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Does the new iPod touch confirm that iPhone contracts are a rip-off?

sineplex said:
I can list at least 20 significant differences.
Click to expand...

Don't be shy, now. Of course there are differences, but 20? At least 20? And all "significant" ones?

OP: It's not the carriers' faults. Apple prices the iPhone at a $370 premium over the iPod touch and it's their job to recover it if they're going to offer it for $200 or so. The differences I see are:

GPS
$2

Cellular radio
$25

Better rear camera
I estimate $10 difference based on Touch camera costing $10

Earpieces/speaker
No known $ but let's be safe and say $10

The wall adapter
Less than $5, which is how much the whole box+all accessories cost

8GB more memory
I estimate $15 based on 16GB costing Apple $27

Compass
$1

All numbers from iSuppli

That's $68 in parts. Does anyone think that testing/approval/labor for these 7 things costs Apple anywhere near $300, half the cost of the device?

Give me a break. Obviously Apple has the right to set their own prices and it's working out pretty well for them (hell, I bought one) but you've gotta be pretty darn naive to think the iPhone 4 is priced in reasonable proportion to the iPod touch, especially when you factor in that the iPod touch is 25% thinner than the iPhone.

Of course APple's not alone in this, all smartphones are overpriced which I guess is to be expected for a luxury like a smartphone.
 
Wow, this thread is going nowhere fast. I really feel like most of you didn't understand the OP's question. The simple fact is that there's no real answer to it.

The plain truth is that Apple charges roughly $400 more for an iPhone than an iPod Touch. The extra parts in an iPhone cost far, far less than that.

The OP is simply asking why that is.

I say there's no "real" answer because it's not like there's some secret $350 part in there. The answer is simply "because they can." They do it because lots of people want iPhones so they can charge that much for them. That's capitalism and I doubt the OP considers that a "reason" like he was looking for, but that's the only answer I can give.

That's pretty much all there is to it.

(The real thing to take away here, OP, is that this is Apple's choice, not the carrier's. Apple is the one charging that much. The carrier is not ripping you off like you thought. They DO have to recover that cost just like they say they do. So your thread-title is wrong.)
 
Small White Car said:
Wow, this thread is going nowhere fast. I really feel like most of you didn't understand the OP's question. The simple fact is that there's no real answer to it.

The plain truth is that Apple charges roughly $400 more for an iPhone than an iPod Touch. The extra parts in an iPhone cost far, far less than that.

The OP is simply asking why that is.

I say there's no "real" answer because it's not like there's some secret $350 part in there. The answer is simply "because they can." They do it because lots of people want iPhones so they can charge that much for them. That's capitalism and I doubt the OP considers that a "reason" like he was looking for, but that's the only answer I can give.

That's pretty much all there is to it.
Click to expand...

Exactly. The OP wasn't saying that the monthly bill was a rip off, but everyone in this tread is saying how they are willing to pay for the data and phone part of the iPhone.

The simple fact is that Apple has a huge markup on the iPhone compared to the iPod touch. Apple could lower their profit margins a little bit and ATT can maintain the same subsidy and the iPhone can be brought down to $175 or even $150 on a 2 year contract. However, it's a simply game of supply and demand. Apple clearly utilizes many financial models to determine the optimal pricing, which they found to be $199 and $299.

Sure, not everyone can afford an iPhone or wants to deal with the contract, but their model must be doing best for them.

Personally, I think a $25 cut in iPhone prices could bring demand up quite a bit, which apple should be able to sustain a few months after the product launch. $175 will break through a huge psychological barrier for many. But, Apple is a company of profit margins, and not necessarily total profits.
 
Small White Car said:
Wow, this thread is going nowhere fast. I really feel like most of you didn't understand the OP's question. The simple fact is that there's no real answer to it.

The plain truth is that Apple charges roughly $400 more for an iPhone than an iPod Touch. The extra parts in an iPhone cost far, far less than that.

The OP is simply asking why that is.

I say there's no "real" answer because it's not like there's some secret $350 part in there. The answer is simply "because they can." They do it because lots of people want iPhones so they can charge that much for them. That's capitalism and I doubt the OP considers that a "reason" like he was looking for, but that's the only answer I can give.

That's pretty much all there is to it.

(The real thing to take away here, OP, is that this is Apple's choice, not the carrier's. Apple is the one charging that much. The carrier is not ripping you off like you thought. They DO have to recover that cost just like they say they do. So your thread-title is wrong.)
Click to expand...

Good post. Nice job saving the thread.
 
