Details of iPhone Negotiations Between Apple and China Mobile Emerge

[kas23]

What a small minded perspective.

Would it surprise you to hear that of the 30 or so Apps on my iPhone, the only ones I share in common with you are Google, weather, and a camera app?

Do you see the point? You found 10 apps that you like out of 15000. I found 30 totally different ones. And someone else probably found 30 totally different from mine. It's not about getting YOU 100 apps, it's about having 10-20 that are great for everyone, no matter what that person needs.

Didn't you see the word "I" repeated several times throughout my post. I'm talking from my perspective, not yours. It's my opinion. With all due respect, please don't tell me you're suppose to know what I want. No need for the insults. I'm just saying that if the app store suddenly disappeared, I wouldn't really miss anything.

 

[kas23]

Ever heard of a company called Research in Motion? They've been doing that for years.

Interesting. I didn't know this. Do you mind posting a link so I can read about this?

 

[Theaser]

Interesting. I didn't know this. Do you mind posting a link so I can read about this?

The company that makes Blackberries?

 

[EDL]

Apple wants $600 in subsidies for the iPhone, and also sell apps at their store and make money? What does China Mobile get out of this? They're already in a dominant position in China (or at least the parts I've been to). I'm glad China Mobile isn't taking the deal.

Sure, Apple should give them the iPhone for free. Who manufactures the iPhone again, CM? Do you even know what a subsidy is? What do you think a smartphone actually costs?

People nowadays just have lost complete relation to the actual value of a smartphone, only because all the carriers are "giving" them away for cheap. Just because they are selling a phone for $200 doesn't mean that's what it costs. The carrier pays upfront the FULL cost (which is anywhere from $500 - $1000 depending on the smartphone) to the manufacturer. So do you think the carrier then sells you the phone for 200 bucks and eats the rest? Um, probably not. - You will pay for it with your monthly service bill over the length of your contract. Only once you're done paying, you're "eligible" to "upgrade" to another phone that they give you for low (a deposit, so to speak).

A subsidy is nothing more than a payment plan for you, offered by the carrier. The phone still costs $600 regardless of who's paying it.

Regarding the app-store, this is basically a non-profit business for Apple, as has been many times said before. Do you think running servers, watching and organizing content is free? This is what the 30% is mostly used for. Obviously, Apple will make a small profit out of it but guess what, Apple is a business and the main purpose of a business is to make profit...

What does CM get out of bringing the iPhone into their portfolio? Loyal paying customers, that pay way more than the iPhone cost and phone service over the lifetime of being their customer. CM should probably ask some other carriers what it has gotten them... I think the numbers speak for itself.

 

[Theaser]

Sure, Apple should give them the iPhone for free. Who manufactures the iPhone again, CM? Do you even know what a subsidy is? What do you think a smartphone actually costs?

People nowadays just have lost complete relation to the actual value of a smartphone, only because all the carriers are "giving" them away for cheap. Just because they are selling a phone for $200 doesn't mean that's what it costs. The carrier pays upfront the FULL cost (which is anywhere from $500 - $1000 depending on the smartphone) to the manufacturer. So do you think the carrier then sells you the phone for 200 bucks and eats the rest? Um, probably not. - You will pay for it with your monthly service bill over the length of your contract. Only once you're done paying, you're "eligible" to "upgrade" to another phone that they give you for low (a deposit, so to speak).

A subsidy is nothing more than a payment plan for you, offered by the carrier. The phone still costs $600 regardless of who's paying it.

Regarding the app-store, this is basically a non-profit business for Apple, as has been many times said before. Do you think running servers, watching and organizing content is free? This is what the 30% is mostly used for. Obviously, Apple will make a small profit out of it but guess what, Apple is a business and the main purpose of a business is to make profit...

What does CM get out of bringing the iPhone into their portfolio? Loyal paying customers, that pay way more than the iPhone cost and phone service over the lifetime of being their customer. CM should probably ask some other carriers what it has gotten them... I think the numbers speak for itself.

iPhone isn't made by China Mobile, it is made by Foxconn.

 

[seedster2]

Well call me Miss Cleo because I have repeatedly said Apple having difficulty applying their business model in the highly coveted Chinese market a long time ago

Apple has little leverage in this negotiation:

1. Iphone's are now unlockable and widely available
2. CM controls the majority of the market w/o the iphone
3. App store isn't so enticing when it still faces serious censorship in China
4. Wackadoo pricing for handsets that aren't luxurious/exotic

 

[G.I. Joe]

All the clones there aren't enough?

