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Apple's 16GB IPhone 6S Is a Serious Strategic Mistake
HughPickens.com writes: Matthew Yglesias writes at Vox that Apple's recent announcement of an entry level iPhone 6S is a serious strategic mistake because it contains just 16GB of storage — an amount that was arguably too low even a couple of years back. According to Yglesias, the user experience of an under-equipped iPhone can be quite bad, and the iPhone 6S comes with features — like the ability to shoot ultra-HD video — that are going to fill up a 16GB phone in the blink of an eye. "It's not too hard to figure out what Apple is up to here," writes Yglesias. "Leaving the entry-level unit at 16GB of storage rather than 32GB drives higher profit margins in two ways. One, it reduces the cost of manufacturing the $649 phone, which increases profit margins on sales of the lowest-end model. Second, and arguably more important, it pushes a lot of people who might be happy with a 32GB phone to shell out $749 for the 64GB model."
But this raises the question of what purpose is served by Apple amassing more money anyhow. Apple pays out large (and growing) sums of cash to existing shareholders in the form of dividends and buybacks, but its enormous cash stockpile keeps remorselessly marching up toward $200 billion. "Killing the 16GB phone and replacing it with a 32GB model at the low end would obtain things money can't buy — satisfied customers, positive press coverage, goodwill, a reputation for true commitment to excellence, and a demonstrated focus on the long term. A company in Apple's enviable position ought to be pushing the envelop forward on what's considered an acceptable baseline for outfitting a modern digital device, not squeezing extra pennies out of customers for no real reason."
But this raises the question of what purpose is served by Apple amassing more money anyhow. Apple pays out large (and growing) sums of cash to existing shareholders in the form of dividends and buybacks, but its enormous cash stockpile keeps remorselessly marching up toward $200 billion. "Killing the 16GB phone and replacing it with a 32GB model at the low end would obtain things money can't buy — satisfied customers, positive press coverage, goodwill, a reputation for true commitment to excellence, and a demonstrated focus on the long term. A company in Apple's enviable position ought to be pushing the envelop forward on what's considered an acceptable baseline for outfitting a modern digital device, not squeezing extra pennies out of customers for no real reason."
Actually I see another reason to keep the base model at 16Gb. App development is crucial to the iPhone (and any other smartphone out there), and many developers don't like to do the extra work to keep their application sizes sane. However, as long as the base model is 16Gb, app developers need to keep this in mind when developing their apps.
If this encourages even only some developers to keep their applications down to a sensible size (knowing that anyone with a 16Gb device will either avoid their application, or delete it as soon as they run low on space) then I guess it's worth it.
I'm not saying the extra money in Apple's pocket isn't a factor, but I'm sure there are other factors at play here, this theory being just one of them.
-- Pete.
Monochrome - Probably the UK's largest internet BBS
I am still using an iPhone 4s and have never had a problem with storage since I don't fill it up with millions of games and I don't take lots of photos...
Just because it is not good for you or some people, doesn't mean that the cheaper option should not be available for those that really don't need the space.
I primarily use it for a "modem" link and for getting messages and checking messages and keeping connected....
I don't agree. 16 GB is more than enough for. It was enough on my iPhone 4 and it surely is on my iPhone 6. For me the iPhone is what it is: a phone. Talking to people, texting, chatting, reading e-mail and surfing the web. That's about it. For all the other computer stuff, I have a laptop.
It doesn't have to be like this. All we need to do is make sure we keep talking.
"Leaving the entry-level unit at 16GB of storage rather than 32GB drives higher profit margins in two ways. One, it reduces the cost of manufacturing the $649 phone, which increases profit margins on sales of the lowest-end model. Second, and arguably more important, it pushes a lot of people who might be happy with a 32GB phone to shell out $749 for the 64GB model."
First you say it's a serious strategic mistake, then you give two perfectly (corporately) good strategic reasons for doing it. Make up your mind!
systemd is Roko's Basilisk.
"But this raises the question of what purpose is served by Apple amassing more money anyhow."
Fundamental misunderstanding of how the world works.
I personally don't think 16GB is enough, but the article is just an unsupported click-bait rant with no supporting evidence. "struck sour for even some of the company's biggest fans" - not just any fans, "biggest" fans. "But it suffers from some skepticism about its long-term prospects." - from the author no doubt. Having a 16GB phone is "... just a vague hedge against eventual future bankruptcy." WTF? How can you hedge against an "eventual" bankruptcy? "That's a somewhat understandable impulse for an incredibly successful company that actually experienced a near-bankruptcy back in the late 1990s." Yep, they're acting on "impulse". Can't even be specific about the date - sometime back in the... 1990s? A thoroughly researched article with a well reasoned and persuasive argument.
... Except the iPhone doesn't have any SD card slot (or any storage expansion for that matter) which makes it more important not to underspec the storage in the first place.
