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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.
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.
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.
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.