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Apple iPhone Price Drops $200
Steve Jobs offers merchandise credit to early buyers
tedster




msg:3443662
 2:37 am on Sep 7, 2007 (gmt 0)

Apple is dropping the price of a new iPhone from $599 to $399 - and the early adopters have been might unhappy about it. Steve Jobs personally answers them in an article on the Apple website:

...even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these.

Therefore, we have decided to offer every iPhone customer who purchased an iPhone from either Apple or AT&T, and who is not receiving a rebate or any other consideration, a $100 store credit...

[apple.com...]


 

carguy84




msg:3443687
 3:23 am on Sep 7, 2007 (gmt 0)

The $100 credit is totally unnecessary, unexpected and very cool. I got my iPhone for free, and I know the danger of being an early adopter, but I think such a big price drop so fast would have tweaked me a bit.

zett




msg:3443758
 6:52 am on Sep 7, 2007 (gmt 0)

I am reading into this: holiday season is coming up, and in the purchasing discussions ATT lowered their order volumes big time. Basically, they told Apple that they won't be able to sell the phone at $599. At least not in the quantities they envisioned after the launch.

What do we learn from this?

1) ATT has the market power here; without ATT, the iPhone is dead. Apple was unable to "turn around" the market. That exclusive deal with ATT did not help much as it is giving ATT the market power. They can now basically dictate the prices.

2) The iPhone seems to be either a cool gadget (and purchased by geeks at $599) or a very expensive phone (and hence purchased by not so many at $599). The mass market does not buy expensive phones. They like affordable phones.

3) The $100 voucher announced in a letter by Jobs indicates that something went really really wrong. Apple did not expect this kind of market reaction. (Also, the discount is apparently coming from Apple only, so ATT seems to say: "Apple, this is YOUR product. We don't care whether your early adopters paid too much or not.")

Nice try, Apple.

Marshall




msg:3443780
 7:38 am on Sep 7, 2007 (gmt 0)

First, $100 store credit - big deal. You 're still out $100 and what's $100 store credit actually costing them!? $20?

And it is curious how close this follows the story of the New Jersey teen who hacked the iphone [webmasterworld.com].

Marshall

Angelis




msg:3443793
 7:57 am on Sep 7, 2007 (gmt 0)

If you are going to spend $599 when something first comes out and then moan about it then it should fall on deaf ears.

I never buy anything when it first comes out because the price ALWAYS drops after a short period of time. The fact in this case its only a few months is irrelevant.

jeffgroovy




msg:3443809
 8:22 am on Sep 7, 2007 (gmt 0)

I got my iPhone for free

Just curios, but did you click on one of those free iphone ads and it actually worked, or did someone buy it for you?

gibbergibber




msg:3443821
 8:31 am on Sep 7, 2007 (gmt 0)

--1) ATT has the market power here; without ATT, the iPhone is dead. Apple was unable to "turn around" the market. That exclusive deal with ATT did not help much as it is giving ATT the market power. They can now basically dictate the prices.--

I think Apple missed a huge opportunity here: release the iPhone without any operator affiliation, sell it at a profit straight to the consumer just like the iPod, without any locking to any network.

Phones don't actually cost that much to buy outright any more, a high end unlocked phone can be bought in Europe for about $300 to $500 plus taxes. This is in the same sort of price range as a high end iPod in Europe.

No US network would dare shut the iPhone out, and shutting out unlocked phones could well be an illegal anti-trust action anyway if Apple (or anyone else) took it to court. Apple would have total control of their product, iPhone users would be able to switch networks at will, and an entire new mainstream market of unlocked phones would be opened up in America with Apple leading the way.

This kind of market can work, many countries have electrical stores full of unlocked phones and people buy them just like they'd buy an iPod.

Apple could still do this, assuming they haven't signed a long term agreement with AT&T (and if they have, well... then they were stupid for tying their hands so early on).

