Why The iPhone Will Be A Flop
I love Apple fanboys. They never stop drinking Apple’s Kool-Aid. See this latest piece in support of the iPhone. It’s wrong in so many places. Let’s examine.
The original iPhones will start at $499 and $599 this June.
Nope. It’s $499 and $599 with a two year contract. As Lewis Black would say, “big fuck difference”. The 2 year contract is so odious that it counts, for all intents and purposes, as an extra $100, maybe more, in the mind of customers. Every single person in America has, by now, been stuck in a two year contract they wished they could get out of, and they haven’t forgotten that. It also serves to make the item ungiftable, more on that in a second.
Look at what happened with the iPod, which started at $399 in 2001. The average selling price for an iPod in Apple’s just-reported Q2 2007 was about $160; a year ago, it was about $200.
True, the original iPod was $400, but it didn’t sell all that much, and there’s a very steep curve when it comes to price and popularity. Cut an item’s price in half and ten times as many people will buy it. The difference between $400 and $500 with a 2 year contract is tremendous.
Most importantly, because the iPod has no contract associated with it it’s a Christmas/birthday gift. In fact, it’s the gift. What percentage of iPods were given rather than purchased by the end user? From data I’ve found, it appears to be over 27% for Christmas alone. Count in other occasions and we might be over 40%. That’s enormous. Not many people have the means to give someone a $500 phone and pay the contract for two years.
There’s a difference between “phones” and “smartphones”. I have no idea how one draws the line, but a good rule of thumb is that smartphones are expensive and regular phones are free (with plans) or very cheap. Apple isn’t trying to sell 10 million phones by the end of 2008; they’re trying to sell 10 million smartphones.
The definition of smartphone is certainly murky, but I’m not sure the iPhone counts. I personally tend to think of a smartphone as one that appeals to businesses. The iPhone has no corporate appeal whatsoever. It doesn’t have push email that any corporate user could want. No big business uses Yahoo for their email or ever would, unless they come up with something similar to BlackBerry Enterprise Server. Leaving data in another corporation’s hands is understandably unpopular. And it doesn’t have a dedicated keypad, without which typing emails cannot be a very good experience. Even if their touch screen is significantly better than any that came before, it’s not going to be good enough.
Maybe I’m the moron, but the way I see it, if the iPhone’s initial price is wrong, it’s too low, not too high.
Maybe, if that 499 is in pesos. If that’s USD dollars and you think it’s underpriced then yes, you are the moron.
There are millions of people who have already spent $399â€“599 on an iPod within the last few years. With the exception of storage capacity, the iPhone does everything these iPods do, and, well, a whole lot fucking more. Why wouldn’t these same people think about spending $499 or more on an iPhone?
Are there? Where are those stats? And how many of them had 4 gb of storage?
And have ten million of them at those prices sold in eighteen months? I doubt it. I’d be surprised if there are ten million people total who’ve spent that much. And again, there’s a whopping difference between an item that costs $499 as a giftable standalone, and an item that costs $499 with a two year cell-phone contract. And a 4GB iPod that costs around $200 and anything that costs $499 with a two year contract aren’t in the same ballpark. They’re not even in the same sport.
Think about how much people would spend on a next-generation iPod that does everything the iPhone does but without the phone: Wi-Fi networking, camera, full-size touch screen, OS X with email and web browsing. Apple could (and might) sell that for $499.
Not really, especially if it only has 4 GB and doesn’t play DivX. The people who could pay $500 already have far better email and a passable camera on their Blackberry. And once again, there is a whopping difference between $499 and $499 with a two year contract. You can’t ignore the difference repeatedly; doing so destroys your whole argument.
I really do think that the biggest disconnect between iPhone fanboys and reality is the two year contract. They talk about the phone as if it’s a $499 iPod. I can’t stress enough the fact that it isn’t. It isn’t giftable. And it’s really considerably more than $499, which nobody is paying for 4 GB of storage. Make it 60 GB and we’ll talk.
Why worry about the iPhone’s appeal to corporate IT?
It’s big and bulky. It’s not a gift, so the only kind of people who can reasonably afford it working in corporate America. Those who would want (and could afford) this phone already have a Blackberry, and because iPhone uses some crappy Yahoo email, they can’t give up their Berries. And because of that, they don’t have room in their pocket for a large media player and they don’t need a phone. Why wouldn’t they just buy an 8gb Nano and call it a day?
The iPod isn’t marketed to businesses and Apple has sold 100 million of them. The iPod is marketed to people, and the iPhone is, too. RIM sold 2 million BlackBerry devices in its most recent quarter; Apple sold 10.5 million iPods in the same period.
Any phone that costs $500 (with a 2 year contract, once again) might not be specifically marketed to businesses (though the push email tells me the iPhone will be) but that’s pretty much the customer base.
And there’s a huge, fundamental difference between these two markets. Businesses, typically, want to buy the cheapest things possible for their employees to use. When buying for themselves, people want to buy the nicest things they can afford.
Is it me, or is that the exact opposite of reality? Businesses often pay twice as much for the same things consumers (who sign contracts to get phones for free) do. People are generally cheap, businesses are not. I know a lot of people in corporate America, and they all joke about how even $50,000 servers are signed for without a question asked. And Blackberries are not cheap by any means, but they’ve viewed as the nicest device in their niche.
If you want to see how ridiculous that fanboy article really is, copy it into word and then go through it and replace each instance of $499 with “$499 with a two year contract”. Do the same with $599. You’ll see immediately why I’d gladly bet the under on 10 million iPhones sold by the end of 2008.
Don’t get me wrong, there are a lot of cool things about the phone. But it has way too many warts to be a hit. It doesn’t really have a niche, and it doesn’t create one. It sort of straddles a few, but it doesn’t allow you to replace the devices in that niche. And it costs far more than a Moto Q and a 4GB Nano. It’ll sell a couple million units to the many people who have wet dreams about Steve Jobs, and that will be about it.