There's no monopoly for Apple to keep, and never has been. Apple has less than 20% of the market for smartphones which is dominated by the various Android manufacturers and isn't even the largest single player overall by many accounts (that would be Samsung), with several other major players and very long tail of also rans. I'd say the smartphone handset market is actually pretty healthy and competetive at present, the smartphone OS market not so much, but there's still a reasonable choice with nice hardware on several platforms. It's a similar situation for tablets, and in pretty much every other market they are currently in Apple is essentially an also-ran in terms of market share - definitely no monopolies.
What Apple does have though is a disproportionate amount of media coverage (both paid for advertising and articles), so perhaps that's skewing peoples perspectives?
UNIX? They're not even circumcised! Savages!
Normally if a company makes lots of profit, it gets used in some way. If there isn't a business need for it, it goes out to investors. That is part of the idea of investing: You can get a share of the profits (it isn't the only reason, but one of them). That doesn't happen with Apple. They just hoard all their profits... to what end?
I personally am not sure why their big investors let them get away with it. I would want my cut if I had money in Apple. However for whatever reason investors are fine with them just amassing a big pile of cash that they don't use for anything, and don't pay out.
Let's look at products from Apple Inc., during its time with, and then without Steve Jobs ...
With Steve Jobs -
1. Apple I
2. Apple ][
3. Apple III
4. Lisa
5. McIntosh
6. iPod
7. iPad
8. iPhone
Without Steve Jobs -
01. Newton ....
... ad nauseum ...
02, iPad
03. iPhone
04. iPad
05. iPhone
06. iPad
07. iPhone
08. iPhone
09. iPhone
10. iPhone
11. iWatch
12. iPhone
13. iPad
14. iPhone
15. iPhone
16. Apple TV
17. iPhone
18. iPad
19. iPhone
20. iPad
21. iPhone
22. iPad
23. iPhone
24. iPhone
25. iPhone
26. iPhone
Muchas Gracias, Señor Edward Snowden !
I notice that Slashdot commenters often find ways to justify abuse.
One problem is not Apple offering a 16GB iPhone, it is that those who want more must pay 20 times Apple's cost.
Although Tim Cook tries to imitate Steve Jobs, he clearly does not understand how to do that. Steve Jobs did everything necessary to positioning Apple products at the top. Offering a new model of iPhone with only 16GB is a sure way to get negative comments, and it did.
Steve Jobs was extremely abusive, biographical books say, but he was aware of the effect of every aspect of advertising and how even minor items might be received in people's minds.
Books: The Little Kingdom: The Private Story of Apple Computer published in 1984, gives the early history.
See page 84 of this book: iCon Steve Jobs: The Greatest Second Act in the History of Business. Quote: "Steve was not only very rich but pulling a quarter of a million dollars a year out of the company in salary, yet he refused to let any of his engineers receive more than $30,000 a year, the lowest salaries of any engineers at Apple. He considered anyone working less than 80 hours a week to be wimping out."
Same here. I just bought a 16 GB ipad mini. They are available with more memory; I don't have any need for more. Sure we COULD fill the storage if we wanted to shoot a bunch of pointless video with it, but that's not what we want to do with it.
We use it for abcmouse.com and a few apps which my toddler's preschool uses. My toddler won't be shooting feature films with it, she'll be using abcmouse and the PBS Kids app. We'll probably use all of 64 MEGAbytes.
> Seriously I see a 16 gig class 10 card on alibaba for $1 in bulk
Those are actually borderline useless 128MB microsd cards with the filesystem tweaked [1] to show up as 16 or 64GB
[1] http://www.ebay.com/gds/All-Ab...
Hey Apple! Make a phone that fits in my pocket!
> When is Apple gonna wake up from the reality distortion field and make a product that makes technical sense.
When they stop being the largest and most profitable company in all of recorded history, with the number 1, 2 and 7 best selling phones on the planet?
Duh.
One problem is not Apple offering a 16GB iPhone, it is that those who want more must pay 20 times Apple's cost.
Your cost analysis isn't a useful one though I think I understand the point you are trying to make. Apple has gross profit margins around 40% and around 56% of their revenue comes from the iPhone. Gross profit is revenue minus cost of goods sold and is a crude measure of the raw profitability of a product before you pile on the costs of running the company and selling the product. While Apple doesn't break out their numbers for cost of goods sold for the iPhone line, it's not hard to prove that even if everyone were to buy the more expensive product, Apple doesn't receive anywhere close to a 20X bump in gross margins. The marginal profits received from the more expensive models is meaningful but it's not an improvement to the degree you are implying.
(Disclosure, I'm a certified accountant in my day job - among other things)
Steve Jobs did everything necessary to positioning Apple products at the top.
