then letting them set their own prices. Apple sets the price and AT&T has to sell them for that price.

on the article:

its not so much a sign of weakness as it is staying competitive. its frustrating being someone who bought it just under a month ago and having your model be discontinued already. but its an evolution and i don't think it would've been met with such shock and all that if say a new 16gig model was introduced to take the 8gig's spot and then a 100 price cut for both. that would've been seen as a refresh and not a replacement/cut and wouldn't have this idea that apple is 'desperate' which i doubt they are.

[tutubibi]

I would bet, the iPhone will be a free product upon signing up for the two year agreement. The subscription is more valuable than the hardware!

Nope, Apple is making money on the hardware first. Unless AT&T will shell couple of 100s to Apple it will not be "free"

[mcmarks]

I fail to see this as a sign of weakness. I would be very surprised if this maneuver wasn't planned from the beginning. The idea is to establish product momentum and that is exactly what Apple is doing. Initial sales were very good despite a high price. Now that we've taken care of the initial buyers, lowering the price will sustain the product sales momentum. What this really indicates to me, is that margins at the higher prices were probably astronomical and now they will be more in line with the rest of the iPod line.

[dwd3885]

i don't get teh point of people getting upset at apple for this price drop because they bought their phone on launch day. prices get lowered all the time.

Hey I bought an Xbox 360 on launch, should I be able to get a refund since they lowered the price?!? Hey, and they have the elite now, so I should be able to trade in my original premium xbox for the elite with no questions asked, no cost to me.

People are really dumb when it comes to apple, they act crazily. Early adopters pay a premium, it is a known fact. Which is why most people wait until the price goes down to buy something. There is a reason why most Apple fans are called fans, short for FANATIC. Just look at this realistically and it should be quite obvious

[nagromme]

if you calculate how much revenue apple generates from the 10% deal with att,

Where is that number from? We have nothing but speculation as to Apple's cut of the service plans. We do have good reason to think Apple is opposed to subsidies, however.

And $200 is not "nothing" to Apple: it is in fact $200 million, for every million iPhones sold :p

[hexonxonx]

As was released last week, the iPhone outsold any other cell phone out there during a set period at that $600 price. That tells me it was doing very well.

The lower price now insures that all kinds of people will now be able to aford that price and they will sell even more.

[gerardrj]

http://www.memotosteve.com/

Pretty much spells it out without whining or making unreasonable demands.