Sidebar Sidebar
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.

What was Apple thinking?

T

totally_fly

macrumors member
Original poster
Nov 12, 2002
96
0
It seems this new pricing plan only benefits AT&T. Apple was making $399 per iPhone sold plus a percentage of the monthly cell phone bill. Now Apple is making 199 per iPhone sold and from what I hear, they are not sharing revenue. So Apple stands to make substantially less money per iPhone sold, meanwhile, AT&T is raising prices and just have a blast ripping customers off.

How does that make any sense for Apple?
 
totally_fly said:
It seems this new pricing plan only benefits AT&T. Apple was making $399 per iPhone sold plus a percentage of the monthly cell phone bill. Now Apple is making 199 per iPhone sold and from what I hear, they are not sharing revenue. So Apple stands to make substantially less money per iPhone sold, meanwhile, AT&T is raising prices and just have a blast ripping customers off.

How does that make any sense for Apple?
Click to expand...

AT&T is subsidizing the iPhone meaning you're getting the phone for a much cheaper price than they may actually pay Apple. AT&T in turn makes that money back via your data plan, voice, etc. Nobody is being forced to purchase an iPhone 3G at all. This is all optional. The prices now fall in line with ALL of the smartphones that AT&T offers.
 
I can almost guarantee apple is not losing a dime. AT&T is paying the difference of the iPhone, and in return AT&T charges us more for the data plans. So in return you are actually paying more in the long run. It's all really a vicious cycle.
 
they may be losing money, by making the phone cheaper...but 10x more people are going to buy the phone now.. thus apple probably breaks even or makes even more. they are not stupid. as if they sat around and said..."hey lets give one of our greatest products away for next to nothing!"
 
totally_fly said:
It seems this new pricing plan only benefits AT&T. Apple was making $399 per iPhone sold plus a percentage of the monthly cell phone bill. Now Apple is making 199 per iPhone sold and from what I hear, they are not sharing revenue. So Apple stands to make substantially less money per iPhone sold, meanwhile, AT&T is raising prices and just have a blast ripping customers off.

How does that make any sense for Apple?
Click to expand...

App Store
 
Mankin5344 said:
I can almost guarantee apple is not losing a dime. AT&T is paying the difference of the iPhone, and in return AT&T charges us more for the data plans. So in return you are actually paying more in the long run. It's all really a vicious cycle.
Click to expand...

^^^What this guy said.


Thanks for making sense. :cool:
 
don't forget that the cost for apple to make the product is like half that of the original iphone. This must be due to the plastic back, right?
 
pedroistheman said:
don't forget that the cost for apple to make the product is like half that of the original iphone. This must be due to the plastic back, right?
Click to expand...

I doubt that. I'm sure the plastic backing reduced the cost, but not by "like half".

Technology tends to get less expensive as time progresses. The cost of the 8 and 16 GB flash memory, for example, was probably higher during the building of the first iteration of the iPhone as compared to what is would cost now.
 
totally_fly said:
It seems this new pricing plan only benefits AT&T. Apple was making $399 per iPhone sold plus a percentage of the monthly cell phone bill. Now Apple is making 199 per iPhone sold and from what I hear, they are not sharing revenue. So Apple stands to make substantially less money per iPhone sold, meanwhile, AT&T is raising prices and just have a blast ripping customers off.

How does that make any sense for Apple?
Click to expand...

For the first generation iPhone, Apple took a cut of the monthly bill. In that case, AT&T couldn't subsidize the phone.

Now that Apple isn't taking a cut, AT&T has done what they do with every one of their smart phones: subsidize.

But when the iPhone sells, Apple is still getting $399 and $499. Think of subsidizing as AT&T buying the iPhone for $399 and reselling at $199. (the $200 will be covered through the raised data plans and the fact that AT&T is keeping all of the monthly bill instead of a percentage)
 
Steve Jobs talked a fair amount about why exactly they decreased their prices of the iPhone. He said that over half the reason people didn't buy an iPhone in the first place was how expensive the iPhone was alone. Having a less expensive phone, (espcially a cutting edge technology like the iPhone), and also having such a high demand, will be profitable for Apple. They will sell more phones for less price, thus feasibly beating their revenue goal.
 
totally_fly said:
It seems this new pricing plan only benefits AT&T. Apple was making $399 per iPhone sold plus a percentage of the monthly cell phone bill. Now Apple is making 199 per iPhone sold and from what I hear, they are not sharing revenue. So Apple stands to make substantially less money per iPhone sold, meanwhile, AT&T is raising prices and just have a blast ripping customers off.
Click to expand...

