Gruber is tripling down on his price predictions

[cleirac]

Actually, if you read his September post more closely, he did say $9999 was his barroom bet. He threw $5000 as his low-end estimate and suddenly that became "Gruber predicts the Edition will sell for $5,000." The $20K is for a mythical Edition with a gold link band. Maybe some day, but not tomorrow.

But there is big a difference with the starting price at $5,000 vs. to cost at least $10k latest guess, from what I am getting here in this forum. And his detailed price listing looks ridiculous. I can hear the heavy sighs even from diehard Apple fans already. He has the right to change his mind / opinion but I am not impress with his style - him being a "famous blogger".

 

[KPOM]

To be honest, as I've said, I'm really hoping you and Gruber are right. I want the SS to be so clearly much more expensive than the Sport that I have a really easy decision to make. If it's only a couple of hundred dollars more (all in) that's much tougher for me. It's "only" a bit more and it's "so much prettier" . . .

And that's why I think you and Gruber are wrong. I think Apple want me to struggle and push myself to pay that little bit more. I don't think they want the decision to be easy for me. If they make the decision easy it's because I'm buying the cheaper one.

Here is my plan. If for some miraculous reason Marco Arment, et. al are right and the Edition is less than $6,000 I'm getting the rose gold model sight unseen, and adding a black classic band to match (stainless steel trim "mixes" well with rose gold). If it is $10,000 like I think it will be, I'll get the space black stainless steel link band. Those are the two combinations that work best with my complexion and personal style.

 

[KenAFSPC]

Repost:

One factor Gruber and others have largely ignored in speculating about Apple Watch pricing is the quality of the ecosystem. The Apple ecosystem, as much as anything else, drives device sales. Many people buy iPhones not because they have a special affinity for Apple, but because they want the Apple ecosystem, namely all of the IOS applications and services.

Apple has the best ecosystem in large part because it is the device platform that provides third party developers the greatest opportunity to make money, directly (via app purchases or advertising) or indirectly (by enhancing the appeal of other revenue-generating products/services).

Advertising opportunities on the Apple Watch's small screen are limited, which removes a major revenue source for application developers. That leaves developers with having to make money through direct application purchases (perhaps 95% of developers) or by enhancing the appeal of other revenue-generating services (perhaps 5% of developers).

Without sufficient demand for Watch applications, which requires a large number of Watch users, few developers will create applications for the Watch and the Watch ecosystem -- which is needed to drive future sales -- will not flourish. This is a chicken-and-the-egg type situation, but it is in Apple's best interest to adopt a pricing strategy that pushes volume sales with modest margins, rather than more limited sales with very large margins. The former pricing strategy nets a large base of customers for third-party applications, whereas the latter strategy does not.

 

[KPOM]

But there is big a difference with the starting price at $5,000 than to cost at least $10k latest guess, from what I am getting here in this forum. He has the right to change his mind / opinion but I am not impress with his style - him being a "famous blogger".

What he said is that he thought it would be $10,000, but could see Apple selling it for $5,000. What he is saying now is that he can't see Apple selling it for $5,000.

----------

Repost:

But that's what the $349 model is for. If they sell lots of them, then there will be apps for it.

 

[cambookpro]

They also suck at their primary function, which is to tell the time accurately. I fell out of love with them when I missed a train because of one.

...

My primary motivation for buying an Apple Watch is that it will keep perfect time.

Casio Wave Ceptor. £80-200ish. Keeps perfect time, down to each leap second

I've had two over the past ten years or so and they're brilliant. If I replace it, it would only be with one that tells the time as accurately (which, luckily, the Apple Watch does).

 

[KenAFSPC]

What he said is that he thought it would be $10,000, but could see Apple selling it for $5,000. What he is saying now is that he can't see Apple selling it for $5,000.

----------



But that's what the $349 model is for. If they sell lots of them, then there will be apps for it.

