Attention Cell Phone Makers, The End Is Near
If the original iPhone hurt Apple's competition, this new phone should just about kill them. And it isn't the new features that is scaring them the most (though that definately shuts up just about every critic who's ever complained about missing features) what really has them terrified is the new price point: $199.
They cut the price in half.
I'll say it again. They cut the price in HALF.
In. Half.
It now cost more to get an iPod touch ($299) than it does to get an iPhone. Do you understand what this means? For the first time since Jobs came back they are deliberately sacrificing their high margins AND undercutting a current established iPod all to sell this new product.
And they aren't doing this out of desperation to sell iPhones either. If you recall Jobs said they sold 6 million phones and the only reason they stopped was because they ran out. They ran out. Are you hearing me? They ran out. When was the last time you heard of that happening to any company?
But wait, it gets better.
If you head over to AT&T's site right now you can find 3 smart phones that do most of what the iPhone does, but for $300. There are 6 phones that cost as much as the iPhone, but do considerably less. Now, here is the really insane part, the Razor (a nice phone, but by no means a revolutionary) cost $150. Now do you realize what Apple has effectivley done? In addition to crushing the high end market, they have pushed into the middle of the market and drastically altered the playing field.
Imagine if Joe Customer walks into a store looking for a phone. On one hand he could buy a Razor (or any of a thousand similar pieces of junk) for around $150 or he could buy the coolest phone on the planet for $50 more. I really don't see this as being a difficult decision.
With this pricing point Apple is forcing the rest of the market to either cut their prices heavily or exit the game completely. In effect, Apple has redefined what the ceiling for cell phone prices should be. They have planted their flag and said you can get the best phone on the market for $199. So now how much is that Razor worth?
Some companies just won't be able to compete with this. Expect one or two portable GPS makers to go out of business (or merge) in the next year or two. Likewise you can bank that Nokia, Sony, Samsung and the rest will all loose quite a bit of revenue thanks to Apple's move. As for Blackberry and Palm, if this doesn't cause their board to break out the suicide pills then nothing will. And while I'm at it, I wouldn't be surprised if this turns out to be the knockout blow that forces Sprint out of the game. After all, they have lost the most customers by far and new commercials notwithstanding, I can't see them turning things around in time to make much of a difference.
There you have it. One announcement and Apple has completely rocked dozens of companies. You can't expect much more from a keynote, can you?
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James, so true. This reminds me of how digital cameras redefined how much the average person would spend on a camera.
Before digital, most people spent around AU$100. Part of the reason was the cost of film and processing made taking a gajillion snaps very expensive. So no one wanted to outlay for something that would be under-used. (I was a rarer beast and often spent upto AU$400 on camera. But I liked decent pictures and took a lot.)
But once digital became entrenched, folks suddenly didn’t bat an eyelid parting with AU$200 to AU$300 for a digital camera. Coz they knew they could use the thing to death. (Of course many babies and children suffered severe flash burns
)
The iPhone, as you point out, looks like doing the same thing. It’ll nudge people into spending more on a mobile phone than they have in the past. Again, a major part of that is that they’ll use the extra features and so get value for money.
For me, at this new price point, the iPhone is suddenly much more tempting as I normally spend around AU$100 on a mobile phone. So the step up to AU$250 (which is what I expect), is not so dramatic as to AU$450 like it could have been.
But, of course, there is still one limiting factor: running costs. I’ll only get an iPhone if I can get it on pre-paid - which is being rumored down here.
Otherwise I’ll have to fork out a bit more and settle for the iPod touch - which, Steve, we’re still waiting to hear about the next version. Will it have GPS too?
Wait- the end is Nigh for toher mobiles? I don’t THINK So…
Firstly the iphone is still locked into an 18 month contract, whomever you get it from.
Your average Joe Consumer with any smatterin gos sense will not go for that. A LOT can change in 18 months, and the prices of cell plans is only set to fall. not rise.
Secondly, a phone is not just a multi-whozit device. A lot of people when upgrading (or buying a new phone), will go with brand loyalty. They will get the same brand phone they had last time (familiarity with o/s), or the phones that all thier friend have (that they have been able to actually try out and use in real world scenarios, not just in the store)..
Thirdly, , there is no pay as you go option. A LARGE CHUNK of hte cell market in the US and Europe is based on the PAYG model. Sure the carriers *prefer* consumers to go for the monthly option, but if you don’t want to be tied into a contract,there are comparable free minutes / data / sms PAYG offers out there (at least there are in Europe)
Fourthly the iPhone is a smartphone.. and that market is NOT the entire cell market by any stretch. Fashion handsets, *disposable* throwabout handsets, handsets for people who actually only WANT the minimum spec set (ie those who want a phone first and foremost, not a mini computer, nor an mp3 player, nor a psudo PDA, *just a phone*). So yeah, the price cut should make other manufacterors, sit up and take notice, but if you thought the Motorolla Razor was the shiznit before, then the New iPhone is not going t sway you . Likewise if worship Sony and wouldn’t want to be seen dead with an Apple product, then again the iPhone is not going to make you reach for yoru wallet.
Is it the best non-blackberry phone on the market right now? Probably? Is it the best mobile phone evah? Highly doubtful
I’m skeptical of the veracity of the claim that they really “ran out” of units to sell. Can’t really be proven can it?
Also curious if they will slash the price on the iPod touch.