 

[cameronjpu]

The company that makes Blackberries?

I assume he meant he didn't know about the revenue sharing that RIM has with carriers. It's old news, and was posted 100 times when the news of Apple's agreement came out. Rather than ask for a link, I imagine typing RIMM Blackberry revenue sharing agreements into google would work wonders.

 

[slackpacker]

This is exactly why America is failing

DO NOT GIVE AWAY THE KEYS OF THE iPhone KINGDOM TO THEM!

They took our manufacturing jobs and gave nothing back. They will take Apps and never give back for that either.

 

[Theaser]

This is exactly why America is failing

DO NOT GIVE AWAY THE KEYS OF THE iPhone KINGDOM TO THEM!

They took our manufacturing jobs and gave nothing back. They will take Apps and never give back for that either.

They did give us products. Poorly manufactured iPhone 3Gs with cracks and light leaks.

 

[butterfly0fdoom]

Most of Apple's business is already with China. Who do you think makes all your Apple products. Certain not Americans.

Well, it may be the Chinese making Apple products, but it's in factories owned by Taiwanese companies. That's a slightly irrelevant point.

This is exactly why America is failing

Maybe Americas failing because of the people in charge of America. Stop projecting your blame on to others.

 

[entropys]

BTW, the government in China maybe officially communist, but its now a totalitarian government.

There's a difference?

Anyway, CM is doing just what other ISPs and carriers would do in a market dominant situation. They get ideas that they can control content and hence additional revenue. In this case their plan has the effect of reducing Apple's revenue. Now, businesses can negotiate these things all they like, but what I have a problem with is the providers of the pipe thinking they have a clue about providing content (and more importantly, they end up price gauging). The customer always ends up losing with higher prices and restricted content.

In Australia, CM's equivalent is Tel$tra. Has a fantastic network, but no one but businesses can afford it in any meaningful context when it comes to the sort of things you would use an iphone for (content).

 

[miggitymac]

There's a difference?

Theoretically, yes.

In reality, almost never.

 

[Ping Guo]

Saying negotiations have "broken down" is a very western way of looking at it. Long, protracted negotiations are the norm in China. To accept Apple's initial offerings would involve a big loss of face. As a matter of national pride, I don't think it would go over well if it looked like CM spread 'em for

Apple has entered one of the most competitive domestic markets anywhere in the world, and they will find that strong arm tactics and trying to throw their weight around will get them nowhere fast. I wish them well. CM will haggle the handset price down, but control of the app store might be the sticking point. Giving subscribers access to a store where the content is controlled by a foreign company won't sit well for a number of reasons. To get around it they'll have to develop a China-specific app store or some filtering system. Which probably isn't a bad idea anyway. It'll be interesting to see what sort of compromise is reached, if any.

In any case, the Chinese consumers rich enough to buy iPhones can already buy HK and US imported models all over Shanghai. Or they can buy theirs in HK like I did.

 

[Glideslope]

This is exactly why America is failing

DO NOT GIVE AWAY THE KEYS OF THE iPhone KINGDOM TO THEM!

They took our manufacturing jobs and gave nothing back. They will take Apps and never give back for that either.

YES, YES, YES!!!!!!! Off with their Heads I say!!!!!!!!!

 

[kdarling]

Regarding the app-store, this is basically a non-profit business for Apple, as has been many times said before. Do you think running servers, watching and organizing content is free?

They claim to be selling close to $1 million a day in apps. So their share is over a quarter million a day.

It doesn't cost that much. Not even close. Otherwise give ME the store to run

This is what the 30% is mostly used for. Obviously, Apple will make a small profit out of it but guess what, Apple is a business and the main purpose of a business is to make profit...

Which is it? For profit or not? Obviously it's hugely for profit. No, they don't take as much as smaller stores. They don't have to.

 

[matrix01]

China - no regard for software

Just in case anyone didn't notice - in Asia (excluding India) there is generally a low regard for software - the idea is, you buy a cheap piece of hardware and the software should come for free with it. Ever notice the burgeoning software industries exporting from China and Japan? Me neither.

It's just a different culture. The Chinese idea is that the innovation should come for free, and of course the software. Sell Apple phones for a couple years, then sell knockoffs. All fair, right?

It is also more normal over there to have many, many rounds of negotiations. Losing face is the worst thing possible - and leaving money on the table in a negotiation is losing face.