The $349 version is all well and good for high schoolers and college kids, but I submit that it is not "dressy enough" for many/most business environments. To sell in any volume, the product must have a price point that appeals to working professionals (i.e., those who actually have money to buy a watch).

 

[cleirac]

What he said is that he thought it would be $10,000, but could see Apple selling it for $5,000. What he is saying now is that he can't see Apple selling it for $5,000.

----------



But that's what the $349 model is for. If they sell lots of them, then there will be apps for it.

Okay, now that makes more sense, thanks KPOM. *I will only read his blog if he is correct on this but I do not want him to be accurate with his predictions lol*

 

[KPOM]

The $349 version is all well and good for high schoolers and college kids, but I submit that it is not "dressy enough" for many/most business environments. To sell in any volume, the product must have a price point that appeals to working professionals (i.e., those who actually have money to buy a watch).

Those that do likely have $700-$1000 for a nicer stainless steel version. This isn't going to be an annual purchase.

Let's get one thing straight. Would I like to be wrong tomorrow and have the Apple Watch be a lot less expensive than I think it will be? As a consumer, sure. But I think we need to compare the stainless steel and Edition to other watches, and not the Sport.

 

[lucas123]

Throwing in my guess.

Apple watch - stainless. 38mm. No band. $349

Sport will be less.

Edition base model will not top $1000.

 

[JayLenochiniMac]

Definitely in pink and brown it is more feminine. In blue I can see some men pulling it off. What I like about it is that it should wear more evenly than a classic band, since the two bands contact over a larger area. Traditional bands tend to wear out right at the point where the pin and buckle meet. This is true even on "good" bands.

Possibly, depending on how feminine this clasp looks in person. The fact that it's available only in 38mm and Gruber's claim that it's a feminine strap would make me severely second guess getting that sight unseen if I were a guy interested in 38mm. Fortunately, I'm getting the 42mm so that makes my decision easy.

 

[Cashmonee]

But I think we need to compare the stainless steel and Edition to other watches, and not the Sport.

I still think this is a bad play for Apple. I cannot see them stacking up well to actual luxury watches. I don't think it is the right market. Of course, I am a schmuck and Apple is one of the most profitable companies in history, so I am prepared to be wrong. I just don't see "Rolex Guy" buying a $10,000 gadget designed to be worn everyday, and not in a rotation.

 

[KPOM]

I still think this is a bad play for Apple. I cannot see them stacking up well to actual luxury watches. I don't think it is the right market. Of course, I am a schmuck and Apple is one of the most profitable companies in history, so I am prepared to be wrong. I just don't see "Rolex Guy" buying a $10,000 gadget designed to be worn everyday, and not in a rotation.

It's not "Rolex Guy" (who likely is getting something higher end, anyway). It's the people who are currently spending $14,000-$15,000 at Burberry on 18kt gold watches.

 

[Cashmonee]

It's not "Rolex Guy" (who likely is getting something higher end, anyway). It's the people who are currently spending $14,000-$15,000 at Burberry on 18kt gold watches.

Ok, even then, those people are not buying one watch to wear everyday. The Watch is only successful if people are using it as their only watch. It doesn't really make sense to wear it a few times a week or less.

I think Apple would be wise to price it at $349/$499/$999 and not talk about anyone else. Just say this is the Watch, and it is in a class of its own. Comparing it to high-end watches or smartwatches doesn't help it.

 

[Rogifan]

I don't agree with Gruber's updated post on storage. All things being equal yes, Apple uses storage for the upsell. But all things aren't equal with Watch. And someone buying the Sport watch would probably be more likely to store more music on it than someone buying the Edition watch. My guess is Apple will not get complicated with this and every device will have 8GB storage.

----------

Those that do likely have $700-$1000 for a nicer stainless steel version. This isn't going to be an annual purchase.

Let's get one thing straight. Would I like to be wrong tomorrow and have the Apple Watch be a lot less expensive than I think it will be? As a consumer, sure. But I think we need to compare the stainless steel and Edition to other watches, and not the Sport.

