No. Apple is not ripping off anyone.
You are not looking at the big picture. You are simply focusing on how YOU benefit from getting a 32GB phone for the price of a 16GB. This is short term thinking. Just thinking about saving $100 TODAY.
Do you think Apple's profits are obscene? Their profit margin is only about 23% the last 2 years. Microsoft and Google have higher profit margins at about 25%. So is Apple really ripping off customers? For every dollar of goods they sell they only make 23 cents profit.
If Apple made the 1st tier 32GB then many who would have bought the 64GB phone would opt for the 32GB. For each of those decisions Apple would lose close to $100 in profit. The upgrades from 16 to 64 to 128 is almost pure profit. $100 may not sound like much to company like Apple but you need to realize how many phones they sell. Here is theoretical calculation:
Apple sells about 250 million iPhones a year.
Apple sells about 35% at the 2nd tier - 64GB
If Apple moves the first tier to 32 GB they could lose about 40% of the 64GB buyers
They will lose close to $90 of pure profit from those who decide to get the 32GB instead of the 64GB.
250,000,000 x 35% = 87.5 milion 64GB buyers
87.5 million x 40% = 35 million buyers who decide to get the 32GB instead of the 64GB
35 million x $95 of lost profit per phone = $3.3 billion in lost profit
Last year Apple made $40 billion in profit. A decrease of $3.3 billion is HUGE. That almost 8% of profits lost.
But you may say who cares if Apple makes $37 billion instead of $40 billion. That's still alot of money. But you should care. Because if Apple's profits begin dipping, even a little it could damage the company. Just look at late 2012 and early 2013. The stock tanked 45% in a matter of 6 months. Why? Because profits were down. Were they down 40%? Down 50%. No. The profits were down a mere 5% and the stock tanked big time.
But why as a consumer should I care about Apple's stock price? You should care because the stock price has a DIRECT EFFECT on the quality of product Apple can produce. For most of the top talent that works at Apple, 90% of their compensation is from stock options. So if the stock tanks or is flat their pay will be drastically effected. Because of this many of the TOP EMPLOYEES will be targeted by other firms who can offer much higher pay because of stock options that grow in value while Apple's does not. Bottom line is with a weak stock price Apple will not be able to retain top talent. Without top talent Apple cannot produce the awesome products we all love.
In addition without the profits Apple cannot support and grow its ecosystem. Without strong profits Apple won't be able to have the money to spend on R&D, acquisitions, and investments in facilities and cutting edge technologies. Other companies like Samsung simply copy Apple's innovations. Apple on the other hand spends BILLIONS in R&D. Companies like Samsung pay very little to run Android on their smartphones. Apple has to invest BILLIONS to keeping iOS running well and improving it every year. Without strong profits Apple would have to cut corners and that would hurt the quality of product.
The bottom line is the iPhone is a premium product. It will cost more than a Samsung or HTC. Just as a BMW will cost more than a Kia. But you get what you pay for. Is there any doubt that an iPhone is a more quality product than a Samsung/HTC? If so then you should be willing to pay a few more bucks for that quality. And be happy that those extra profits will be invested in R&D/top talent/ect to keep pumping out awesome products.
Here is a conversation I overheard the other day:
Concerned Troll: Yo, Tim Cook how is the iPhone sales going?
Tim Cook: Its going great! We can't even keep up with demand! We are sold out for the next 4 weeks.
Concerned Troll: Yo, Tim I got a great idea for next year.
Tim Cook: Lets hear it.
Concerned Troll: Next year you should give 16GB free to the low end phone.
Tim Cook: ok......
The point is Apple can't even keep up with demand when the iPhone launches! Why the hell would they discount their phones by giving memory free for the low tier? This strong demand continues through the holiday season and through Chinese New Year in February. So why would Apple sell iPhones at a discount when they can't keep up with demand for the first 6 months of release? It would be pure stupidity.
But guess what happens in March when the demand 'weakens'? We see all kinds of deals on iPhones. Last year BestBuy was giving $100 gift cards on all iPhone6 phones purchased. T-mobile and Sprint was doing the same. In other words you could get the 64GB iPhone6 for the price of the 16GB iPhone at launch. The bottom line is if someone is willing to wait 6 months after release they CAN get a 64GB iPhone for $650. They just need to wait a bit until the demand equalizes with supply.
So if 16GB isn't for you, you have 2 options. Either shell out the extra $100 and get the 64GB phone or wait 6 months and buy the iPhones at a discount. If you can't wait then shell out the $100. And what the hell is $100 anyway? Spread over 2 years thats about $4 a month. Are you going to really die from shelling out $4 more a month for the 64GB model? If so then the iPhone isn't for you. You probably are better off buying a $300 Android phone or a used iPhone. The bottom line is you gotta pay to play. PERIOD. There are tens of millions of other people who are willing to pay.
Apple is not greedy. Their profit margin is only 23%. They need to make profits to continue to support their awesome ecosystem, retain the best talent, and invest in R&D and new technologies. The demand for iPhone is so high in the first 6 months of release it is UNREASONABLE to expect Apple to 'discount' their top end phones. Those who have a tight budget and can't spend the extra $100 should either wait a few months till discount deals come around or realize that maybe a cheaper used iPhone or Android would be the more responsible thing to do.