So the way it goes is, you make a firm, solid agreement, and then the Chinese say "just one little thing before we sign" - and they ask for all your profit for the next 50 years. Don't be offended by it - it's just the way it's done. When they're really convinced that there isn't a penny left in the negotiations, then you can start trying to collect on what they owe after the first sales. It' just another culture.

 

[GT500Shlby]

China is such a bag of hurt. Blu-Ray support on Mac's would be MUCH easier!

 

[SoGood]

Apple might as well sell it unlocked in their Apple Stores in China.

Actually, they virtually do. Large quantities of unlocked iPhones are being ferried across from Hong Kong and other popular destinations. And guess why Apple decided to sell unlocked iPhone 3G in HK at a time when they resisted everywhere else. They aren't stupid.

In any case, I am not taking sides on this one. It's simply two "for profit" companies battling it out squarely and fairly in an open market place.

 

[SoGood]

This is exactly why America is failing

DO NOT GIVE AWAY THE KEYS OF THE iPhone KINGDOM TO THEM!

They took our manufacturing jobs and gave nothing back. They will take Apps and never give back for that either.

Did you not know that it was China that's supporting the US economy through their purchase of US Govt Bonds? The fact that the US Govt (in particular during GW Bush/Chaney's reign) was ashamed to tell you doesn't mean it did not exist.

In any case, the US has screwed the rest of the world enough and this little bit of pay back can only be considered to be a small pay back.

 

[diamond.g]

Hmmm, the iPhone trounces the PSP in some areas. I can see it being disadvantaged due to a lack of buttons but some of the games available are fantastic and impossible to recreate on other platforms.

Not true.

Ever heard of a company called Research in Motion? They've been doing that for years.

AFAIK, the revenue sharing gets you push mail (from RIM). That would be something that Apple has you pay an extra 99USD a year for.

 

[cameronjpu]

AFAIK, the revenue sharing gets you push mail (from RIM). That would be something that Apple has you pay an extra 99USD a year for.

As far as you know?

There's been no indication EVER of what the revenue sharing gets you with RIMM. All we ever heard was that Apple was getting X percent revenue sharing from the networks, while RIMM was getting X-3 percent, or whatever.

There was never any suggestion that revenue sharing got anyone anything except a sweet phone to sell exclusively for some period of time.

 

[diamond.g]

As far as you know?

There's been no indication EVER of what the revenue sharing gets you with RIMM. All we ever heard was that Apple was getting X percent revenue sharing from the networks, while RIMM was getting X-3 percent, or whatever.

There was never any suggestion that revenue sharing got anyone anything except a sweet phone to sell exclusively for some period of time.

Well almost every Blackberry service that I have seen from US carriers offers push email to the device. So I would assume part of the 30USD you pay per month goes towards that service (which would in turn go back to RIMM).


Of course I could be wrong (wouldn't be the first time).

 

[cameronjpu]

Well almost every Blackberry service that I have seen from US carriers offers push email to the device. So I would assume part of the 30USD you pay per month goes towards that service (which would in turn go back to RIMM).

So what? Just because there is a service provided doesn't mean that that's where a monthly payment goes. BB gets a monthly payment from the provider because they have bargaining power over their phones. Apple has the same.

 

[joelypolly]

here is some logic for the thread

Here are some logical explanations as to why the negotiations have failed at this point.

1) Apple wants 600 in subsidies which is about 4200RMB, the typical mobile phone user in china spends about 50~100RMB a month on a prepaid plan. Data Plans here start at around 5RMB for 5MB up to 100RMB for 800MB. If we assume that China Mobile is willing to to have a unlimited plan for 100 RMB with 100 RMB for calls thats 200 RMB a month. This means it would take China Mobile 2 years before they get anything back from the iPhone.

2) 30% that Apple wants each month for doing nothing except bring the iPhone to China Mobile. To put things in perspective China Mobile has over 415 MILLION subscribers. Do they really care if Apple can bring them 5 million more or even 10 million more? Also there are only really 2 telcos in China.

3)iPhone has been available in as a grey market item since it release in 2007. Price has hovered between 4000~6000 RMB. Anyone that wants one can get one.

To all those raciest members of the forum: Why would you blame China when it is US companies that CHOOSE to move jobs to China.

To all those complaining about intellectual property: In Asia in general the culture doesn't believe you can really own an idea. (Very very common for singers in asia to perform a song written by others) However this the rise of capitalism this is probably going to change but slowly.

Also for interest there is a fake iPhone in China made by a company called GoldenApple and its called a hiPhone.