Do Tag and Tissot sell $349 watches? How many watch brands go from $349 to possibly $20K?

 

[bsforever]

IF Gruber's prices are right regarding the Watch Sport and Watch models (~$1000 for the latter), then I'm sorry but the Watch could be headed for a backlash (or at least not as blockbuster an uptake) and this ties in with the New Yorker Ive profile about the pushback he received within Apple regarding positioning these devices for the uber-wealthy or not so wealthy. Really a stainless steel Apple watch, which I assume to be the standard midrange model, costing 1k just breaks that $500 psychological barrier.

The trick with Apple so far has been that they've been able to avoid these kinds of missteps, premium enough but not so expensive that it turns off your core customer base. But the more I think of the article, and how it made clear that this was Jony Ive's pet project plus there was an instructive comment in there about how 'he's always been a bit bling', and Jony's taste for luxury automobiles, the more I get uneasy about this Watch. It could be a punt too far.

As for the Watch Edition, I think the market and price bracket it seems to be aiming for are generally of no import/consequence to the rank and file Apple customer.

In short no way will I and many Apple fans I know spend Macbook Pro territory money on a watch.

 

[Rogifan]

IF Gruber's prices are right regarding the Watch Sport and Watch models (~$1000 for the latter), then I'm sorry but the Watch could be headed for a backlash (or at least not as blockbuster an uptake) and this ties in with the New Yorker Ive profile about the pushback he received within Apple regarding positioning these devices for the uber-wealthy or not so wealthy. Really a stainless steel Apple watch, which I assume to be the standard midrange model, costing 1k just breaks that $500 psychological barrier.

The trick with Apple so far has been that they've been able to avoid these kinds of missteps, premium enough but not so expensive that it turns off your core customer base. But the more I think of the article, and how it made clear that this was Jony Ive's pet project plus there was an instructive comment in there about how 'he's always been a bit bling', and Jony's taste for luxury automobiles, the more I get uneasy about this Watch. It could be a punt too far.

As for the Watch Edition, I think the market and price bracket it seems to be aiming for are generally of no import/consequence to the rank and file Apple customer.

In short no way will I and many Apple fans I know spend Macbook Pro territory money on a watch.

Maybe but if this is the case then it was up to Tim Cook to step in and say no. Tim Cook is CEO he should have the final say in any decisions.

 

[bsforever]

Maybe but if this is the case then it was up to Tim Cook to step in and say no. Tim Cook is CEO he should have the final say in any decisions.

Yes, but isn't Jony operationally the most powerful and best remunerated Apple employee - at least when/how Steve set it up. Basically the power behind the throne and currently playing the Steve role.

I'm just uneasy with one man being left unchecked, it was cool to have Steve around to balance things out. Hopefully we'll find out tomorrow that they haven't lost their marbles,

 

[odds]

Case material and sapphire is often the main distinguishing features between a $250 and $1000 watch.

I bought two Citizen Eco-Drive watches with nice stainless steel cases, sapphire displays, and high quality solar-powered movements. Guess how much they were? $249 each. I sold both of them in preparation for the Apple Watch.

 

[Rogifan]

Yes, but isn't Jony operationally the most powerful and best remunerated Apple employee - at least when/how Steve set it up. Basically the power behind the throne and currently playing the Steve role.

I'm just uneasy with one man being left unchecked, it was cool to have Steve around to balance things out. Hopefully we'll find out tomorrow that they haven't lost their marbles,

We don't know that one man is left unchecked. I have a very hard time believing if every other senior executive at Apple was against this that Tim Cook would have moved forward with it. Doesn't matter how Steve set it up he's no longer here and Tim Cook is running the show.

 

[douglasf13]

I bought two Citizen Eco-Drive watches with nice stainless steel cases, sapphire displays, and high quality solar-powered movements. Guess how much they were? $249 each. I sold both of them in preparation for the Apple Watch.

