Why is the iPhone 2.5x as expensive as iPod Touch

[aneftp]

The tech in these phones are not the same year after year. Tmobile is still selling the phones at the same price as anyone else.

True. But almost every other tech (DVD, blu ray which come with more and more features every year become cheaper).

Same with computers. We all remember $3000 computers. Now you can get high end computers for half the price with better techs and specs.

The profit margin on high end phones (especially factoring in the millions they sell) is incredible.

It's not like Lexus or Audi BMW sell the most cars. They charge a lot more but sell in less volume.

With the high end smartphone market. It's the exact opposite. The iPhones and the galaxies sell more in volume than the cheaper smartphones.

 

[617aircav]

True. But almost every other tech (DVD, blu ray which come with more and more features every year become cheaper).



Same with computers. We all remember $3000 computers. Now you can get high end computers for half the price with better techs and specs.



The profit margin on high end phones (especially factoring in the millions they sell) is incredible.



It's not like Lexus or Audi BMW sell the most cars. They charge a lot more but sell in less volume.



With the high end smartphone market. It's the exact opposite. The iPhones and the galaxies sell more in volume than the cheaper smartphones.

There are cheaper smartphones out there if you want it. The problem is you want an iphone which is not cheap.

 

[carjakester]

*Shrug* - we get an 'Australia tax' on a lot of our stuff. Although weirdly while some products have a heavy extra cost, others don't.

Apple products are at an extreme premium here.

Edit: to give you another example...in the US the PS4 was $399, in AU we paid $549. And our dollars are pretty similar currently.

what if you buy it online and have it shipped to you?

 

[617aircav]

*Shrug* - we get an 'Australia tax' on a lot of our stuff. Although weirdly while some products have a heavy extra cost, others don't.



Apple products are at an extreme premium here.



Edit: to give you another example...in the US the PS4 was $399, in AU we paid $549. And our dollars are pretty similar currently.

$549 Australian is $480 US. Not that bad. If you add state tax it's about $432 in the US.

 

[kilcher]

I paid $300 for a current gen iPod Touch. Paid $99 for my iPhone 5 (Sprint 2 year agreement w/port in promo).

I'd never pay full retail for a smartphone.

Cool loophole bro!

 

[aneftp]

There are cheaper smartphones out there if you want it. The problem is you want an iphone which is not cheap.

I've owned all 7 iPhones. Owned original G1 to nexus 5 and 3 of the samsung Galaxy phones. Plus various high end Nokia Symbian devices back in the days.

The issue is manufacturers collude and leave out essentials of a high end smartphone (like a nice lens). A nice lens doesn't cost more than $10-15 tops in a high end smartphone. They can easily add it to the moto g.
But they don't for obviously reasons.

 

[alent1234]

True. But almost every other tech (DVD, blu ray which come with more and more features every year become cheaper).

Same with computers. We all remember $3000 computers. Now you can get high end computers for half the price with better techs and specs.

The profit margin on high end phones (especially factoring in the millions they sell) is incredible.

It's not like Lexus or Audi BMW sell the most cars. They charge a lot more but sell in less volume.

With the high end smartphone market. It's the exact opposite. The iPhones and the galaxies sell more in volume than the cheaper smartphones.

the computing power to decode 1080p is the same as it was 6 years ago when blu ray first came out. the drives are cheaper now as well making it cheaper to build a blu ray player

smartphones, the chips and everything else inside them is brand new and more powerful every year

they still have $3000 computers now as well, for most people they can make do with a much cheaper one

 

[takeshi74]

But that's still one ridiculous markup.

Assuming that the two are equivalent based solely on storage capacity is ridiculous as well.

Technology is supposed to get cheaper over time.

It's not "supposed to" anything. That's a gross oversimplifcation.

 

[jrswizzle]

the computing power to decode 1080p is the same as it was 6 years ago when blu ray first came out. the drives are cheaper now as well making it cheaper to build a blu ray player

smartphones, the chips and everything else inside them is brand new and more powerful every year

they still have $3000 computers now as well, for most people they can make do with a much cheaper one

BluRay players are dirt cheap because no one buys them. With all the digital content out there moving to 1080p, devices that do more than just play movies (Xbox, Playstation), the DEMAND for BluRay players isn't very high.

Like someone said before - its all about supply and demand. Nothing else. Apple sells their product at the prices people will buy them.

Nowadays, $700 will buy you significantly upgraded tech every year versus every 5 or 10 years in the past. Tech is moving at a breakneck pace right now, it's really quite amazing.

