I bought my iPhone 5 and iPad 4 at Verizon using their time pay option. With this option I was able to buy new devices and spread the cost over 12 months. I hear T-Mobile and AT&T are doing something similar. Would this still be considered a subsidy? If not, then it appears that the popularity of subsidies may subside.
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I think Apple iPhone is in serious trouble if US carriers end subsidies
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I think, the main thing is to mask the price, or at least make figuring it out akin to trying to peer through a murky pool.
So long as they can assure a consumer, "don't worry about the cost, it's only $30 per month with 0% financing." Enough will go for the deal, as they always have in all other purchases, where the short term fallout should be minimal.
Over the longer term, I'm not sure. Since over time, consumers tend to become more savvy.
Apple did try to sell iPhone 2007 8gb for $599. That didn't go too well. They had to lower the price to $399 in 2.5 months by Sept 2007.
Can we fast forward to 2013? The wireless landscape is completely different than 2007, 7 years ago.
Interesting. In NZ, our contract plans are $20 per month more the the Open plans. We have subsidies, but to get a really low up front you need to go onto a higher plan, that is often more minutes and data and thus cost than you need. My Telco, and also the one I work for now does 12 or 24 months interest free, which allows:
No upfront, no contract, choose the plan you want. These have to be on account, but we have some very good low cost prepay plans, that can actually go on account, so they qualify as well.
The google play edition HTC One, galaxy S4 at around $599/649. No subsides. How are they doing?
Maybe apple will be fine at its $650-750-850 price point with month interest free installments by the carriers.
Apple is doing just fine with iPad sales with no subsidies.
Who knows how this will end.
Its not a subsidy, although the telco will bear a cost as its interest free. And while I assume that option in the US is not on contract, the customer will tend to stay, as if they change providers, they need to pay the phone off then.
BTW, how easy is it in the US to change providers. In NZ we have three, Telecom NZ, Vodafone, 2Degrees. To change, it takes about 15 minutes, keep same number
I have no clue, nor do I think I care that much about how the s4 is doing. How many phones do you think apple has sold a full price?
We don't know how many iPhones Apple has sold at full price. All we know is the average selling price is $637 per apple's lastest earnings.
The subsidy model is extremely tricky. Apple probably does not discount much to the carriers in bulk.
But a Samsung MSRP of over $550-600. From Sprint CEO's remarks a couple of years ago. The iPhone is subsidized 40% more than any other phone. One does not have to be a rocket scientist to deduce that Sprint or the other carriers are paying any where close to MSRP for non iPhones. Judging from those remarks. A $199 galaxy phone subsidized vs a $199 iPhone subsidized. It's fairly obviously carriers are subsidizing iPhones more than any other phones.
Well then if this was 2007 I suppose they'd be in a real pickle, wouldn't they?
We won't know in the near future. Cell phone contracts are 2 years. Until most are flushed out. It will be hard to predict.
But apple has already acknowledge sales of iPhone 5S/5c were affected last quarter and mentioned changing carrier subsidies as a factor.
Look apple will announce "blockbuster" iPhone sales in Q1 2014 as well. It's cause it finally launched on china mobile. With it's 750 million subscribers. Even if 1% of the subs buy the iPhone. That's over 7.5 million iPhones being sold.
But read into apples next earnings about the USA market. They are very subtle and investors can read in between the lines.
Yep. In NZ we can buy on interest free, no contract, better plans on open term, great option. I feel that Apple is moving past the restrictions that the great SJ had in place, they worked for the birth of the modern smartphone, but not now. Bigger screen soon, Apple TV with more functionality, iPad Pro???, iWatch. The board has spoken last year, I can see a big Apple push happening
Yes, my post was for non-contract purchases. It's just as easy to switch providers here. I've gone from T-Mobile to Sprint to Verizon and none of those jumps took longer than a half hour. I haven't tried AT&T, mainly because I'm quite happy with Verizon, but I wouldn't think it's more difficult - making things too difficult would drive customers to look elsewhere I would think.
The 5s sold WAY better than Apple expected, and the 5c worse. And the 5s topped smartphone sales for months on end. So... okay?
The point is that the iPhone is not in some weird unique position vis a vis sales in a no-subsidy market. Its off-contract price is roughly in the middle of the pack for ALL high end smartphones that aren't the Nexus 5 and it's been selling better than any other phone on the market just like it has for the past few years.
If carriers end subsidies, y'know what's gonna happen? Apple will drop the price to around $500 or so because now there's no issue with the telcoms and the world will keep on turning with no problems. Same thing Samsung, HTC, Motorola, and LG will do.
2 questions:
1) What is the difference between carrier subsidy and carrier financing? I assume that in both cases ATT carries the inventory. So how are they losing on a subsidy but financing benefits them? According to your math, they're losing money on the financing, and they only make it back up if they get x more customers than they would have w/ contract plans.
2) Where are the new price plans for ATT? I only see the new family share plans.
And not a reply to you but to the original post, Google is not going to drive the price of iPhones down. Apple would not cut their margins by 75%. Google and Xiaomi are not making money off their hardware, it comes from their services and users on their platform. You would probably see OEMs exit the market if there is no profit to be had, which would be awful b/c development would stall.
Exactly, it seems wireless plans without subsides are cheaper and there is a certain type of momentum for wireless companies to now be in the leasing business.
1) the biggest difference is with a subsidy your monthly payment stayed the same after 2 years. The carriers made out better. They have to change their model b.c people are jumping ship to tmobile/prepaid.
2) they still do shared plans it is just more data at a lower price. I don't think they have stopped subsidized yet. They have the next program, which is similar to financing but still more expensive.
for a subsidy at&t sends a check to apple or samsung for each phone sold. with the new plans its done by a financing company
it frees up a lot of cash for the carriers to upgrade their network instead of sending it to the phone manufacturer
With a 0% loan AT&T still has to be "the finance company" something for managing these accounts. So it still seems like there has to be an expense for AT&T for these phones.
This is a very small sample size, but over dinner last night, I just casually asked some friends if they would be willing to pay full retail price for the new iPhone 6 at $650.
While all were hesitant and agree the price seemed exorbitant, to a tee, each one stipulated they would pay the premium. The usual reasons were they felt Apple is a superior product, better end user experience with hardware and OS integration, and ecosystem.
I posed a question if any were willing to change to Android for a comparable phone at half the price. None were willing, and offered a pretty compelling reason as to why; namely, if there were product in which they'd pay a premium for, it's a smartphone, since we use it daily with it becoming an integral part of our everyday professional and personal lives.
As I've said, small sample size, but nonetheless I was surprised each were so willing to pay more, even when I explained the price is way higher than is necessary.
Finally, amazingly enough, each loved the 0% financing, and observed that made the price acceptable. At that point, I was kind of surprised.
While all were hesitant and agree the price seemed exorbitant, to a tee, each one stipulated they would pay the premium. The usual reasons were they felt Apple is a superior product, better end user experience with hardware and OS integration, and ecosystem.
I posed a question if any were willing to change to Android for a comparable phone at half the price. None were willing, and offered a pretty compelling reason as to why; namely, if there were product in which they'd pay a premium for, it's a smartphone, since we use it daily with it becoming an integral part of our everyday professional and personal lives.
As I've said, small sample size, but nonetheless I was surprised each were so willing to pay more, even when I explained the price is way higher than is necessary.
Finally, amazingly enough, each loved the 0% financing, and observed that made the price acceptable. At that point, I was kind of surprised.