Seiko and Citizen tend to punch above their weight, but I was referring more to standard automatic watches. As brilliant as Eco-drive is, it doesn't have much of a horological following.

 

[Night Spring]

Basically, leaving out the people who will buy the Edition, there are three groups.

1. People who will buy the Sports no matter what the SS costs.
2. People who will buy the SS if it's below a certain price level. If it is above that, they will buy the Sport, or nothing at all.
3. People who will buy the SS, no matter what the cost.

The question is, how many people are in group 2, and what are their cutoff price points?

So let's say, out of a 1000 people, a 100 are in group 1, a 100 in group 3, and 800 in group 2. Let's say for all the people in group 2, the cutoff point was $500.

In this scenario, if Apple prices the SS at $600, they sell 900 Sports, and 100 SS.

If they price the SS at $500, they sell 100 Sport, and 900 SS.

Now, let's assume that for every Sport sold, Apple makes $100 profit.

For every SS sold at $500, the profit is $150. When sold at $600, the profit is $250.

So....

(100 Sports x $100 profit) + (900 SS x $150 profit) = $145,000
(900 Sports x $100 profit) + (100 SS x $250 profit) = $115,000

Hmmmmm.... By pricing the SS higher, Apple is leaving some money on the table, but not as much as I thought. Someone please check my math, I'm not too good with numbers.

I suppose you can make up a spreadsheet and plug in the numbers and play around with various percentages and price points and see what happens.

 

[Rogifan]

I suppose you can make up a spreadsheet and plug in the numbers and play around with various percentages and price points and see what happens.

Which I'm sure Apple marketing has been doing for some time now.

 

[profmjh]

Basically, leaving out the people who will buy the Edition, there are three groups.

1. People who will buy the Sports no matter what the SS costs.
2. People who will buy the SS if it's below a certain price level. If it is above that, they will buy the Sport, or nothing at all.
3. People who will buy the SS, no matter what the cost.

The question is, how many people are in group 2, and what are their cutoff price points?

So let's say, out of a 1000 people, a 100 are in group 1, a 100 in group 3, and 800 in group 2. Let's say for all the people in group 2, the cutoff point was $500.

In this scenario, if Apple prices the SS at $600, they sell 900 Sports, and 100 SS.

If they price the SS at $500, they sell 100 Sport, and 900 SS.

Now, let's assume that for every Sport sold, Apple makes $100 profit.

For every SS sold at $500, the profit is $150. When sold at $600, the profit is $250.

So....

(100 Sports x $100 profit) + (900 SS x $150 profit) = $145,000
(900 Sports x $100 profit) + (100 SS x $250 profit) = $115,000

Hmmmmm.... By pricing the SS higher, Apple is leaving some money on the table, but not as much as I thought. Someone please check my math, I'm not too good with numbers.

I suppose you can make up a spreadsheet and plug in the numbers and play around with various percentages and price points and see what happens.

Very interesting.

You missed out:

4. People who will buy the Edition. I don't think these people overlap the other groups at all.

I'm in Group 2. My price level is £600, which probably equates to $799.

 

[Night Spring]

Very interesting.

You missed out:

4. People who will buy the Edition. I don't think these people overlap the other groups at all.

I did say, leaving out people who buy the Edition...

I agree, those people are in a category unto themselves. I didn't want to confuse myself any further than I already was!

----------

Which I'm sure Apple marketing has been doing for some time now.

Yes, most certainly. I just got it into my head to try laying out some numbers myself, and maybe I'll get a better sense of their reasoning.

 

[Sodner]

I still think you CANNOT compare these Watches to "real" Swiss movement time pieces. I have a 30 year old Rolex that sells for 7x what I paid for it. Its still WORKS and is still sold -- looking just like the one I have. These watches are, excuse my wording, timeless. The Apple watch will be almost useless in 3 years. No way Apple can command the same prices as these watches. Sure we will pay for the materials; SS, sapphire, gold and leather, but not on par with these high end time pieces.