I agree completely. At last years WWDC, they made a very big deal about how the price of the original iPhone was too high and how $199 and $299 seemed like the perfect price for the iPhone. Turning around a year later and slapping their customers in the face, the very same people who bought an iPhone 3G BECAUSE it was 200 dollars with a price tag of 500 dollars is a horrible business plan.
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Predictions on Upgrade process for iPhone 2009
- Thread starter KratosKilla
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I agree completely. At last years WWDC, they made a very big deal about how the price of the original iPhone was too high and how $199 and $299 seemed like the perfect price for the iPhone. Turning around a year later and slapping their customers in the face, the very same people who bought an iPhone 3G BECAUSE it was 200 dollars with a price tag of 500 dollars is a horrible business plan.
Again, I remain curious as to why people think that they're for some reason more special and important to the carriers than people with other phones.
IPhone customers, moreover, are particularly valuable, mainly because they also buy expensive data plans. Their average bill is $94 a month, 60 percent higher than the companys overall customer base. Data represented 27 percent of AT&Ts $11.7 billion in wireless revenue in the quarter, up from 22 percent a year ago.
<snip>
Put another way, if the company gets 2.5 million new customers a year because of its iPhone exclusivity, the deal represents at least $700 million a year in operating profits profits that it could lose if Verizon sold the iPhone, too.
that is why
Definitely not "special," but probably "important" because companies tend to cater to rabid fanbases to maintain customer loyalty and revenue streams.
There other smartphones which use the same expensive plan structuring, so using that, it should work the same for them, yet it doesn't Nobody in their right mind would find it smart to eat half of a subsidy just to please a diehard fan base, especially when those same people would buy the phone at full price anyway.
I have no doubt AT&T is making money right on iPhone customers, and the idea of locking them in with those people with another expensive 2 year contract is very appealing to them.
I'm sure AT&T love's have a yearly product which causes costumers to upgrade like clock work. I doubt any other hardware company besides Apple gets that kind of turn around.
Wouldn't that mean that a non-eligible-subscriber who owns say a motorola would be worth more to AT&T as an iPhone owner. So why wouldn't this person get the best price as well.
And to your first comment, "It's just not how Apple does things..." I bought a Macbook which I thought I paid for but later had to pay to activate an 802.11n capability that was already built in. And then go ask some people who paid $400 for an iPod touch and had to pay $10 for an upgrade that was free to iPhone owners simply because Apple calculated the iPhone revenue over several months. iPod touch owners pay more, for less hardware (storage excluded) and then have to pay for updates. - that's just how Apple does things. Apple doesn't own AT&T, but that's just how AT&T does things as well.
I'm not sure they want to pay for almost half of your iPhone each year.
Yeah, but a report this year indicated their were 4.5 million iPhone users. AT&T claims 78.2 million total customers.
So the iPhone customers represent less than 6% of their customer base, yet accounted for 27% of AT&T's wireless revenue for the quarter.
I'd say that is more than reason to demonstrate the unique value of iPhone users.
And to all of the issues with subsidies paid by AT&T, the above report also indicates that before launching the 3G, AT&T had an operating margin of 41.2%. After launching the 3G, that dropped to 33.5% due to the subsidies. However, as of the report date, the margins were back to 40.9% ... so basically where they were at before the launch. So volume of users has already paid for the subsidies just 1 year into the 2 year contracts. With not as many people upgrading to the new iPhone, their margins wouldn't be affected as much as last year and would certainly recover much faster than 1 year.
That's the subsidized price.
It's not slapping their customers in the face. People got hundreds and hundreds of dollars off the purchase price of an iPhone because they guaranteed a 2-year revenue stream for ATT. That's why everyone didn't pay $500. How does it make sense for ATT to keep slashing hundreds off the price of each phone they sell if, in effect, they're only guaranteeing themselves 1-year revenue streams every year?
I'm an iPhone 3G user so I'd love the opportunity to upgrade for that low price, I just don't think it's going to happen. It doesn't make sense for ATT. You didn't buy an iPhone for $200 or $300. You bought a 2-year contract with ATT in return for receiving $300 off a $500 phone.
$300 of a phone with an $80 a month plan....AT&T makes back that money very, very quickly. The fact that every 3G iphone user pays $30 a month for data, plus extra for texting (most do) means AT&T have already made their subsidy back plus some.
AT&T could easily allow 3G users who have had their iPhone for 6+ months to upgrade (those who have had a contract long enough to payback their subsidy).
So enough with all this subsidy crud. The carriers have already made their money back. They have a much better chance at profit if they allow users to upgrade and lock into a new 2 year agreement.
