AT&T to cut iPhone price to $199 – right after pigs fly

iphone_pigs_fly.jpg

Yup – this rumor is everywhere. I know, I know…you want it to be true. I want it to be true – we ALL want it to be true.

BUT…do you really think the 3G iPhone is going to come out at a price point that is $200 dollars cheaper than the current model?

Sure, Forbes is a nice source – in theory anyway – but the source of Forbes source is “a person familiar with the strategy”. The writer also states the iPhone “will likely be locked or programmed so buyers can’t take the cheaper iPhone to another phone service.”

Now, if that last quote from his article doesnt’ convince you that this guy doesn’t know what he’s talking about, I’m not sure anything will…but I’ll try anyway…

Let’s ask some questions about this rumor, and see if it holds water…

Q. Would Apple allow AT&T to undercut them on their own product?

A. No. Sure, Apple has let a discount like this happen in the UK (which is probably how this whole rumor started in the first place), but that’s in a completely different market, and what they’re doing is clearing out inventory in an area where the iPhone has not sold as well as it has here in the US.

I do not believe Apple is going to allow At&t to sell their product for less than you can buy it in an Apple store.

It doesn’t even make sense.

If you go into an Apple store and pay $399 or $499 for this device, you are still forced into a 2 year contract with At&t. You think either company is going to get away with that?

You’ll have furious customers who purchase the phone at the Apple store who demand their $200 back – either from Apple or from At&t…and they’ll get it…or they’ll file a class action lawsuit (that’s how things work in this country).

Q. Does Apple or At&t need to do this?

A. No. In less than a year, Apple has managed to sell more iPhones than every single competitor in the US cellphone market, except RIMM. That was with an EDGE based phone, and no 3rd Party applications.

Now we’re talking about the next generation of the iPhone – with 3G and more 3rd Party applications than you’ll be able to count, from a variety of major sources…and Apple is going to allow the product to be devalued to $199?

I don’t think so.

At&t has no motivation to do this either – they are already having to pay Apple a chunk of the monthly revenue, and the device is selling like mad – why would they put themselves further in the hole? Especially since their is no guarantee that the iPhone will stay exclusive to them forever?

We’ll know for sure about this in a little over a month, but as far as rumors go – this one just doesn’t hold much weight. The sad thing is, this will spread like wildfire all over the place – then people will be disappointed when it doesn’t happen, and they’ll have already priced it at $199 in their minds – making it seem over-priced when it is actually released.

I hate rumors.

Comments

  1. >Q. Would Apple allow AT&T to undercut them on their own product?

    Simple solution to this one is to have the subsidy come in the form of a mail-in rebate that requires two year contract activation.

    >Q. Does Apple or At&t need to do this?

    Do they NEED to do this? No, probably not. Does it make good business sense? Yes, definitely. Given that both Apple and AT&T get a cut of the monthly service fee, knocking $200 bucks off in the form of a rebate with activation means more money for both of them. I’m sure they’ve done the market research and figured out that if they can sell X iPhones at $499 they can sell X^X iPhones at $299. It’s the same reason they dropped the price of the Apple TV by 70 bucks when they came out with the 2.0 software. They figured if they can sell more devices at a lower price point they’d in turn get more recurring revenue from movie rentals and iTunes purchases. In the case of the iPhone it makes even more sense because they can actually predict the exact amount of revenue from a service contract based on any given number of users.

  2. Sure, iPhone sales have been great, but at its price point, it only sells to a certain demographic. Apple wants to get this technology in as many hands as possible, so at $199 or $299 i think that a lot more people would be open to getting one, not only the people with excess expendabilty. They’ve surely learned from the Macintosh of days past… that when the product is unaffordable, other, lesser companies will swoop in and take away that share.

  3. @Vincent

    Apple didn’t lower the AppleTV to a point where they were losing money on it. Its a different situation with the iPhone.

    @arajara

    Apple isn’t the one that is supposedly doing this. At&t is.

  4. I think this rumor is being spread maliciously by an iPhone competitor so that when the 3G comes out the splash will be drowned out by the whines of the disappointed.

  5. >Apple didn’t lower the AppleTV to a point where they were losing money on it. Its a different situation with the iPhone.

    I know they didn’t lower the Apple TV to the point where they were losing money. The difference with the Apple TV and the iPhone is that they know for sure how much recurring revenue will be coming in if someone activates an iPhone for a two year contract.

  6. @Vincent Colombo

    I understand what you’re saying – they know that the person buying it will have to subscribe to them, and they don’t get that from AppleTV…but as the current method of activation stands, that’s not entirely true. Per the current agreement with At&t, you take your iPhone home with you, or it shows up in the mail, and you activate it through iTunes – unless that changes there is no guarantee that an individual is actually going to sign up after purchasing.

    Regardless, I still do not believe that Apple is going to allow At&t to devalue the price of the new phone.

  7. That’s why I’d guess it would be a rebate with a two year contract activation rather than just a discount taken directly off the purchase price of the phone. I’m not saying it is going to happen, I just think it would make sense. I seem to recall Steve Jobs stating that he’d love to see the iPhone at a $99 price point eventually.

  8. wake up, they will definitely lower prices going forward (around 08 summer). sales of existing 8gb are slowing in expectations of new products and price decreases, this creates pressure for apple t olover prices. Meanwhile competition kicks (MSFT today).

    What apple did is called market skimming and is commonly used in imperfect markets when one producer has pricing power, which thanks to high tech apple had/have. Angry “rich boys” that made a fool of themselves by standing in a sheep line to pay what 600 or was it 700 for a phone 6months back can cry but they were too happy target not to shoot at. They paid (with inflated $ anyway) what they could effort. Lets focus now older and lover end products (8gb’s) to common pple, $299 sounds definitely reasonably to me. 200 down is too much, but another 100 slide for 8gb is in the cards. imho

  9. hahaha, guess you were wrong on this one!
    to bad this is one of the top match for “iphone todo recurring”

  10. @kirkjerk

    Yup – I was 100% wrong on this one. :)

    No denying it.

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