July 25, 2007
From the desk of Jane Galt:Winterspeak notes that fewer iPhones were sold than expected, and says:
It may be still to early to say, but perhaps, for all its wizardry, the iPhone is still not good enough as a phone to convince people to switch. I've always contended that cell phones need to be cell phones first, which means focusing on 1) reception and 2) voice quality. I did not see much in the iPhone's marketing material about 2), and AT&T is not known for 1).If the iPhone does dissappoint, I'm sure that tech pundits will say it's because it's a closed platform, without any third party applications. I think the real reason will be that it's missing some core phone basics, and because it's too expensive for something as fragile and losable as a cell phone.
My diagnosis dovetails with his: it costs $600, with no special for signing a contract, and forces you to switch to AT&T's inferior network*.
Churn is very, very expensive for phone companies, so they generally pay consumers not to switch, by offering them a new phone every time they sign a new contract. In effect Apple thought its phone was good enough to capture those rents for itself: instead of paying you to sign a lengthy contract (by giving you a discounted iPhone), Cingular instead tried to pay Apple to make you come on board. If the early sales figures are right (and don't suddenly pick up), that will be evidence that the features of the phone are not enough to force large numbers of consumers onto its network.
The iPhone is really, really cool. It would be a category killer if it were sold like a normal phone. But at the current price (including the network switch) it's not worth it to a lot of consumers. Even many of my super-gadget-geeky friends have declined the honour. As will I unless they start selling it more like a normal phone.
* Yes, I know that this depends on what city you're in, but in many areas where the iPhone's target audience lives, it bites weasels. Being awesome in Chicago and Atlanta is not enough to overcome this. And no, Apple didn't go to AT&T because it's GSM and they wanted to make their phone work worldwide. They approached Verizon (CDMA) first, but since Verizon has the biggest network and the largest customer base, they weren't willing to make the concessions Apple wanted to do the deal.
>The iPhone is really, really cool. It would be a category killer if it were sold like a normal phone.
Do you mean a normal landline telephone that can be used anywhere, or like a status-quo cell phone sold at discount with a contract?
The second would be great, but the only material difference between that and the current state of the iphone is the discount. So that's like saying "It would sell better if it were cheaper."
The first case would really be something, but they'd have to double the # of iphone models (or add more hardware) to account for both types of networks, and you'd lose the "visual voicemail" feature until all such a thing is standardized among providers. Furthermore, you'd still probably want to sign a contract since pay-go plans are more expensive. One would hope that the contract terms would be less onerous than the terms for discounted phones, but that isn't very likely.
Maybe the best case scenario would be the option for a voice-only plan and just ride free wifi when it's available, as the current data connection is crap. They've cracked the phone to allow you to do this, but it requires a pay-go plan for the voice service (on AT&T).
I have to say that one of the ways I talked myself out of an early iPhone is my long and sad experience with Cingular (now ATT) in my rural Upstate locale. It's the only local provider that reliably can handle my apartment, but I get between no and next-to-no reception in my office building. Soooo...a cool toy I can't show off at work?
"In effect Apple thought its phone was good enough to capture those rents for itself: instead of paying you to sign a lengthy contract (by giving you a discounted iPhone),"
I suspect that a cheaper phone or cheaper service is coming down the road. It's just that Apple knew that there would be a "fanbase" who would pay the "early adopters tax" for the iPhone, and the current pricing is to get that money while they can.
But knowing Apple, the iPhone may become more economical, but never "cheap". But they'll make up for it by adding value to the phone, with more features and better features.
Which is why the iPhone will not be open to multiple carriers anytime soon. Apple wants to be able to push whatever network they are joined up with to certain levels of quality and features. I suspect that part of Apple's contract with AT&T is that they have to make certain improvements and investments in their network.
If AT&T fails to meet Apple's expectations, there are probably some "outs" in the contract that will allow them to leave AT&T before the five years are up. They've been burned by partners before, when IBM promised to get the G5 processor to over 2.0GHz, and failed to do so for two years, which embarrased Apple to a great degree.
Apple will sell it at more normal prices in the next 12-18 months; look at the iPod for Apple's true product rollout intentions.
Until then, the AT&T network is what stopped me. But that's it -- I'm an admitted fan of Apple hardware/software, and the user interface plus a full featured web browser intrigue me greatly.
I think people keep forgetting about the lead time to cancel a cell phone contract. I may be odd in that I am willing to pay the $600 for the phone, but I draw the line when my current provider demands another $150 as an early cancellation fee. Unless something odd happens to let me out of my contract early, I will be waiting a bit longer.
Well, I've had Cingular(ATT) service for years, and the reception here (in Michigan) is good. And having a world phone that worked on trips to Europe has been quite handy, too.