They position their brand near the top but not always the products themselves. Apple often starts their products at or near the top of the market but they routinely sell products that are no where near the top of the market. In phones and tablets and ipods this is simply their older models which they continue to sell. In PCs they sell computers that are designed for market tiers below the top. I have a Mac Mini myself that even when it was first introduced was no where near state of the art and wasn't designed to be. Apple HAS to provide products that aren't at the top of the market because if they didn't their competitors could easily undercut them from the bottom end of the market. Apple doesn't want to compete on price alone but they cannot ignore lower tier market segments.
Offering a new model of iPhone with only 16GB is a sure way to get negative comments, and it did.
Only by people who wouldn't buy one anyway. The 16GB model is probably not intended for you. It is intended for people like my Dad who uses about 3 apps and doesn't take a meaningful amount of photos or video and isn't trying to store a Library of Congress worth of music on his phone. He uses less that 8GB of storage on his phone and that isn't likely to change. Providing a 32GB model would cost Apple money and really only benefits a relatively tiny group of users who happen to need more than 16GB but less than 32GB. I'm pretty sure Apple has done the research and if a 32GB unit would result in them selling more units then they would make one. I am certain that there is a very large group of users like my father who want the basic features of an iPhone but simply don't use much storage.
Of course, 16GB is too small - unless you want a smartphone for email, web, messages, maps, etc etc, and don't plan on shooting any HD video.
Which describes a HUGE number of users out there including my parents, my in-laws, the owners of my company, and probably 2/3 of my aunts and uncles. Don't make the mistake of thinking everyone users their smartphone the same way you or I do. I use close to 100GB on mine. My father uses less than 8 and there are many more like him.
I have a 160GB iPod classic for music, and a camera for photos. Separate devices are better. All I need is that bag of holding to keep them all in...
Separate devices are not necessarily better. I have a 128GB iPhone and it stores my entire music collection and all my point an shoot photos and video with room to spare. What benefit would I get from carrying around separate devices if I don't need specialty performance? If I need the performance of an SLR camera then sure, I'll carry one but that is pretty rare. And most people feel the same way. That's why iPod sales have dropped, point and click cameras have plummeted, etc. People don't want to carry around 3 devices when 1 will do the job fine. Thanks but I'll carry around just my smartphone which will serve me very well 99.9% of the time.
I have heard an argument from the corporate IT side that Apple needs to continue to offer the 16gb model for the sake of corporate clients, who don't want to stuff them full of data or apps, but want to tightly control what apps are on them, and need little more room for anything else. As they're not going to make one just for corporations (this is Apple, after all â" scaling & possible scaling down the road, or they're not going to do it), they might as well make it the baseline version.
brwski
"Because without beer, things do not seem to go as well''
The problem is the price. I agree that 16GB is low for a $650 phone.
iPhone 6S comes with features — like the ability to shoot ultra-HD video — that are going to fill up a 16GB phone in the blink of an eye
The author obviously never bought an iPhone himself.
When you try to buy an iPhone from Apple's website, just next to the options for memory size, it has a helpful link saying "How much storage is right for you?", and if you click it, this passage pops up (emphasis mine):
iPhone 6s and iPhone 6s Plus come in three storage sizes: 16GB, 64GB, and 128GB. The term “GB“ stands for gigabytes. The more gigabytes you have, the more content you can store on your iPhone, such as apps, games, photos, HD videos, music, and movies. For example, if you have a large music or photo library or lots of apps, it’s a good idea to consider an iPhone with a larger storage capacity. If you rarely download apps or you don’t take many photos or videos, an iPhone with a smaller capacity may be better for you. When deciding which size to choose, be sure to consider how your storage needs may change over time.
So the author is basically saying, the 16GB model which Apple also told you is only good if you don't take many videos, will easily be filled up if you, duh, take many videos! No shit, Sherlock!
As usual, every time year when Apple releases the new iPhone model, there are these troll pieces coming out trying bait readers. Happens every year.
Oliver.
Apple wants you to use iCloud; a good way is to sell you a 16 GB phone, and then an iCloud subscription when you don't have enough storage for your photos or your music (and maybe Apple Music on top). With the new iCloud pricing of $12 per year for 50 GB, it is not such a bad deal.
I prefer however to buy a 64 GB version and not be dependant of Apple's services, whose reputation is not as good as their hardware.
Most of them zombies do the same thing over, and over, and over again, without realizing the emptiness of their action
We're discussing Apple iPhones, not last night's Republican presidential debate.
That's funny because I read another article stating that 16GB vs 32GBis around $7 in manufacturing cost difference. Wow, what a margin! The author is sooo right.
I can buy a 32 gig thumbdrive for 9 bucks. Apple is buying in quantity, 32 GB chips couldn't cost them more than a couple bucks. Screwing your customers for a few cents is a great strategy if you don't want them coming back, this is a stupid move on Apple's part. I was seriously thinking about upgrading to a 6S, now I'm going to hold off.
Never let a lack of data get in the way of a good rant.