Steve Jobs and Apple announced the much-anticipated updated 3G version of the iPhone today. Reviewers and bloggers are impressed with the new features, clearer connections, slimmer model and new updatesÃ¢â‚¬â€ but most of the world will be talking about the new price. Previously $399, now only $199.
That’s a 50% price slash for a new product in a world where newer usually means more expensive. Most Apple fans and Mac-aholics were shocked when Steve Jobs announced a reduction in price during the roll out of the first version of the iPhone. But this is a whole new ball game.
When the iPhone was first unveiled over a year ago, a major sticking point for potential buyers was the price. $599 was too steep for the average cell phone user to make the switch. A few months later with some needed updates, the price dropped down to $399. Early adopters were fuming and Steve Jobs tried to console his lovelies by offering a nice little $100 Apple gift certificate.
Now with a $199 price tag, the real question is how can Apple afford to do this? The first part of that answer has to do with the exclusive carrier of the phone’s service – AT&T. According to a NYTimes article about this:
The carrier will no longer give a portion of monthly usage fees to Apple. Instead carriers will pay Apple a subsidy for each phone sold, in order to bring the price from $399 down to $199 for the 8 Gigabyte model. The company did not specify the amount of the subsidy.
In addition to the new upfront revenue for Apple, AT&T is banking some extra coin by bumping its monthly data service charge up to $30. It was previously only $20. However, some might argue this isn’t a big gouge, because after all the new 3G service and network is heralded as being faster and clearer than the previous one.
Many Apple investors are creaming their pants over these new pricing models for Apple. For one thing, with a more standard up-front purchasing model with AT&T, Apple can standardize how it sells the iPhone internationally. Asian and European markets will be more likely to get on board. This is bad news for AT&T, because Apple doesn’t need to care about young punks ‘unlocking’ the iPhone for different wireless services anymore. That’ll hurt AT&T’s exclusivity leverage.
But what if you stupidly bought the old iPhone just a few weeks ago? According to Apple, if you bought an old-iPhone after May 27th, you’ll get the new 3G one for free. Hooray! Sucks for everyone who went on that big May 26th shopping spree.
I think the new updates, better reception and more marketable price tag will give the iPhone the edge going forward. I can’t really see how similarly priced phones can compete with all that innovation and demand.
Actually when they start kicking this new version out on July 11, I may even get one. Let us know what you think in the comments section.
NYTimes: The Cost of the $199 iPhone, June 9, 2008
Gizmodo: iPhone 3G First Hands On, June 9, 2008