6 guesses why Apple cut the iPhone price
By Keith Shaw on Fri, 09/07/07 - 2:50pm.
Who'd have thunk that the biggest story of the week from Apple wasn't its shiny new iPod devices or its spat with NBC regarding iTunes, but the $100 rebates now being offered by Apple to "disgruntled" early adopters who shelled out $600 to be the first "look at me" owners of the device, the world seems more interested in this news than about the new devices themselves.
So why did Apple decide to drop the price of its 8GB iPhone and discontinue the 4GB model, and so soon after its mega-hyped launch? Most hyped devices, especially in the consumer electronics space, can stay at the same price for much longer periods of time (even Apple's own iPods never faced dramatic price drops). Witness the gaming console market, where it practically takes an act of God for Microsoft, Sony or Nintendo to drop its prices.
So was this move a bold, aggressive move on the part of Apple to get more competitive in the mobile phone space, or a company that realized its hyped product was losing ground and needed a jump start?
I have six theories (in no particular order of preference) on why Apple did the price cut. They're probably all wrong:
6) Apple realized that the iPhone price tag was too high. One of the complaints about the iPhone was its high price, so they address this by cutting the price $200. Some analysts are saying that the pace of sales for the iPhone are slowing, and a price cut is one way to spark interest in the device as it goes towards its 1 million iPhone mark. With the price drop, nobody can really say that the iPhone is overpriced except for Apple-hating bloggers who wouldn't like anything the company does anyway.
5) Apple is scared of a potential competitor – the gPhone. Perhaps Apple wants to avoid the same kind of situation that Sony found itself in last year, when its higher-priced PS3 sat on shelves while the less-expensive (and more intuitive and fun) Nintendo Wii took the title of "hottest gadget of the holidays." While comparing the iPhone vs. gPhone (which has only been rumored) to the PS3/Wii battle is like comparing apples to oranges, the last thing Apple wants this holiday is a lot of iPhones sitting on store shelves.
4) Apple wanted even more publicity by getting the "early adopters" up in arms about them shelling out $200 extra dollars at launch, then quickly respond to the criticism by offering the $100 rebate. If I was a conspiracy theorist, I'd say this was part of the plan all along – comments on blogs about the $100 rebate includes praise for Apple for addressing the complaints so quickly and effectively. Heck, if I got a $100 rebate for my iPhone I'd probably run right back to the Apple Store and buy some accessories anyway, so it's win-win for Apple.
3) Price is the quickest complaint that Apple can fix. My two biggest complaints about the iPhone are ones that might take Apple longer to fix – the lack of enterprise e-mail support and the wide-area wireless network it runs on for Internet and e-mail. If the iPhone was on Verizon's EV-DO network, I probably would have lined up in front of an Apple Store on June 29. Enterprise e-mail is likely to get addressed, but probably not until the 2nd generation device (although they probably could do this with a software update too).
2) Apple knew that it needed to drop the price, and instead of just announcing this separately, they hid the news along all of the other iPod announcements, hoping that the fanboy bloggers and others would ooh and ahh about that stuff instead of noticing the price drop. More conspiracy theory than guess.
1) Apple really does want more people to experience the iPhone: From the official press release: "We've clearly got a breakthrough product and we want to make it affordable for even more customers as we enter this holiday season."
Some customer research bears this out – research firm Compete shared some data that says the price cut could more than double interest in the iPhone. A June survey shows that 18% of respondents would pay $400 or more for an iPhone, compared with just 8% at the $599 price tag. Apple gets an additional 10% of people interested through the price drop.
Do you have any additional guesses? Was this move a good one or bad one for Apple? Hit reply and let's get the conversation started…
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new iphone coming
The reason for the price cut is for several reasons most already mentioned. But the one I think people are missing is the fact that a new iphone is coming out in december. Did anyone notice that this price drop was specified as "For the holiday season" they wouldn't be stupid enough to drop the price and than raise it after the holidays.. unless the updated one is coming out with all the fixes.
I spoke with an AT&T representative and she told me not to buy one because a new one was coming out in december with a removable battery and an improved screen among other things. I asked her how she knew and she said she has connections. Maybe, maybe not. I kind of doubt it knowing apple. But either way it seems to make sense when you think about it.
I'm holding off...
maybe after the holidays?
I really don't see a company like Apple coming out with a new iPhone in December, which is too late for the holidays (let's face it, you want to have all of your inventory ready to go in October and November), plus you then risk alienating your customers even more.
I wouldn't be surprised to see the 2nd generation coming in January for delivery later in 2008, but that's just speculating (which everyone on the Internet is good at anyway).
to launch a new model with 3G?
one thing that iPhone lacks is the faster internet connectivity ove GSM - the 3G. currently, iPhone supports EDGE which provider slower internet access than 3G. may be that Apple heard these complaints about lack of support for 3G and they decided to release a new model with 3G and probably fixes for other complains like user replacable batter..etc. to do this they need to quickly sell all iPhone that got manufactured. Hence the price cut.
just a wild guess :-)
-Manoj
Hmmm not so sure about that...
Apple cutting 25% of a product price at once? you gotta be kidding! even if there's going to be a new iPhone with 3G or whatever, there must be something else around here.
When you're selling a lot of iPhones, you don't need to lower the price, if you're going to sell a new version you don't need to do that either, just look at the prices of the iPod, there's not a real discount in price, just new models are more features for buck but the price remains the same.
I've got two theories, one is that AT&T is asking for more volume the iPhone can sell, maybe there are some not known contract issues about new activations forecast and presure from the mobile operator did the trick.
On the other hand, iPhone may be not selling that well press and apple says.
One part of the business it's the activation fee apple should be receiving from At&t, so the mobile operator should made a statement to apple volume and asked to lower the price because of it... bu anyway, if apple's iPhone where that good in selling... there's no way to cut 25% of it's price... not in this world.
BTW, do you remember 100s of people doing large lines to buy the PS3?? does it really means the product it's a universal hit??? PS3 it's a hell of a product but veeeery pricey... iPhone it's a hell of a product but even more pricey... and worst of all... by far the most closed go to market strategy i've seen in the last decade.
A price drop was going to happen eventually, but...
...the timing is odd. my best guess on timing is indeed to spark holiday / back-to-school sales.
Dropping the 4GB and leaving only one model is more interesting. We know they are coming out with a V2 model. It's the when and what's in the V2 that we don't know yet, but we can speculate.
With the 16GB iPod touch I think it's a safe bet that the V2 iPhone will have 16GB. We can also hope it will also be 3G. Corporate e-mail support for all iPhones and native app development support at the launch of the V2 iPhone would also be nice.
The timing for the V2 is up in the air. Apple could announce it at their January Macworld. Announcing a 3G phone a few months after releasing the EDGE phone for EMEA is also bad timing. Apple could make the V2 phone available only in North America would work, but again cause strife in EMEA.
Everyone seems to want the same handful of features for the V2 iPhone (more memory, 3G, corporate e-mail, native apps, etc.) I hope all of these functions are available when the V2 launches. I think the biggest problem for Apple is releasing V2 too soon after V1. Shipping new versions should be kept to 1 or 2 times a year like the rest of the mobile phone industry.