You are not looking at the big picture. You are simply focusing on how YOU benefit from getting a 32GB phone for the price of a 16GB. This is short term thinking. Just thinking about saving $100 TODAY.
Do you think Apple's profits are obscene? Their profit margin is only about 23% the last 2 years. Microsoft and Google have higher profit margins at about 25%. So is Apple really ripping off customers? For every dollar of goods they sell they only make 23 cents profit.
If Apple made the 1st tier 32GB then many who would have bought the 64GB phone would opt for the 32GB. For each of those decisions Apple would lose close to $100 in profit. The upgrades from 16 to 64 to 128 is almost pure profit. $100 may not sound like much to company like Apple but you need to realize how many phones they sell. Here is theoretical calculation:
Apple sells about 250 million iPhones a year.
Apple sells about 35% at the 2nd tier - 64GB
If Apple moves the first tier to 32 GB they could lose about 40% of the 64GB buyers
They will lose close to $90 of pure profit from those who decide to get the 32GB instead of the 64GB.
250,000,000 x 35% = 87.5 milion 64GB buyers
87.5 million x 40% = 35 million buyers who decide to get the 32GB instead of the 64GB
35 million x $95 of lost profit per phone = $3.3 billion in lost profit
Last year Apple made $40 billion in profit. A decrease of $3.3 billion is HUGE. That almost 8% of profits lost.
But you may say who cares if Apple makes $37 billion instead of $40 billion. That's still alot of money. But you should care. Because if Apple's profits begin dipping, even a little it could damage the company. Just look at late 2012 and early 2013. The stock tanked 45% in a matter of 6 months. Why? Because profits were down. Were they down 40%? Down 50%. No. The profits were down a mere 5% and the stock tanked big time.
But why as a consumer should I care about Apple's stock price? You should care because the stock price has a DIRECT EFFECT on the quality of product Apple can produce. For most of the top talent that works at Apple, 90% of their compensation is from stock options. So if the stock tanks or is flat their pay will be drastically effected. Because of this many of the TOP EMPLOYEES will be targeted by other firms who can offer much higher pay because of stock options that grow in value while Apple's does not. Bottom line is with a weak stock price Apple will not be able to retain top talent. Without top talent Apple cannot produce the awesome products we all love.
In addition without the profits Apple cannot support and grow its ecosystem. Without strong profits Apple won't be able to have the money to spend on R&D, acquisitions, and investments in facilities and cutting edge technologies. Other companies like Samsung simply copy Apple's innovations. Apple on the other hand spends BILLIONS in R&D. Companies like Samsung pay very little to run Android on their smartphones. Apple has to invest BILLIONS to keeping iOS running well and improving it every year. Without strong profits Apple would have to cut corners and that would hurt the quality of product.
The bottom line is the iPhone is a premium product. It will cost more than a Samsung or HTC. Just as a BMW will cost more than a Kia. But you get what you pay for. Is there any doubt that an iPhone is a more quality product than a Samsung/HTC? If so then you should be willing to pay a few more bucks for that quality. And be happy that those extra profits will be invested in R&D/top talent/ect to keep pumping out awesome products.
Here is a conversation I overheard the other day:
Concerned Troll: Yo, Tim Cook how is the iPhone sales going?
Tim Cook: Its going great! We can't even keep up with demand! We are sold out for the next 4 weeks.
Concerned Troll: Yo, Tim I got a great idea for next year.
Tim Cook: Lets hear it.
Concerned Troll: Next year you should give 16GB free to the low end phone.
Tim Cook: ok......
The point is Apple can't even keep up with demand when the iPhone launches! Why the hell would they discount their phones by giving memory free for the low tier? This strong demand continues through the holiday season and through Chinese New Year in February. So why would Apple sell iPhones at a discount when they can't keep up with demand for the first 6 months of release? It would be pure stupidity.
But guess what happens in March when the demand 'weakens'? We see all kinds of deals on iPhones. Last year BestBuy was giving $100 gift cards on all iPhone6 phones purchased. T-mobile and Sprint was doing the same. In other words you could get the 64GB iPhone6 for the price of the 16GB iPhone at launch. The bottom line is if someone is willing to wait 6 months after release they CAN get a 64GB iPhone for $650. They just need to wait a bit until the demand equalizes with supply.
So if 16GB isn't for you, you have 2 options. Either shell out the extra $100 and get the 64GB phone or wait 6 months and buy the iPhones at a discount. If you can't wait then shell out the $100. And what the hell is $100 anyway? Spread over 2 years thats about $4 a month. Are you going to really die from shelling out $4 more a month for the 64GB model? If so then the iPhone isn't for you. You probably are better off buying a $300 Android phone or a used iPhone. The bottom line is you gotta pay to play. PERIOD. There are tens of millions of other people who are willing to pay.
Apple is not greedy. Their profit margin is only 23%. They need to make profits to continue to support their awesome ecosystem, retain the best talent, and invest in R&D and new technologies. The demand for iPhone is so high in the first 6 months of release it is UNREASONABLE to expect Apple to 'discount' their top end phones. Those who have a tight budget and can't spend the extra $100 should either wait a few months till discount deals come around or realize that maybe a cheaper used iPhone or Android would be the more responsible thing to do.