--2) The iPhone seems to be either a cool gadget (and purchased by geeks at $599) or a very expensive phone (and hence purchased by not so many at $599). The mass market does not buy expensive phones. They like affordable phones. --

The average sale price of a mobile phone worldwide is about $100 (with all taxes, subsidies etc factored out). What's more, the majority of the phone market is in developing countries, where many people actually rely on these devices as their only phone line. They don't want flashy expensive gadgets, they want something simple and reliable which will keep them in touch with the outside world. The average phone sale price has been going down consistently as the overall market has grown, so it's precisely the wrong moment to try and gain significant market share entirely through high end phones.

But I don't think Apple does want significant market share, I think they'd be happy to stick with a profitable-but-tiny 2% or 3% of the phone market.

There's a big big misconception about Apple, people think they're a mass market manufacturer but they're not, they're a luxury item manufacturer. Apple's products tend to be relatively expensive and bought by a relatively small number of people, and are bought for their design and brand above all else.

Separate music players including the iPod are only bought by perhaps 50 million people a year at most, whereas mobile phones sell over 1000 million a year and growing.

Even if Apple captured 100% of the separate music player market and converted them all into using iPhones (a fairly unlikely scenario), that would still only give them a 5% phone market share overall, which would put them in fourth or fifth place.

Interestingly, 5% is somewhat similar to the market share of Apple's Macintosh computers, which have the same relatively high prices and brand-and-design sales pitch.

pontifex




msg:3443883
 10:14 am on Sep 7, 2007 (gmt 0)

The WHOLE iphone hype is totally unnecessary. Any publicity is good publicity, someone once said. So, should the world not ignore the whole product? :-)

P!

iThink




msg:3443917
 11:16 am on Sep 7, 2007 (gmt 0)

China and India are the biggest markets in the world for new mobile phone handsets now a days and these $399 phones are not gonna fly here, doesn't matter how much they are hyped.

lgn1




msg:3443949
 12:14 pm on Sep 7, 2007 (gmt 0)

If you are going to ride on the bleeding edge all the time; then you should expect to draw blood occasionally.

Thats the price you pay for impatience and impulse buying.

The store credit was a nice marketeting ploy by Apple however. This is the type of people you want to come back and back to your gadget store.

ogletree




msg:3443953
 12:16 pm on Sep 7, 2007 (gmt 0)

Why is this on front page? Are we digg now?

weeks




msg:3443965
 12:28 pm on Sep 7, 2007 (gmt 0)

Ogle, I believe the iPhone and mobile web in general deserves more, not less, discussion among webmasters. The mobile web is going to change biz model of many sites in ways we cannot predict.

More interesting to me is how the iPod is now a way to access the web. Is this an important development? I think so, but I'm not sure. And, if it is important, how?

ebound




msg:3444038
 1:51 pm on Sep 7, 2007 (gmt 0)

Question to those that have an iPhone - is it even worth $399?

amznVibe




msg:3444085
 2:56 pm on Sep 7, 2007 (gmt 0)

Why didn't Apple just wait until November to do the price drop which would have made existing customers less jadded?

I bet sales flatlined at $600, all the suckers were gone.

Good luck on the next over-hyped product.

Wait for the Meizu M8 (iphone clone).

rogerd




msg:3444144
 4:01 pm on Sep 7, 2007 (gmt 0)

This is a common enough approach in many industries. If you look at supply and demand curves, they will intersect at some middle ground. Instead of introducing a new product at that price, you introduce at a very high price to convert as many sales as you can from the customers who are willing to pay. Then, after time passes, you either drop the price a notch or introduce a new model at a somewhat lower price to convert more customers. After more time, you repeat the process. In essence, you are maximizing profits by stair-stepping down the demand curve.

What's surprising about this is the rapidity and magnitude of the price reduction and the fact that it's a simple price cut, not the intro of "iPhone Lite" or something. I can imagine that even some of Apple's True Believers will feel a bit taken advantage of.

carguy84




msg:3444194
 4:33 pm on Sep 7, 2007 (gmt 0)

gibber, don't forgot, AT&T had to outlay some serious cash to redo their voicemail network for the iPhones voicemail functionality.

Just curios, but did you click on one of those free iphone ads and it actually worked, or did someone buy it for you?

