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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.'"
It won't matter to me what his prices are. An incredibly short-sighted error, IMHO. I'm good for five of them (three kids and my SO.) But no connectivity, no buy.
I've fallen off your lawn, and I can't get up.
Crazy Eddie ended up in jail.
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.
Does anybody really think that Apple won't make money on it at $399? For Grid's sake, it's assembled overseas for slave wages. It only has a few parts (if you count the main board and display as one part each). I don't think they will hurt. And if they do -- that is, if they are dumping it on the market for a loss -- then they are prosecutable under antitrust laws.
Please, let's see some real news, rather than trying to make problems up.
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.
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.
Sounds almost like a Mr. Obvious sketch. What do you mean technology prices drop over time?
Only the State obtains its revenue by coercion. - Murray Rothbard
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.
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.
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
I'll club a seal to make a better deal!
--
"Outlook not so good." That magic 8-ball knows everything! I'll ask about Exchange Server next.
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.
Now pundits are saying that Apple is desperate and crazy because it lowers prices
No... pundits are saying that Apple is desperate and crazy because they aren't even close to making their target of 10 million phones in the first year. If Apple gave us an unlocked phone with an SDK, they could easily make or exceed that goal. It's simple really: Apple decided to focus on a great profit instead of a great product, and ended up with neither.
Yeah. If you include the required 18-month contract, the iPhone will cost *at least* £900 in the UK (=$1800). £900!
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.
The fed doesn't favor investment over work. What does that even mean? When a company invests in a new technology, that means more work. When a city invests in new infrastructure, it means more work. When farmers plant more crops, it means more work. Investment facilitates work. Without it, people wouldn't have jobs, and nothing would get done. The fed does not "favor investment over work", they favor investment because it leads to work.
The fed works to mediate the economy so that people with money will continue to invest it. If new investment stops, people lose their jobs. If no one is working, no one is building new houses, no one is growing food. That is a really bad thing.
So hack it and use T-Mobile pay-as-you-go...
Come up with a real example of a domestic case of a 'dumping' conviction that did not involve leveraging or maintaining a monopoly market and I'll gladly accede.
When information is power, privacy is freedom.
It sounds better than the other two phones I've had -- Siemens SK65 and Nokia 3120. It's a pretty good phone, though it could do with voice dialing if you drive a lot and need to dial whilst driving. Me, I don't drive much, so it's fine.
-b.
Steve didn't say: let's make a phone that we can sell to 120 million people. He said : let's make the best phone we possibly can and I'll be happy if we get 1% of the market.
must... stay... awake...
Common sense is expensive. I'd say $100 is pretty cheap a price to pay for a lesson, really.
You certainly don't find many devices with the iPhone's feature set in the $0-$100 after contract price range.
Really? No GPS, no tethering, no mem card, no IRda, no real bluetooth PAN, no MMS, no OTA pda syncing, no useful push email, no IM, no tactile feedback. I'm having trouble finding some features, can you point them out?
Da Blog
Congratulations for so whole-heartedly buying into Apple's marketing, but he was going for the biggest possible profit, not a desire to make the perfect cell phone. There's easy to imagine improvements, that would have added cost but made the iPhone better - GSM or an unlocked OS are obvious ones. The super-expensive Nokias have a lot of options that the iPhone doesn't.