But the iPhone? Nope. Too expensive, too fragile, too big. No way I'm going to carry that around in a pocket everywhere like I do my Razr. A wifi-enabled, cell-network enabled, media-playing tablet might be very handy (though not for $500), but it won't ever serve as my cell phone.
People just don't understand how Apple works. This is forgivable in the general public, but pretty sad in journalists.
Apple ALWAYS starts at the high end of markets, skims the cream, then moves down. The MacBook Pro will always ship before the MacBook. The iPod Shuffle didn't come first.
They shipped the most expensive iPhone they thought they could get away with first. Next, we will see progressively cheaper iPhones as Apple moves down the market.
They do this every time, it should come as no surprise to anyone.
My wife got a free iPhone from work. She declined, because it was less functional than her Treo 650. Everyone acted shocked, until they tried to use theirs for email and texting.
3rd gen iPhones will rule - when they come out.
They've been burned by partners before, when IBM promised to get the G5 processor to over 2.0GHz, and failed to do so for two years, which embarrased Apple to a great degree.
I think you've got that backwards: Apple is notorious for burning suppliers by demanding comparatively limited volumes of hardware in specializied configurations, and letting their marketing department promise specifications (which are then changed whimsically according to current market breezes) long before the supplier has formally confirmed that they can deliver on those specifications.
Anony: His statement matches my understanding of that particular instance, however.
Plus the article that all this links to (the original one expired, but here is another one) doesn't quite say what the writeup claims.
It talks about lower than "expected" activations in the "first two days" after release.
Remember the bitching about how AT+T's network was overloaded and people couldn't activate for those two days?
This sounds an awful lot like a complete non-story* - especially since claiming fewer were sold "than expected" makes one wonder whose expectations were being disappointed? Apple's never released a target number for the short term to have missed.
* Which, honestly, describes most of the blathering "news" stories about the iPhone all around.
(Full disclosure: Don't own one, not going to anytime soon. Not in the market for a PDA phone at all, which is the reason. Rather have one than any Windows Mobile or Blackberry, however.)
It's 600 dollars.
For a phone that, at the end of the day, is marginally more useful than the 40 dollar model you can get @ Sam's Club.
Still 200000-300000 is a lot sales for something like that @ that price point. But Apple made the same mistake that Sony made with the PS3-- thinking people were willing to pay through the nose for something that, while technically brillant, is still just a video game machine (or a cell phone).
I think a few people here have it right (Levasseur, Rob, Pr9000).
You get the product out there, and then tweak successive generations. It may be $500 or $600 now, but overtime you will refine existing features, add new features, and lower the price and differentiate the models in the product line.
Then after a two or four year hitch with At&T, they team with, say, Google.
Is it not odd that Google is bidding for phone spectrum, and attempting to change how phones are sold, where the purchases of the phone do not have to be tied to any one network. Hmmmm.
Everyone ought to see that handwriting on the wall. If Google gets what it seeks (and the standard phone companies are fighting it), it would allow buyers to chooose whatever phone pleases them and run it on across that new spectrum.
It's not merely about a phone, or talking on a phone. It's about changing what phones can do, and changing the system by de-linking handsets from service.
So for now, Apple will be content to sell a few, tweak its product, build loyalty, add quality, and then... make a broader more economically beneficial move when the time is right.
The iPhone is really, really cool. It would be a category killer if it were sold like a normal phone. But at the current price (including the network switch) it's not worth it to a lot of consumers.
Right. It's not exactly like Jobs is giving the things away.
Thing is, people have grown accustomed to crashing technology prices, so, expectations are that prices will come down.
That said, I really really lust for the superduper mobile browsing the Iphone apparently provides. That to me is a killer ap. I need it for work (and no, a laptop doesn't work for me because I'm on the go, and on my feet, and need a small device I can use when I'm not sitting down). The research I've done tells me that pretty much everything out there besides the IPhone uses an inferior browser, and doesn't come close to giving one the rich browsing experience you get with a computer (I'd be elated to find out I'm wrong on that score). From what I can tell, the IPhone does. The AT&T situation's not even an issue for me, but the price is. I can survive another year or two if I have to wait for prices to come down.
What occurs to me is that it is going to be difficult to browse the net while talking on the phone, something I frequently find myself doing.
Winterspeak notes that fewer iPhones were sold than expected, and says:
1. It's fewer iPhones activated than expected, not sold.
1b. That includes the fact that AT&T had problems with activations because they were overwhelmed by volume.
2. The "expectations" were simply WAGs by analysts; they weren't really based on anything at all.
3. The time frame for these "early sales figures" is two days. The iPhone was introduced on June 29, and Q2 ended on June 30.
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