It was a gift, I let my neighbor borrow a car for a month and he bought it for me to say thanks.

The phone is the COOLEST phone I've ever owned, and it does almost everything perfectly, except email. The email client is easily the worst ever. You can't delete messages fast, even if you set it to check every 15 minutes, unless you're on wifi it really is only ever hour. It is SLOOOOW to open an email. If you're coming from a Blackberry, it is near impossible to live with. But the browser, youtube integration, google maps, ipod functionality... is well worth the hassle so long as in your mind you know they're going to fix the email client soon.

Oh and I don't like not having a real keyboard.

chocorol




msg:3444228
 4:54 pm on Sep 7, 2007 (gmt 0)

I think the price drop has something to do with the release of the new iPod Touch, which is actually an iPhone without camera and phone capabilities.

Rugles




msg:3444281
 5:38 pm on Sep 7, 2007 (gmt 0)

Gee, I am shocked people are no longer lining up to pay 600 bucks for a cell phone.

potentialgeek




msg:3444291
 5:50 pm on Sep 7, 2007 (gmt 0)

If the price drop is so significant to you, should you have bought one in the first place? Are the complainers teens or college kids who had to check their sofas to afford one?

I guess it makes sense that impatient kids who couldn't wait till the price dropped are quick to complain.

I wish Jobs hadn't got defensive. I thought he was cool until this. If you have a cool product, make no apologies.

p/g

europeforvisitors




msg:3444392
 7:41 pm on Sep 7, 2007 (gmt 0)

>>No US network would dare shut the iPhone out, and shutting out unlocked phones could well be an illegal anti-trust action anyway if Apple (or anyone else) took it to court. Apple would have total control of their product, iPhone users would be able to switch networks at will, and an entire new mainstream market of unlocked phones would be opened up in America with Apple leading the way.<<

U.S. cellular phone networks use several different standards, not just GSM, so not all users can switch networks by inserting new SIM cards. Also, U.S. mobile-phone users tend to be on long-term contracts, which makes it harder to change providers in many cases.

Anolonda




msg:3444451
 8:44 pm on Sep 7, 2007 (gmt 0)

Apple-aniacs make me smile. >sigh<

tictoc




msg:3444453
 8:46 pm on Sep 7, 2007 (gmt 0)

Apple does not have to give this $100 credit. That is very nice of them to do this. Good for Apple.

I am waiting for the better version to come out where it hopefully will be more advanced at text messaging and other problems fixed.

microcars




msg:3444517
 9:43 pm on Sep 7, 2007 (gmt 0)

Question to those that have an iPhone - is it even worth $399?

imo- yes and I thought it was worth $499

I really did not understand what I was missing until I was given one as a gift and dumped my RAZR.

I got one for my wife after seeing how it actually worked.
I hate cell phones.
This one stays in my pocket all the time now.
I have a dozen email accounts to check and a forum to moderate.
no problem.

We both went to NY this week and it is the first time I have not taken a laptop with me on a trip. The only thing I missed was not having a particular database with me.

I am pretty sure that Apple planned this all along, they did what is known as "walking the price curve".

There are always some people (apparently almost 750,000) that are willing to pay to be an early adopter.
Apple got each and every one of them in 2 months and rather than let sales stagnate, they moved to the next group of people willing to pay $399 for one.

If you go listen to their last Q financial report, they hint at this.

Even with this "store credit" thing they come out way ahead.
In addition to the media promotion for the new iPods, they now have MORE media exposure for the iPhone 2 months after it came out and now a whole new group of people are going to be interested in it simply because it is cheaper.

those of you that think it is just a toy or a fashion accessory have obviously not used one.

The friend who bought me one as a gift did so as a "thank you".
He uses his cell phone constantly, never shuts up.
I thought his son might be interested in the iPhone, but once he saw it, he had to buy one for himself and it has changed the way he communicates now. He had no interest in a "smart phone" before this.
And I had no real interest in an iPhone for myself until I got one.

zafile




msg:3444564
 11:14 pm on Sep 7, 2007 (gmt 0)

IMHO, iPhone = Newton

jecasc




msg:3444892
 9:41 am on Sep 8, 2007 (gmt 0)

Strange thing. I have a 35 EUR Motofone F3 that I carry around more for emergency purposes. Only my office has the number and my family. And if my office gives my number to anyone hell breaks loose.

