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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.'"
Wouldn't selling it for use on any network generate more sales? If X is the number of users on AT&T and Y is the number of users on T-Mobile, then X + Y > X, unless of course, T-Mobile has less than 1 user. Would it be impossible for them to have a phone that works on all GSM networks. Oh, I forgot, they probably got really good kickbacks from AT&T for going exclusive.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
No kidding. I'm on Sprint and I dropped the data plan because it was too costly, and if you don't have a plan data is about 7c per kilobyte. Per K! Let alone the fact that Sprint won't let you get a goddamn picture off your own camera phone unless you subscribe to "PCS Vision". Fortunately, I found an outfit selling a USB cable for my phone, and it was compatible with BitPim. It's still limited in what it can do by the firmware (can't dump my own ringtones or pictures into the thing) but it's better than having to pay extra to email pictures to myself! Bloodsucking leeches, all of them.
Seriously though, cellular companies have a lot of justifying to do. They have a fraction of the infrastructure to maintain vs. a traditional telco, yet their rates are still in the "gouge the customers eyes out with a rusty spoon" category.
The higher the technology, the sharper that two-edged sword.
Its funny how much we've been conditioned to think that the price of things should go up not down. Think about it, all other things being equal, as we get smarter, more efficient with our production of goods prices should go down. Prices only go up because inflation is an even more powerful force than innovation in our economy.
Second, the cost of everything has an fixed component and a quantity component. One reason an F22 fighter is so expensive is that relatively few are built. The same thing happened with the iPhone. At the beginning they weren't sure if they'd sell 1 or 1 million. They had to guess and price accordingly. Now that so many are sold, the fixed costs (like engineering) are paid-in.
Meanwhile, they are competing with many other kinds of smart phones. Most of which were cheaper already. Doesn't anyone remember all the talk about how the iPhone was outrageously priced above competing smart phones?
Yeah. So after their profit margin was clearly fat, they cut prices to be competitive and more than just fan-boy enthusiasm. We should be worried? This article is drawing ridiculous connections between the iPhone and the panic over the sub-prime mortgage market.
After the rate cut that the Fed announced, fellow-liberal Jon Stewart asked Greenspan pointed questions of whether America is a free economy given the invisible hand of the Fed that favors "investment over work", these guys have been wondering what kind of "flation" we will have to live with.
The Fed chose to cut rates to prevent deflation. The Slate article seems to suggest that deflation has only been postponed and companies will be hit in the long term. But the price cuts are held often - think Thanksgiving or Labor day weekend sales. The fact that there is (almost certainly) a chance to get products way cheaper at a certain point in time does not mean that sales at other time will slow down. The iPhone price cut debate is over - atleast on Slashdot. We all agreed that there will always be early adopters who don't mind paying extra to be the first ones to own a cool piece of gadgetry. That is the very definition of early adopters.
2+2=5 for very large values of 2.
I would lean towards a fourth choice - leave the carriers out of it. You seem to be working on the assumption that Apple needs to have any kind of relationship with the networks, which I guess means that's the state of affairs in the US? As I said in my post above, the cash that AT&T are paying them makes a perfectly good business rationale for going exclusive, but from a consumer point of view I would've thought that just selling the phone as a standalone device in the Apple stores and allowing the customer to choose their provider (perhaps sans visual voicemail, I guess, but AFAIK all the other features are standard, meaning no software customisation or compatibility issues) would be perfectly acceptable as well as neatly avoiding the problems you outline.
The iPhone's price cut was surprising (way earlier than I expected), but that's the nature of the cellphone/personal electronics business. Always has been. A device comes out at a premium price, and then over the 6-12 months of the device's lifecycle the price drops drastically. By the time the new hotness replaces it not only has the price collapsed, but it's not even a lust object anymore. But we've been going through those cycles ever since the Walkman.
What's masked it a little here in the US has been the subsidies that cellphone carriers pay to get lock-ins. And they increase the subsidies as the life of the gadget progresses (at least on paper), to reduce the perceived cost more. Remember, once upon a time the Motorola RAZR was the hottest phone on the market. And it cost around $400-$500, even with a contract. And that was just a phone! Now, of course, they're free with contracts, and have been for quite a while.
Anyhow, I'd say the dependency of the domestic auto market on rebates is a much better bellwether for the state of the "Crazy Eddie Economy" (and I grew up in New York, so I remember those ads), along with the use of incentives in the housing market. Heck, supermarket coupons are part of it, too. When discounts are the norm without any real reason to do so (real costs are always dropping in the electronics business), prices have no real floor, and consumers have no incentive to pay the "real" price, because they know that it's going down. A lot.
-- Josh Turiel
"2. Do not eat iPod Shuffle."
Apple knew there were a bunch of fanboys who would pay almost anything to get an iPhone early, so they gouged them for as much as they would pay. Once they'd all bought iPhones, it made sense to cut prices to attract a different market. It turned out that the fanboys were annoyed enough that Apple decided it was worth giving them partial refunds.
So nothing surprising, just Apple doing whatever seemed likely to maximise profits. You don't like it? Tough luck. Those who live by the sword shall die by the sword.
Isn't the PS3 being sold at a huge loss to inflate sales? Shouldn't that make it illegal too?
So hack it and use T-Mobile pay-as-you-go...
Call it "investment over hoarding", and use "buying gold" as your basis for comparison.
When people buy gold, they basically stick it under their mattress. They don't use it themselves, and no one else gets any benefit from it either. For all intents and purposes, that gold has been removed from the economy. It doesn't build new factories, buy new machines, or pay anyone's wages. It doesn't even do anything for the person who bought it. It just sits there while the owner waits for the price to go up so they can make a profit selling it to someone else. And then the new buyer will stick it under another mattress.
Investment, OTOH, creates wealth. The money I invest in a company's stock allows the company to buy factories and machines, pay wages, and make products. And the ratchet of a competitive market means that products tend to provide more value for less money over time. That means every dollar I have gains more buying power, making me wealthier even if I don't have more money per se.
Case in point: about ten years ago, I bought a 1GB hard drive for $700. These days, a gig of drive costs between 50 and 75 cents. My dollar today buys a thousand times as much drive as it did ten years ago, even though I don't have a thousand times as much money.
So yeah.. the Fed (and the IRS.. 'expenses' aka: 'investments' are deductible) prefers to see investment over hoarding.