AT&T could easily allow 3G users who have had their iPhone for 6+ months to upgrade (those who have had a contract long enough to payback their subsidy).
So enough with all this subsidy crud. The carriers have already made their money back. They have a much better chance at profit if they allow users to upgrade and lock into a new 2 year agreement.
Yes, they could do it, but I don't think people should be mad if they don't. Apple has $28 billion in cash reserves on their balance sheet, would it make sense for them to distribute that among their customers? Of course not. Could they? Probably. Just because ATT makes a profit on iPhone customers doesn't mean they need to keep paying $300 every year for them to upgrade their hardware when they already have them locked in for two.
So enough with all this subsidy crud. The carriers have already made their money back. They have a much better chance at profit if they allow users to upgrade and lock into a new 2 year agreement.
It depends what their retention rate is upon conclusion of contracts. You're oversimplifying this, and for you to say it's a bad decision based on the very limited amount of data you have is just unwise. ATT has people to perform these calculations, and if they find that it's worth it for them to subsidize iPhones every year taking into account the costs and benefits associated with it, they will. If not, they won't.
The iPhone plans are the same as every other smartphone on AT&T. So why do you still expect special treatment.
If anything, I'd say Apple is more likely to see customers buy the new device regardless of the lack of a subsidy vs. RIM, WinMo, etc.
what if apple keeps the 3g iphone at a lower price point and then brings out a higher spec one at some other price point?
keeping the 3g at 100 USD or below allows for a profit margin and higher market share and more customers, but it can also open up the viability of an exchange program.
it could read like this:
"iPhone 3g customers, trade in your old iphone 3g to buy the new iphone at subsidized price."
then apple could refurb and restore the turned in iphones, and resell them for a said amount.
keeping the 3g at 100 USD or below allows for a profit margin and higher market share and more customers, but it can also open up the viability of an exchange program.
it could read like this:
"iPhone 3g customers, trade in your old iphone 3g to buy the new iphone at subsidized price."
then apple could refurb and restore the turned in iphones, and resell them for a said amount.
This just jarred something in my brain...Boy Genius Report had a posting awhile ago about AT&T potentially rolling out a trade-in program in June.
Link
Every smartphone requires a $30 data plan? News to me.
Seems to me like you're over complicating it. Based on the sales figures stated in this thread (6% of AT&T's customers making up a much larger portion of its profits) makes me believe that AT&T is pulling in quite a bit a money per customer.
It's rather simple to make that small jump from AT&T making a large profit on each customer to customers paying back their subsidy. Doesn't take a rocket scientist to make that one.
Besides, this thread is the "predictions thread" not the "wait and see thread". I believe that one is on the front page of MR.
If AT+T do allow an upgrade path for 3G owners, which i think they would be daft not to, i can only see this happening one way.
An iphone cost's $X to att. So att subsidise this to $200 (disregarding the 16GB here for a minute), so att are out of pocket $(X-200). Now assume:
1)They account for this subsidy over the 24months on a monthly basis
2) The next iphone comes out for a price of $Y subsidized on a new 2 year contract
The only sensible move for att, would be to terminate your new contract, and recoup the subsidy of the 3g by adding it to your next gen sale so the price of the new phone would be $ Y + (months left on contract)*[(X-200)/24] and you now have a new 2 year contract starting on the day you get your new phone.
That to me makes complete financial sense, you have made a net profit on the first contract, and have a user for a 2 year contract, which in a year you can offer the same thing.
EDIT: Now that i think more about it. If apple are going to release a new phone every year (and they will), why not just offer 12 month contracts, and either decrease the subsidy or make up the subsidy else where. But then what if the user wants to jump ship? By getting two chances to offer a new contract works extremely well in ATTs favour.
An iphone cost's $X to att. So att subsidise this to $200 (disregarding the 16GB here for a minute), so att are out of pocket $(X-200). Now assume:
1)They account for this subsidy over the 24months on a monthly basis
2) The next iphone comes out for a price of $Y subsidized on a new 2 year contract
The only sensible move for att, would be to terminate your new contract, and recoup the subsidy of the 3g by adding it to your next gen sale so the price of the new phone would be $ Y + (months left on contract)*[(X-200)/24] and you now have a new 2 year contract starting on the day you get your new phone.
That to me makes complete financial sense, you have made a net profit on the first contract, and have a user for a 2 year contract, which in a year you can offer the same thing.
EDIT: Now that i think more about it. If apple are going to release a new phone every year (and they will), why not just offer 12 month contracts, and either decrease the subsidy or make up the subsidy else where. But then what if the user wants to jump ship? By getting two chances to offer a new contract works extremely well in ATTs favour.