If someone wants to reach me he has to call my office, and if it is important they call me and I call back.

95 percent of the calls are either not important or not urgent and can be handled later when I am back - or never. Same goes for emails. If they cannot handle an issue in my office they call me and ask - if it's important and urgent.

If its not important they are not allowed to call. If it's important but not urgent they are not allowed to call. No way I would need a 500$ phone with the few calls that reach me this way. Or answer emails while I am not in the office.

It always pisses me of when I am in a meeting with someone and his 500$ phone rings and then he breaks the conversation to handle some unimportant business.

I sometimes have the impression its not the call that really matters to some people but the opportunity to try to impress me with their cell phone. I always wonder how people even can get some work done without filtering of phone calls. Also many people don't seem to have any private life anymore. Or don't concentrate on the people they are around with and talk to someone on the phone instead of talking to the people that are present.

Sometimes if you are in a train and you sit next to some seemingly bored business buffoon you can imagine the guys in his office rolling his eyes when he calls in every ten minutes on his 500$ business buffoon phone and disturbs them with no real business whatsoever. Presumably to check if the office is still there or something.

Sylver




msg:3444969
 1:37 pm on Sep 8, 2007 (gmt 0)


--2) The iPhone seems to be either a cool gadget (and purchased by geeks at $599) or a very expensive phone (and hence purchased by not so many at $599). The mass market does not buy expensive phones. They like affordable phones. --

The average sale price of a mobile phone worldwide is about $100 (with all taxes, subsidies etc factored out). What's more, the majority of the phone market is in developing countries, where many people actually rely on these devices as their only phone line. They don't want flashy expensive gadgets, they want something simple and reliable which will keep them in touch with the outside world. The average phone sale price has been going down consistently as the overall market has grown, so it's precisely the wrong moment to try and gain significant market share entirely through high end phones


I live in Thailand and travel a fair bit in South East Asia (mostly developping countries). $100 is pretty much entry level for a basic cellphone. The average cell phone costs $200 and the demand for the gadget phones is huge.

I think you really don't understand these people. The folks buying $400 cellphones are not the rich.

Yes, a lot of folks earning $150/month *DO* spend $200 up on a cell phone. Insane. But they do. And the $300+ segment is extremely popular as well. 3 MegaPixels cellphone/cameras with MMC cards and stuff are really hot items here.

There is also a huge second hand market where you can get used $500 phones for $350, and resell it in a blink if you are strapped for cash.

However the really interesting issue here is what's coming next. Internet telephony is a mature technology and requires only a half decent Internet connection.

And Internet connexion using a cellphone (3G) is becoming increasingly viable. In fact I sometimes call overseas with Skype or another VOIP sytem through my cellphone Internet connection ($8 for 50 hours). Still pretty buggy, but assuming connection speeds keep increasing, it will be possible to have a real cellphone, out in the woods, calling to another cellphone on the other side of the planet, free of charges. Most decent cell phones can run custom java programs, so hooking up VOIP in a cellphone is pretty much done. Computing power is there, OS & software are there too, and the connections are not that far behind. Picture that. You buy a phone and from there on, all the calls are free.

Phone networks are in for a serious headache. I think we are going to see some major changes in the next few years. If they succeed creating decent Internet connections through cellphones, they can kiss goodbye to most of the phone charges.

Trax




msg:3444972
 1:45 pm on Sep 8, 2007 (gmt 0)

All i want to know how is how they will price them when they are offered outside the US... anyone read anything about that?

[edited by: encyclo at 4:43 pm (utc) on Sep. 8, 2007]

microcars




msg:3445225
 7:04 pm on Sep 8, 2007 (gmt 0)

All i want to know how is how they will price them when they are offered outside the US... anyone read anything about that?

and you won't read anything accurate about that until Apple officially announces it.

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