To faintdreams: don’t forget that there are lots and lots of unlocked iPhones - withOUT contracts.
get the REAL scoop, here’s something interesting to make everyone think about the new iPhone
http://www.applewatchdog.com/?p=111
Apple isn’t really sacrificing its high margins. They are still making a bundle from the units they sell to the carriers. The price point drop comes from subsidization of the cost by the carriers. This does provide the interesting price differential with the iPod Touch. However, because an 18 month agreement needs to be signed in the store to own a 3G iPhone, the iPod Touch still remains attractive, since it is free of obligation.
From what I understand the price has actually GONE UP. They cut the price by $200 but raised the monthly fee by $10 which mans another $240 to the total price.
Just a note faintdreams, if you head over to the O2 website, you’ll see that they will be offering a PAYG option (although no word on pricing yet).
Also, they have a lower, yes lower, monthly plan, still 18 months, with the iPhone at 99GBP.
For once it appears we are getting a better deal than the USA, unless I’m missing something ...
Plus O2 are extending the Wi-Fi hotspots to include BT Openzone.
I marveled at the $200 price as so uncharacteristic of Apple. Until I read that the data plan is now $30 instead of $20. So it’s $200 less upfront, but $240 MORE over the life of the two year contract, and even more if you keep the phone longer.
While it’s true that the data plan is $30 for any other phone as well, I don’t think the other phones REQUIRE the data plan the way the iPhone does.
Still, me want.
As for them running out, please, James, even you the perrenial kool-aid guzzler can’t be that naive.
Faintdreams - the iPhone isn’t a “smart phone” by the old standards. Until the iPhone, “smart phone” meant “business+email phone” - and most articles call the iPhone a smart phone because they have no other word for it. Apple has defined a new market and while I’m not sure how it’ll play out, it’s certainly a big market.
Apple is selling a mobile internet & entertainment device… it came into the phone business because of the wireless data connections and because Nokia etc were adding music and movies to their phones. It’s always great when someone comes at an industry from a different angle.
Oh, by the way, you’re right about customer loyalty - but there are many people who are loyal iPod customers and I’d say that iPod sales figures are a good indication of the iPhone’s starting point. With Apple selling 20million iPods and about 4 million iPhones in the last 6 months, that’s a substantial potential iPhone audience.
Just checked - Nokia sells 240million in the same period...!. Well it’s great to have competition.
Lets not get carried away. The iPhone 2 really only adds 2 new features. GPS and 3G. Everything else is software which will be available on the iPhone 1.0. Where are the features that were missing from the first iPhone? Guess what, they are still missing. Voice Dialing, Bluetooth Modem, copy and paste, video recording, instant messaging, MMS, etc. These are show stoppers for a LOT of people including myself. I believe my Palm Centro has more capabilities than the iPhone. Granted, the UI sucks.
The iPhone still has a lot of room for improvement. And its going to need it. Especially after watching the demo of Android at Google’s I/O Conference a couple of weeks ago. Because if Android can provide as good or good enough user experience with the UI, it will kill the iPhone in a feature comparison.
As far as the price, you do realize in the long run the iPhone costs more now? Sure its nice that you can save some of that money now and just pay more every month, but wow, $70 a month, just to get started is getting pretty steep.
I agree completely.
Cash Flow is a critical financial consideration. USA truckers have been paying $199/year for WiFi limited to specific truck stops (like Flying-J, Petro, TA, Pilot, Love’s...) or so they can get on the internet with their laptops.
Other travelers have also been paying about $200/year for internet access on the road too.
Monthly “dumb” cellphone rates range $60-$100. With 24/7 eMail and Internet access at 3G and WiFi speeds for only about $80/month in actual cash flow, an iPhone effectively combines cellphone and computer capability.
So, replacing my “dumb” but compact (will miss small size) RAZR with super smart & fast $200 iPhone 2 is a no brainer economically or technologically. And the Apple COOL design factor is like… WOW!
GPS and 3G is what I’ve been waiting for in the iPhone, and a reduced price tag is oh, so sweet!
Lowering the price seems to be part of a strategy to gain market share.
Of a product that can’t be used with most phone services and in most countries.
Something here does not compute.
If Apple is letting go of the monthly revenue from AT&T;service, it is only because there is a new revenue stream for them -the AppStore. Contrary to the break even model of iTunes, the AppStore promises to bring in enough profits to allow for the reduced iphone price, much like how the game console model works.
Once the pro apps and high end games start rolling out, and businesses across the globe begin adoption of the platform, the windfall for Apple will be enormous.
I don’t think the cell phone manufacturers can duplicate that.
Marketing iPhone#1 was born in a vacuum, resulting a prompt $200 adjustment in price.
iPhone#2 enters the market with a history, permitting Apple to reassess their marketing plan (drop participation in revenue) and initial sales prices per memory chip.
Apple intentionally permitted stock of iPhone#1 to be exhausted so the planned adjustment in price and “return policy” problem for #1 units would not bite Apple or its retailers.
Running out of stock became important to cut the umbilical cord with iPhone#1-EDGE to cleanly market the enhanced iPhone#2 with G3/GPS at much lower prices.
If RIM, NOKIA, SONY, et alia were merely anxious over a potential G3/GPS iPhone competitor, the new HALF PRICE announcement has to result in a “Prozac moment” of almost universal manic depression.