Its funny - people complain about Apple's profit margins, especially on the iPhone - but the fact those profit margins are shrinking is exactly why their stock tumbles after every earnings call. They sold a record number or iPhones and also hit a revenue record, however profits were flat year-over-year. Whether we believe it or not, Apple IS feeling the squeeze - what used to be 50% margins on the iPhone are now 40% or lower. The 30% iPad margins are in the low 20s%....

And it will continue that way - even without Apple lowering their prices. Why? Because they're having to pack more and more into the devices they sell. Technology is moving quickly, but prices for the parts Apple uses don't come down that drastically in a year.

 

[179202]

Just curious:

32GB iPod Touch: $299

32GB iPhone 5S: $749


Of course Apple can charge this amount because people are paying for it. But that's still one ridiculous markup.

Comparing Apples to Oranges. Might as well ask why the iPod Classic and iPhone are priced different, etc. Fundamentally different devices (they just look a bit similar).

 

[alent1234]

sales of physical media still outnumber digital media

 

[RokkenRock]

The last time I checked, i.e. a few seconds ago, flagship phones by samsung, HTC, Sony, you name it, all cost more or less the same as iPhone here. So the title should probably renamed to why is a top end phone around 2.5x as expensive as iPod touch.

 

[AppleWarMachine]

It's that much better

 

[Krimsonmyst]

$549 Australian is $480 US. Not that bad. If you add state tax it's about $432 in the US.

How much do state taxes vary? And do you guys have it on iPhone purchases? In Australia all our taxes are included in the marked price, so if it says $549, that's exactly what you pay. (Your system made for some awkward shopping experiences when I visited the US a few years ago)

 

[cynics]

The last time I checked, i.e. a few seconds ago, flagship phones by samsung, HTC, Sony, you name it, all cost more or less the same as iPhone here. So the title should probably renamed to why is a top end phone around 2.5x as expensive as iPod touch.

Lol where did you look?!

 

[617aircav]

How much do state taxes vary? And do you guys have it on iPhone purchases? In Australia all our taxes are included in the marked price, so if it says $549, that's exactly what you pay. (Your system made for some awkward shopping experiences when I visited the US a few years ago)

Average sales tax is about 7 percent. You get used to paying more than the sticker price.

 

[179202]

Cool loophole bro!

Your comment made me properly giggle.

 

[NuggetSauce]

Cool loophole bro!

u jelly brah?

It's not a loophole, it's just not being foolish enough to pay full retail for a phone.

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You're paying it off in the long run.

You mean i'm buying cell phone service, like I have been every month for the past 14 years.

 

[kdarling]

Just curious:
32GB iPod Touch: $299
32GB iPhone 5S: $749

Yep, the iPhone sells for $450 more, even though there's only about $120 difference in parts, royalties, R&D.

As others noted, it's because Apple can.

It's a good thing that R&D doesn't cost anything.

Extrapolating from Apple's quarterly reports, R&D is ~$20.

Google doesn't care about or need to make profit with phone sales, they make their money by selling and using the users information.

It's true that most of Apple's revenue now depends on iOS devices, and Apple feels the need to make 53% gross profit on a device that every other maker averages about 25-30% on.

Technology is supposed to get cheaper over time.

Yep. The usual rule of thumb for years was that the first models of anything (microwaves, VCRs, videocams, disc players) cost around $1000-$1200, and then dropped like a rock within a few years.

In fact, smartphone parts have gotten cheaper, too:

There are cheaper smartphones out there if you want it. The problem is you want an iphone which is not cheap.

Even mom & pop outfits in China are now able to buy all the parts needed for a smartphone and sell a cheap one for $100... and a really really nice one for under $300.

That's why analysts were so worried about Apple. Apple is all about high profit margins, and therefore high phone subsidies. Without subsidies, either sales or the price would drop sharply.

However, it looks like loans, trade-in programs etc will take the place of carrier subsidies, and that will extend the era of high priced devices in such places.

 

[Deguello]

u jelly brah?

It's not a loophole, it's just not being foolish enough to pay full retail for a phone.

----------

You're still paying full retail for the phone, that cost is just hidden in the cost of service unless the provider -- like AT&T -- offers a lower service price for those not on contract.

 

[NuggetSauce]

You're still paying full retail for the phone, that cost is just hidden in the cost of service unless the provider -- like AT&T -- offers a lower service price for those not on contract.

Thanks for the info, but I fully understand how phone subsidization works.

In a real world sense, that's irrelevant to someone who always signs a 2 year agreement. And someone who paid $800 after sales tax for their latest gen iPhone still paid $800 for their iPhone. And my highly controversial opinion is, I have to laugh at people who do that.

But the point I was originally making is that it's unfair to compare the price of an iPod Touch to the price of an unsubsidized iphone. The unsubsidized price is artificially inflated to discourage people from buying off contract, for reasons most here are aware of. And if you want the freedom and conveniences of buying a phone off contract, you shouldn't be complaining about paying a premium for it, and comparing the price of it to an unsubsidized product.

