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Crazy Stevie's iPhone Prices are Insaaane!
theodp writes "Slate takes a look at the alarming lesson of the iPhone price cut and ponders the long-term effects of a Fire-Sale Nation mentality, especially when companies go all Crazy Eddie slashing prices on products like homes and cars that have active secondary markets. 'High-profile price-chopping tends to occur whenever companies freak out about the vicious combination of a slowing consumer economy and the prospect of getting stuck with big inventories of unsold goods. The tactic often works in the short term. The hype over insanely low prices functions as a form of free advertising, and the lower prices tend to attract buyers. Apple announced on Sept. 10 that it had sold its 1 millionth iPhone.'"
From a business standpoint, it makes sense. AT&T and T-Mobile are the only GSM carriers in the US. Apple wants GSM because it's an international standard and they don't want multiple versions of the iPhone for different countries. AT&T has a larger customer base and more coverage than T-Mobile, so Apple went with them to maximize sales. AT&T does suck (as someone who's currently locked into their glitchy network), but looking at the numbers, it was the logical choice. to make.
I don't care how nice a screen it has, at $400 with a 2 year contract, a locked phone with no extensibility and EDGE-only speeds is still far from cheap. The best one can say is that it has gone from an insanely overpriced phone to merely an expensive fashion phone.
iPhone doesn't start hitting "Crazy Eddie" pricing until it's below $100.
Well they decided that it was worth $599 to them when they handed over that money. They should be grateful to get any rebate, let alone $100.
Many pundits also complained that the iPhone could not compete with the smart phones. Of course, the iPhone is not competing with the smart phone, but merely assuming that some people might be willing to pay more for a phone upfront if it provided a value. Such a market was made clear by the Razr.
Now pundits are saying that Apple is desperate and crazy because it lowers prices. It is true that Apple never has a sale, but this is a phone. Phones start expensive and then get cheap. It always happens. I don't have an iPhone. Being an early adopter was not worth the price. I was waiting for this price drop, and a relaxation to contract rules typical to ATT. The price drop is not like the price drop of a Mac or an iPod. With those devices, one is not contracted with a total costs that is at least $2K.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
The car example cited in this article (Toyota with $850 of incentives per car vs. US car manufacturers with $3K average) is a perfect example of why US automakers are so very, very screwed.
No matter how much Consumer Reports et al. say the reliability has improved, and no matter how much the US makers craft intriguing and unique new offerings, their cars' value will continue to tank.
Sure, all cars lose value the minute they're driven off the lot, and it's a substantial number. But go take a look at what happens to a Civic or Camry versus what happens to a Fusion/Taurus or Malibu. Go ahead, check it out. It's awful.
I bought a new Scion tC last year. I was all primed to buy a used carwith ~35K miles; it makes sense to let someone else take the financial hit. Then I looked at the prices on used Scions, used Civics, etc. $17K cars were selling for $14K after three years. It made absolutely no sense to go buy a three year old car with a nearly-expired warranty and a possibly shady maintenance record when $3K got me a brand new one. On top of that, I was paying cash; the price difference is narrowed even more if you're financing, because the used car will almost certainly have a higher APR.
Now contrast this with a Ford Focus or Chevy Cobalt or similar. Go look at the similar models, and marvel at how much more has bled off of the value; it's because the $17K Ford, depending on when you catch it, might be only $15K, and might have a 7% or a 0% APR. It's great in the short term, and if I was interested in a Focus I'd be all over it.
Ultimately, if I was buying this car to drive it into the ground and toss it at 300K miles, it would be smarter to buy the Ford (assuming the reliability was the same, which isn't really the case with the Focus). Most people, myself included, don't do that. They get rid of the car in the 80K to 120K range, when it's starting to show some age but before it might potentially require major repairs. And many people look at how the US automakers have played their "SUPER LOW 72 MONTHS 0%! $3,000 CASH BACK" games and they walk across the street to the guys who might charge a bit more, but won't slash their prices next week. All things being equal, a Camry with the same MSRP as a Malibu or Fusion will resell for more at every step in its life, and it's because Toyota has shown that they're going to hand out approximately the same deal to everyone.
I want to buy American, or at least be able to widen my prospects when looking at cars. I really do. If I were willing to drive cars into the dirt, I could probably do it, but I'm not comfortable with the risks near the end of the car's life. A $2,000 engine repair does make better financial sense than buying a new car, but not when your car won't start, and you have to get a rental for a week, and you're wondering if it will be okay for another year or will require a new transmission in four months. So, like most people, I sell mine before I think those problems will show. As long as the US automakers are willing to go "Crazy Eddie" and reap the short-term profits, though, they'll continue to lose out on long-term buyers like me. I sincerely hope other industries are willing to look at Ford, GM, and Chrysler's experience when they think that it's a good idea to slash their prices.
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I agree, and the more amazing thing, is that they are doing the same thing in other countries. I mean, I can understand doing something like that in the US with the crazy service provider situation there, but why do it in european countries too?
Just sell the thing in Apple stores; put the visual voicemail thing on the internet as a service and allow people to pick their own plans.
Max.