So I have been reading all the rumors of the next generation iPhone getting all this wonderful hardware, and it's made me debate a few things. Over all, It has been rumored that we will see 3G, capacity upgrades, another higher quality camera, and better battery life. However it has been rumored that we'll see a price drop in the new model. This has lead to the debate that there will be two models in the near future, one being a high end "pro" model, and the other a low end "Budget" model. What if these rumors were not about two phones, and were rather about one "Screamer" budget iPhone. I know what people would think "Are you crazy? Why would a company do this? They will be losing money on every sale!" Let me explain: This business model is all too familiar in many companies and fields. Let's look at the gaming industry for example. Xbitlabs says, "With the PlayStation 3, you are getting the performance of a supercomputer at the price of an entry-level PC. And also, "The analyst firm claims that its preliminary estimates the combined materials and manufacturing costs of the PlayStation 3 is $805.85 for the model equipped with a 20GB hard disk drive (HDD), and $840.35 for the 60GB HDD version. The estimates do not include additional costs for elements including the controller, cables, packaging, freight as well as profit for resellers, such as BestBuy.." But why would Sony want to lose $300 on every system sold? The answer lies in the software. "It is ordinary for game console makers to lose money on hardware, and make up for the loss via video game-title sales." http://www.xbitlabs.com/news/multimedia/display/20061117130000.html But how does this apply to the iPhone? Two words, "App Store." Just like sony, they could risk putting more power into the iPhone and lose money by making it affordable, only to turn around and make more than enough to make up for money lost, in the app store. As you may know, Apple gets 30% of all the sales sold though the App store. And that 30% of sales can more than make up for the money lost from hardware. By lowering the cost of the product, they will sell more phones. With more phones, there will be many more people that have access to the app store, of which they can purchase software. However, this all comes at a risk. Will the App store be as big of a hit as hoped? This is where the PS3 has failed. While the hardware was high class, it's games were poorly implemented. Is apple going to take this risk? iFund? What is to come down the road?