This is going to sounds like a stupid question, but I am not a financial wizard. If the regular retail price of these smartphones are 600+ dollars, and you're getting it for the $200 price with the 2 year contract, I'm just curious as to who profits. Here's what I know: The carriers want to lock you into that 2 year contract. I get that. For most of us, 2 years on an iphone is at least $2400. So, there's the profit for them... So, I guess what I'm asking is - do the cell carriers (sprint, verizon, att) pay 600+ to apple for each unit and eat that $400 difference (because the contract is more important/lucrative to them)? If this is the case, then I can see apple making a profit, given that it doesn't actually cost $600 to produce each unit. Does anyone know exactly how this works?