Apple, those silly kids - they know nothing about making money.
 
well considering they were probably losing potential revenue from everyone who unlocked and went with t-mobile or another carrier, they probably decided this time around it wasn't worth the time and investment to worry about staying one step ahead of the enthusiast market. so they are taking all their money up front and taking it to the bank. which is good move for them since their business model is setup that way, and not setup from month to month residuals
 
tritonj said:
well considering they were probably losing potential revenue from everyone who unlocked and went with t-mobile or another carrier, they probably decided this time around it wasn't worth the time and investment to worry about staying one step ahead of the enthusiast market. so they are taking all their money up front and taking it to the bank. which is good move for them since their business model is setup that way, and not setup from month to month residuals
Click to expand...
well, they lost increased revenue, but weren't making a loss on each iphone sold, as they were being sold for full price
 
philgilder said:
well, they lost increased revenue, but weren't making a loss on each iphone sold, as they were being sold for full price
Click to expand...

att is still buying them at full price, and then discounting to us, they aren't buying from apple for $199. and they were sharing revenue in the previous deal, this one it is essentially att pays apple end of deal, last time it was phone sold, money shared, monthly payment money shared. in the long run this was better for apple, because there is a guaranteed constant flow of revenue, the problem was staying ahead of unlockers, and i'm sure both att and apple just decided it wasn't worth the time so they went with the tried and true method of phone manufacturer sells phone to carrier, carrier pays phone manufacturer, carrier makes money back on services
 
thanks to everyone for pointing out the obvious subsidizing by AT&T

That was a pretty absent-minded question on my behalf :p

I think this thread can be closed now
 
Actually one last question does remain. If Apple is getting all the money up front, does the 2.0 firmware signal the last of the free firmware updates for the iPhone?
 
StoneGaijin said:
No way,

I think even Jobs said, iPhone = Free updates
Click to expand...

How are they able to do that if they recognize all the iPhone revenue up front? If they are still able to defer the cost of the device (since they no longer get a cut of the service plan) why don't they do that with the iPod Touch?
 
diamond.g said:
How are they able to do that if they recognize all the iPhone revenue up front? If they are still able to defer the cost of the device (since they no longer get a cut of the service plan) why don't they do that with the iPod Touch?
Click to expand...

May be ATT is still paying in monthly installments to Apple. They might still be paying like 20$ a month for the next 2 years for every 3G iPhone activated on ATT. But its more like an installment than revenue sharing I guess. Nothing really has changed between Apple and ATT IMO. Just that apple slashed the prices in order to sell more(also the BOM cost has come down so they are able to afford this price cut).
 
djransom said:
AT&T is subsidizing the iPhone meaning you're getting the phone for a much cheaper price than they may actually pay Apple. AT&T in turn makes that money back via your data plan, voice, etc. Nobody is being forced to purchase an iPhone 3G at all. This is all optional. The prices now fall in line with ALL of the smartphones that AT&T offers.
Click to expand...

The way the new iPhone was presented sounded like Apple lowered the price of it. But if it is subsidized, then it isn't lowered. I understand AT&T's data charges...it's the same for any phone. But what is so misleading is the subsidized part. He should have said "the subsidized price of the iPhone will not be more than $199".
 
ImNoSuperMan said:
May be ATT is still paying in monthly installments to Apple. They might still be paying like 20$ a month for the next 2 years for every 3G iPhone activated on ATT. But its more like an installment than revenue sharing I guess. Nothing really has changed between Apple and ATT IMO. Just that apple slashed the prices in order to sell more(also the BOM cost has come down so they are able to afford this price cut).
Click to expand...
Hmm, if the BOM is cheaper then why can't we buy the phone with out a plan?
 
diamond.g said:
Hmm, if the BOM is cheaper then why can't we buy the phone with out a plan?
Click to expand...

BOM doesnt include assembly costs, shipping costs, R&D costs, marketing costs. So BOM is good enough information for comparing 1st gen iPhone to the new 3G iPhone, it does not really tell you the actual money it costs apple to manufacture n sell one iPhone.
 
to answer your 2 questions:

"what was apple thinking?"

answer: $$$


"how does this make any sense for Apple?"

answer: $$$



case closed; move on people; nothing to see here...
 
You must log in or register to reply here.
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.
Top Bottom
Back