 

[617aircav]

Thanks for the info, but I fully understand how phone subsidization works.

In a real world sense, that's irrelevant to someone who always signs a 2 year agreement. And someone who paid $800 after sales tax for their latest gen iPhone still paid $800 for their iPhone. And my highly controversial opinion is, I have to laugh at people who do that.

But the point I was originally making is that it's unfair to compare the price of an iPod Touch to the price of an unsubsidized iphone. The unsubsidized price is artificially inflated to discourage people from buying off contract, for reasons most here are aware of. And if you want the freedom and conveniences of buying a phone off contract, you shouldn't be complaining about paying a premium for it, and comparing the price of it to an unsubsidized product.

Subsidized or not the phone still comes out to the same cost to the consumer.

 

[Deguello]

Thanks for the info, but I fully understand how phone subsidization works.

In a real world sense, that's irrelevant to someone who always signs a 2 year agreement. And someone who paid $800 after sales tax for their latest gen iPhone still paid $800 for their iPhone. And my highly controversial opinion is, I have to laugh at people who do that.

Let's see: A two year agreement at $40 a month -- leaving aside data because it costs the same, regardless -- instead of $15 a month is a $25 a month phone subsidy. $25 a month times 24 months is $600. Plus $199 for the base iPhone 5 means you paid $799 for a $750 phone. Now, you might want to quibble about sales tax or whatever, but you're also paying higher taxes and fees on a higher phone bill, typically at a rate even higher than sales tax, plus you're paying a $36 activation fee.

Plus, my credit card covers loss and theft and, if such happens, such coverage will be for the full cost of the phone, not the subsidized cost, which would leave me far less out of pocket for a replacement.

So, I'd say your opinion isn't highly controversial so much as highly innumerate.

 

[hharzer]

At least here in Germany, the iPhone is much pricier than a normal Android phone.

For an iPhone, you pay roughly 950$ if you pay it directly from Apple. Most flagship devices from HTC, Samsung etc. have a price tag that's only half of that.

But if you buy it subsidized with a contract, the price is the same. For example: About 40$ for unlimited calling, texting and internet with a high speed cap at 2GB and additionally, you get an iPhone or an Android phone for free on top. For iPhone users, this it's one of the best things they can get, if they need unlimited everything.

Another method is that you pay, say, 20Euro a day and an iPhone for about 250Eur. In the end, you pay the normal price of an iPhone (699Eur), but you get unlimited internet ( capped at a certain volume, but no fees for overages ), unlimited texting and a few included minutes ). So you effectively pay nothing for your contract.

I got my iPhone from my brother, he signed a contract but didm't want a phone, so I took my chance Additionally, I have an iPad. For my iPad, I have 5GB of high speed LTE for less than a dollar, and on my iPhone, I use a prepaid card with multiple phone numbers including a landline number for cheap/free calls from family and friends. There pretty new, so they only have 1GB of data for 14$, which is extremely expensive, but they want to introduce new options soon.

The main difference between both devices are the internals and possibilities. An iPhone has everything an iPod has, but not vice versa. This combined with mobile internet and GPS results in the higher price. I mean, how much money can you save with an iPhone? It is essentially a camera ( though not as good as most standalone cameras, but still pretty good and mostly sufficient ), a navigation system that's always at hand, dictionary, library, etc. etc. That alone justifies the price. Android's capable of that too, but just not as versatile and effective.

 

[C DM]

Let's see: A two year agreement at $40 a month -- leaving aside data because it costs the same, regardless -- instead of $15 a month is a $25 a month phone subsidy. $25 a month times 24 months is $600. Plus $199 for the base iPhone 5 means you paid $799 for a $750 phone. Now, you might want to quibble about sales tax or whatever, but you're also paying higher taxes and fees on a higher phone bill, typically at a rate even higher than sales tax, plus you're paying a $36 activation fee.

Plus, my credit card covers loss and theft and, if such happens, such coverage will be for the full cost of the phone, not the subsidized cost, which would leave me far less out of pocket for a replacement.

So, I'd say your opinion isn't highly controversial so much as highly innumerate.

But even using those numbers there's a difference of being out of $750 in one go vs. being out a little money every month over a 2 year period, thus having access to some of that money during that time. Doesn't sound like much, but neither does the $50 difference that's in the example when talking about these numbers. And if you keep that money in some sort of a savings account, or perhaps invest it and who knows make even more money off of it, then you actually could come out way ahead. The point is that with something like a $50 or even $100 difference the overall "savings" (not just plain numbers, but factoring in availability of funds and paying over time and all that) can balance out much more, and can be even the opposite for some.