The R&D cost of the iPhone is likely significantly higher than that of the iPod touch, as more testing has to go into ensuring that the phone meets federal regulations and can successfully and safely transmit data/make calls. Let's not also forget all the licensing and FCC approval costs the iPhone has to undergo because it is also a phone, not just a media player. The iPod touch's development cost is likely very low as it heavily borrows from what is already known to have worked in the iPhone.
 
Small White Car said:
Wow, this thread is going nowhere fast. I really feel like most of you didn't understand the OP's question. The simple fact is that there's no real answer to it.

The plain truth is that Apple charges roughly $400 more for an iPhone than an iPod Touch. The extra parts in an iPhone cost far, far less than that.

The OP is simply asking why that is.

I say there's no "real" answer because it's not like there's some secret $350 part in there. The answer is simply "because they can." They do it because lots of people want iPhones so they can charge that much for them. That's capitalism and I doubt the OP considers that a "reason" like he was looking for, but that's the only answer I can give.

That's pretty much all there is to it.

(The real thing to take away here, OP, is that this is Apple's choice, not the carrier's. Apple is the one charging that much. The carrier is not ripping you off like you thought. They DO have to recover that cost just like they say they do.)
Click to expand...

all manufactured devices are overpriced...it's the nature of capitalism and business in general...however the long term usefulness of these overpriced parts is what you're paying for...and as many have said the ability to not be tethered to a wifi hot spot is what you're paying for with an iPhone vs. iPod Touch...NO, everyone understands what the OP is asking...it's a simple answer "profits" not the most magnanimous answer but the simple truth...why doesn't the OP start a company that sells celluar hardware at wholesale prices and report back on his successes and failures? maybe the OP meant this as some sort of rhetorical question?
 
some of you have a limited understanding of capitalism and the most basic of business models....

"Apple could lower their profit margins a little bit..."

how would this benifit Apple?....the idea is to make money
 
SAD*FACED*CLOWN said:
some of you have a limited understanding of capitalism and the most basic of business models....

"Apple could lower their profit margins a little bit..."

how would this benifit Apple?....the idea is to make money
Click to expand...

Because profit margins doesn't always mean highest profits.

Two scenarios:

1) I could sell 1 unit (maximum) of my product for $100 with a $50 total cost to my business. Profit = $50. Profit margin per unit: 50%

2) I could sell 2 units of my product for $160 ($80 each) with a $100 total cost ($50 each) to my business. Profit = $60. Profit margin per unit: 37.5%

Pretend that the number of units represents demand. If apple lowered their profit margins (which they have done on some of their products within the past few years), they can raise their demand to make more total profit.

However, there is a delicate balance between the 2 and a lot of modeling is required to find this balance.

EDIT: This is how it would help Apple. However, I'm sure they have done their research and found their pricing to the best for them as a company. However, as I said, Apple likes their profit margins and dedicated group of apple consumers.

But here's a link for you to learn a little about profit maximization:
http://en.wikipedia.org/wiki/Profit_maximization
 
Small White Car said:
Wow, this thread is going nowhere fast. I really feel like most of you didn't understand the OP's question. The simple fact is that there's no real answer to it.

The plain truth is that Apple charges roughly $400 more for an iPhone than an iPod Touch. The extra parts in an iPhone cost far, far less than that.

The OP is simply asking why that is.

I say there's no "real" answer because it's not like there's some secret $350 part in there. The answer is simply "because they can." They do it because lots of people want iPhones so they can charge that much for them. That's capitalism and I doubt the OP considers that a "reason" like he was looking for, but that's the only answer I can give.

That's pretty much all there is to it.

(The real thing to take away here, OP, is that this is Apple's choice, not the carrier's. Apple is the one charging that much. The carrier is not ripping you off like you thought. They DO have to recover that cost just like they say they do. So your thread-title is wrong.)
Click to expand...

There is a real answer, but it's 'soft' proof, and most everyone nowadays thinks this type of proof should be free....

It's the costs for GSM R&D for a new phone (and all that goes along with it, engineers, testing, design, re-design, etc. etc.), as well as FCC approval (and all it's costs). Please don't tell me these costs don't exist, and that they should be free. I worked for a cell phone manufacturer in a previous working life for 4 years, and the design and R&D is not an inexpensive piece of bringing a phone to market. I've been 'on the inside' of all those cool images of a testing facility that Apple put out for their R&D center (except is was for the other manufacturer, someone we all see mentioned here nowadays).

