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Apple Makes $831 On Each AT&T iPhone
Ponca City, We Love You writes "The NYTimes reports that Gene Munster, an analyst at Piper Jaffray, has studied Apple's financial statements and come to the conclusion that AT&T is paying Apple $18 a month, on average, for each iPhone sold by Apple and activated on AT&T's network — up to $432 over a two-year contract. This shows how much incentive Apple has to maintain its exclusive deal with AT&T rather than to sell unlocked phones or cut deals with multiple carriers. Last week Apple disclosed that 250,000 iPhones had been purchased but not registered with ATT that Apple thinks are being unlocked so Apple has now taken action to curb unauthorized resellers by limiting sales of the iPhone to two per customer and requiring that purchases must now be made with a credit or debit card — cash will not be accepted." The latter article links to a US Treasury page explaining the incorrectness of the widely-held belief that cash cannot be refused for any transaction.
$399 phone
$432 from 24 months @ $18/month
----
$831
My mom says I'm cool.
They make money, good for them. As long as they give what the customer wants, they'll get sales (I don't have one. At most, I'll get an iPod Touch one day. Mostly because of the limitations of AT&T service rather than the cost).
I just find it amusing that some people get upset that a hardware manufacturer makes money or a lot of it. Maybe they are so accustomed to the subsidized Xbox model where MS supposedly loses money on each sale only to try to salvage it later (MS couldn't afford it if Xbox was their business like Windows/Office is anyway). It is no way to say that Apple has to be doing things that way and there is a lot of competition out there for these devices if you don't like their way of business.
I still think Apple is being rather silly about the cash issue. Many people I know don't have credit cards because that's how they control their spending. This isn't to say that they don't have money though.... their probably more affluent than average and can afford these gadgets.
as correct as that explanation is for the 831 number, the math is wrong.
apple doesn't get iphones from fairies. They pay money to build them.
It's worth pointing out that you can still avoid having to use a personal credit card with your name on it by getting one of those re-loadable Visa cards. Yeah, there is a small cost involved, but it can be worth it if you value having the ability to buy without using your own, named card.
The greatest piece of legislation that could be passed would be one requiring that software and hardware manufacturer's could not impose restrictions on how it is used. Not only would the iPhone situation be a non-issue, but the way would be clear for Linux developers to provide drivers without fear of prosecution by hardware manufacturer's. Of course, given greed, this is nothing more than a pipe dream...
A business doesn't have to cater to what's BEST for the customer. A business needs, and ONLY needs, to provide the following two points:
- A better product value (this includes technical specs, service quality, license agreement, and of course price) than any other competitor can offer;
- A NET gain for the customer for purchasing the product (in other words, no matter how objectively "crappy" the product is, the customer will be more satisfied buying the product than not buying it.
Out of the whole range of options which satisfies the above two points, a business will always choose one that is best for the BUSINESS, not the customer.
E.g. If more people cared about carrier lock-in and less about the flashy buttonless display, then they wouldn't buy iPhone in particular, would they? Can't say I'm terribly thrilled by Apple's tactics, but I find it perfectly fair that in a free market society where competition to Apple DOES exist, Apple has the full right to say "either take our products how they are and with all strings attached, or take a hike".
If you don't like this business model, then you do not support free market in principle (not preaching whether that is good or bad, just stating the fact).
Cash must be accepted as payment for debts. IOW if you owe someone money and offer cash in payment, they can't legally refuse to accept it. If you do not owe them money, though, then no debt exists and that rule doesn't apply. A merchant's entirely free to refuse any method of payment for a transaction where no debt exists yet.
For the iPhone, this means that if you walk up to the counter wanting to buy, they're allowed to refuse to sell for cash. Once you've bought the phone and used the service and now owe them money for that service, however, they're not free to refuse a cash payment.
Three Squirrels
People say things like "it's Apple's right" and "good for them". Of course, it's Apple's right to do those deals.
Nevertheless, where do you think this money is coming from? Do you think that AT&T is giving that to Apple because they are such good buddies?
No, you are paying for it one way or another (e.g., by paying a premium for their sluggish EDGE service).
> YOU CAN NOT REFUSE LEGAL TENDER. That is a stone cold law from the 1800's.
Of course you can. "Legal tender" simply means that it is a legally acceptable form of payment, not that you must accept it.
I can demand live chickens and jelly beans as payment if I feel like it, and you waving cash in my face while threatening to call the police can't make any difference.
"Slow down, Cowboy! It has been 3 years, 7 months and 26 days since you last successfully posted a comment."
Now another way of saying this is I am paying 431 dollars less than the true sales price of the iphone. Or another way of saying it is, AT&T is giving me an $18 a month discount for using an Iphone on their network. All upside to me. Of course that mean I should be upset about the unlockers who are preventing them from giving me an even larger discount.
This seems to fit some other piece of the puzzle. For example, Why to UK iphones cost so much more? Presumably because of a lower subsidy. And why is apple booking the iphone revenue as deferred subscription income? Because they are probably not making any money on the sales, but on the 18$ per month.
Finally, this also helps axplain the anomolous $200 price drop. My original guess, which this reinforces, was that apple took a huge gamble on the technology. Craploads could have gone wrong. The screens might have scratched to easily, the batteries might have died prematurely, the OS might have blue screened. . So many untested things you can't really adequately Q/A before the roll out. Plus it might not have been popular. There were a few look-alikes in the pipeline, what if one had rolled out earlier?
So they had a huge risk margin built into the price. Once the risk dissipated they could remove that. But at the time this hypothesis seemed a little off. Sure a risk margin is there in any product but how could they overestimate by 50% of the propert phone price? that seems way too high. But now realize the true sales price of the phone was 1031$ and they lowered it by 20% to 831. Now it does not seem quite so absurd.
Some drink at the fountain of knowledge. Others just gargle.
Your right, I don't expect a business to act in any way that does not maximize their own profit. Nevertheless, we need to pass laws and regulations to ensure that the actions of profit maximizing corporations do not interfere with the collective well-being of society.
Property laws, Anti-trust legislation, and contract enforcement are all examples of such laws. Without such measures, free markets would barely function, let alone be optimal.
Certain types of actions, such as carrier lock-in, creating Monopoly power, and exclusivity contracts, are very often the most profitable courses of action for a company (An extreme example would be forced enslavement and wide scale theft). However, these actions leave society poorer than it would have been had these actions been illegal.
The Free Market is a mathematical ideal, described precisely in the first Welfare theorem. It is a great ideal, and one that we should strive for as an utmost priority. However, the model assumes that these kinds of transactions do not exist.
So to support a business model based on depriving consumer choice is not free-market, it's Plutocratic.
I can't get over how many people think Apple should not be entitled to freedom of contract. Apple can do about anything it damn well pleases. If you don't like it, don't buy a stinking iPhone. They don't 'owe' the consumer anything. It's their goal to make as much money as possible. If their tactics for making said money are so egregious, vote with your dollars and go elsewhere. But don't talk about changing the law just because you can't have an iPhone exactly how you want it.
They make it sound like they have the right to go after people just because they haven't activated the phone. Apple may not be required to sell them unlocked yet, but consumers have the right to unlock them, plain and simple. This is borderline control freak territory on Apples part, and it looks even worse because they are taking massive kickbacks on an already expensive piece of hardware that was sold far above cost.
Most phone makers get a kickback from the carrier because the consumer never paid the manufacturer directly, but this is not the case with Apple.
LOL. Yes, and they also don't take out zero-down mortgages, make car-buying decisions based on the monthly payment rather than the total cost, or rent extra-fancy furniture/tvs/etc when they could buy cheaper versions.
Average number of credit cards per U.S. household: 12.7
Just because you and your few closest buddies have some clue about financial planning, doesn't mean 99.9% of people do.
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
All the stuff that Apple does for every iPhone user POST-SALE costs AT&T at least that much to do for themselves. AT&T is like a silent partner just printing money. You pay them every month but otherwise you deal with Apple. Over at Verizon they are doing all the Apple stuff themselves, but doing it badly.
The complaints about the iPhone never seem to come from iPhone users. The highest customer satisfaction in phones is iPhone at 82%, the next best is Blackberry at 51%, then ALL THE REST are below 50%. Everybody is paying a similar monthly carrier fee for their phone, but not everybody is getting the same value from it. So complaints about how much money Apple/AT&T are making while offering a single phone that has both the highest customer satisfaction and the most features really seem disingenuous to me. Complain about how much companies are making for selling phones that garner http://www.google.com/search?client=safari&rls=en&q=iphone+customer+satisfaction&ie=UTF-8&oe=UTF-8
business...simply because their rebates are in the form of 'pre-charged debit cards' which I still haven't found a method of depositing the value of into my bank account without incurring a fee.
The card I received from cingular/att was equivalent to a VISA check/debit card, I spent the full amount without fees at the grocery store. Surely you buy things at some place that accepts VISA cards?
You're clearly comparing Apples and Oranges here.
I still do almost all my purchasing with cash. I get it from ATMs, but then nobody really knows where I spend that money. That means my wife can't track where I've been, except the the nearest ATM.
All pass beyond reach of medicine. None pass beyond the reach of love.
It's tough to start conspiracy rumours when they state up front that they won't take cash because they're trying to track the people who purchase their phones. I prefer it when they try to hide what they're doing to reduce their customers' privacy. It's more challenging ...
.. paranoid crackpot leftover from the days of Amiga.
...so sorry.
Fuck Apple
This is more horrendous bullshit, from a hardware manufacturer trying to hold it's consumers / customers hostage...to the world's shittiest telco.
There is NO device that has functionality SO GREAT...that would make me jump through hoops such as this nonsense.
When are people going to wake up?
I do not think the Apple strategy will fly. It is easy enough to purchase prepaid credit cards and to use those to purchase iPhones. They may add a level of indirection but I doubt they will be able to prevent it.
If technology is driving down the cost of hardware (circuit complexity increasing by 2x every 2 years -- classic Moore's Law according to Wikipedia). Meaning you can compress data at a lower cost, you can transmit more data at a lower cost. Then why should not communications costs be declining at that same rate? I could care less if I get video on demand. My voice comununications should be almost free. The challenge to AT&T, Verizon, Comcast, etc. is why our bills (adjusted for quantity of data delivered) should not be declining by at least 1/2 every 2 years.
Apple can sell a fancy phone, whose advanced features I do not have to use. Lower the costs of my minimal connectivity. That is all I (as someone 51 y.o) needs to have I mean *really* what the hell does an iPhone provide that an easily available terminal cannot provide. And if you do not have an easily available terminal -- where the hell are you living? (And as a brief aside I have had dinner with Steve Jobs -- though I respect him as an individual I wasn't that impressed.) I would cite Google as being much more likely to change the playing field than Apple at the current time. It could strongly be argued that Apple has sold out to AT&T. Fortunately the hackers will defeat their efforts to completely manipulate their technology -- which customers have purchased. My hardware. My right to program it for my purposes. Claim otherwise. You will lose.