If anything, I think it's the iPod Touch that's over priced. 90% of it lately is an iPhone without the GSM technology. The engineering design and R&D of the iPod Touch was mostly making some layout changes to make it thinner (more design $) and accept a new circuit board (more design $)....the rest of the supporting circuitry and software R&D was taken care of by the original R&D of the iPhone, as it's got the iPod features.

But, bottom line of it is exactly what you mentioned SWC (and comes full circle), it's what the capitalistic society will pay for it, so that Apple can make a profit. Which, in my opinion, is quite alright. I love the iPhone (have had all models) and Santa loves to give away the iPod touches to those who don't yet need a phone feature. :D
 
WilliamG said:
You need to remember that most of the world doesn't live in America, too...
Click to expand...

Sorry, but for the context of this thread, almost everyone was talking about AT&T and US dollars. I realize that some carriers in Europe (and Canada) will outright sell you an iPhone with no subsidy, while others will do a 1-year contract. For the longest time, Europe made the American carriers look like a joke as far as pricing and phone selection. For the sake of this thread and the iPhone, AT&T is one of the biggest carriers of the iPhone and usually is the first to get any new model.

Therefore, if we're talking about a "home" market for the iPhone, I think logically, the US would be the way to go. Similarly, most European markets would make sense for companies like Nokia or Sony Ericsson.

Plus, if you want to complain about your local phone provider picking up a 2-year contract idea with the iPhone, well, you can probably blame AT&T.
 
WilliamG said:
Thank you for the useful response.

I hope we see 3-year iPhone contracts in 2011. :rolleyes:

Next you'll be saying that the extra $20 a month for tethering is a bargain. ;)
Click to expand...

You were asking contract but nothing about $20 tether data plan, don't change the subject. If you don't want contract change to Go phone plan. You want $199 iPhone plus free call with Att? Get real!!!
 
dojoman said:
You were asking contract but nothing about $20 tether data plan, don't change the subject. If you don't want contract change to Go phone plan. You want $199 iPhone plus free call with Att? Get real!!!
Click to expand...

I think your missing my point entirely....
 
ecschwarz said:
It has been at least 3+ years (before the iPhone), but I seem to recall the 2-year-contract model going back to the AT&T Wireless (pre-Cingular) and VoiceStream (pre-T-Mobile) days: http://www.nytimes.com/2007/03/10/technology/10money.html
Click to expand...

Exactly. I've been a customer of AT&T and any company they were prior to since the days of Pac Bell Wireless. I honestly cannot recall a time where Cingular required less than 2 years as standard ... ergo, not all that recent.
 
jessica. said:
Exactly. I've been a customer of AT&T and any company they were prior to since the days of Pac Bell Wireless. I honestly cannot recall a time where Cingular required less than 2 years as standard ... ergo, not all that recent.
Click to expand...

I second that. I have been an Cingular/AT&T Wireless customer in some form or fashion since I was 16 (I'm 25 now) and they have always had 2-year contracts. The only cell phone company I've ever known to have one-year contracts was VoiceStream before they became T-mobile.
 
WilliamG said:
This is not a bashing thread, so please be civil!

With the new iPod touch available this week, you get 8GB for $229, 32GB for $299, or 64GB for $399, in a VERY thin package.

With the iPhone 4, we get 16GB for $199 or 32GB for $299.

Now, the differences between the iPhone 4 and the iPod touch are:

1.) Better rear-facing camera on the iPhone 4.
2.) GPS on the iPhone 4
3.) Phone on the iPhone 4 (3G chip etc etc)
4.) Speaker-phone and earpiece on the iPhone 4.

Is there anything else?

That doesn't look like all that much to me, yet we're made to pay for a 2-year contract with our iPhone 4s because they are "subsidized."

I know not much has changed over the last few years and that the iPod touch has for the most part always been an iPhone without the phone, but this year it seems even more so that this is the truth.

There's more to it - of course. The iPhone had a lot more R&D I'm sure, with regard to the stainless steel band, the screen tech, the uh... antenna placement, but still, it feels like we're still getting ripped off with 2-year contracts.

A 1-year contract I can understand. But 2 years? Really?

Any thoughts, people?
Click to expand...

Based on your numbers, your question makes no sense. The iTouch 32GB is a ripoff compared to the iphone 32gb.
 
If you don't like it you don't have to get a subsidized iPhone, hell you don't even have to get one at all. And if you want to you can buy one for 600-1200$ unsubsidized. Just think about that when you d*mn AT&T's contract, keep in mind the paid for 66% of your phone.
 
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