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  • Memo for People Who Bought an iPhone Before September 5

    September 5th, 2007

    I feel your pain. Understand that I don’t own an iPhone, and I’ve been going back and forth for weeks as to whether I really need one. After all, I only use my wireless phone to make and receive calls, and seldom expand the contact list beyond my immediate family and friends.

    Indeed, even though I have a 60GB iPod, and not nearly enough music to fill its expansive capacity, I don’t really travel with it all that much. In my car, I have a 6-CD changer, which is usually occupied, plus satellite radio. At home, I can listen to what I want using the Bose sound system attached to my Mac, or to my home theater system.

    Playing a portable sound system, with ear buds? Well, these days, I only use standard headphones when doing our two radio shows, and otherwise, I prefer naked ears. I take along a Bose noise-canceling headset so I can get a little shuteye on the plane. Otherwise, frankly, I just never became accustomed to spending my spare time immersed in sound with my ears covered.

    But that’s just me.

    So if I did buy an iPhone, it would be used as a phone and general portable Internet connection device. The iPod component would go largely unused. At $599, the iPhone made less sense to me, but at $399, it becomes somewhat more compelling. That is, of course, if I really want to move over to the AT&T network, and I still have some qualms about that.

    However, I want to consider the poor individual who just shelled out full price for the 8GB iPhone, or bought the 4GB version, without considering the need for extra storage — or maybe because you just wanted to purchase the less-expensive version.

    Now that Steve Jobs has cut the price by $200, can you go back to Apple and AT&T and demand a rebate? It’s certainly worth the effort, although this had to be expected at some point in time. Call it the early-adopter tax that one pays to be first on the block with a new gadget from any technology company. In saying that, it has been reported that you will probably be eligible for a rebate for up to 14 days prior to the date of the actual price reduction.

    Then again, even if I had expected an iPhone price reduction from Apple, I didn’t anticipate that it would come so quickly, or amount to $200. I might have expected $100, but it’s fair to say that Apple needed to pull a surprise on us. I should also point out that their stock price took a hit, because some analysts seem to feel the price cut was not inspired by success and greed, but the result of a falling off in demand for the device. After learning that the iPhone topped all other smart phones in July, that doesn’t seem likely, but who ever said Wall Street was particularly sane?

    As for the rest of Apple’s announcements: The “phatty” iPod nano is just a natural outgrowth of that product line. Ditto for the iPod classic with larger hard drives, particularly in light of the fact that Microsoft cut $50 from the price of the 30GB Zune, which seems even more paltry in light of what that extra money buys you from Apple.

    Indeed, the iPod touch wasn’t terribly surprising either. It doesn’t take much imagination or special creative powers to remove the telephone circuitry and camera, make the case thinner and provide most of the remaining features with a tad more Flash storage.

    I suppose one might regard the partnership with Starbucks as a neat development, particularly if you use their Wi-Fi hotspots or partake of their beverages and pastries. Having a Wi-Fi version of iTunes also demonstrates to Microsoft the real possibilities of wireless connectivity on a portable digital player.

    It’s such a logical, predictable progression, you have to wonder why Microsoft couldn’t figure it out, and confined the Zune’s Wi-Fi feature to that pathetic “squirting” process. Right now, in fact, I regard the Zune’s price reduction as little more than a desperate effort to move a failed product. It’s not something that I would regard as particularly helpful. Right! People might remind me that the iPhone’s price also went down, so maybe I’m being a hypocrite.

    The other issue that lies in the background is the skirmish between Apple and NBC/Universal. Already NBC has taken its TV shows to Amazon, which excludes tens of millions of Mac users, unless you use Boot Camp or the Parallels or VMWare Fusion virtual machines to run Windows. That, too me, is downright stupid, and it demonstrates just how far that the entertainment industry is out of touch.

    Of course, maybe it’s just a power play. But I don’t think brinkmanship is going to have much of an impact on Steve Jobs, particularly since NBC still remains a lesser TV network compared to the competition that does have product on iTunes.

    In the end, NBC will probably cave. For now, though, most people don’t buy TV shows, particularly when your cable TV, satellite provider or genuine TiVO DVR box will conveniently record your favorites for a one-time fee or modest monthly charge. And how long do you really want to keep those shows anyway, right?

    Will they ever learn? Don’t bet on it.



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    20 Responses to “Memo for People Who Bought an iPhone Before September 5”

    1. David says:

      I just finished watching the QuickTime stream of the event. To me, the products all look incredibly compelling, but the iPhone now seems like a steal at $399. The Starbucks feature is cool, but I wish they were further along in deploying it, especially considering it was two years in the making.

      Did anyone notice that there doesn’t appear to be an email app on the iPod Touch despite the wi-fi?

    2. I just finished watching the QuickTime stream of the event. To me, the products all look incredibly compelling, but the iPhone now seems like a steal at $399. The Starbucks feature is cool, but I wish they were further along in deploying it, especially considering it was two years in the making.

      Did anyone notice that there doesn’t appear to be an email app on the iPod Touch despite the wi-fi?

      Correct, so far at least: No email client. But that shouldn’t preclude you from checking your mail via Safari, using .Mac or the Web mail feature of your ISP or Web host.

      Peace,
      Gene

    3. Dana Sutton says:

      I’ve read several news reports about the lowered price of the 8gb iPhone, some (such as MacMinute) say the rollback is “for the holidays”, i. e. temporary, while others (such as Macworld) don’t mention this and make it seem permanent.

      Now, why Apple go and do this? I can think of at least three possible reasons, 1.) the original profit margin was absurdly high, 2.) the cost of manufacturing has gone down dramatically since the iPhone was introduced, or 3.) in actuality Apple has not been happy with the way iPhones are selling and has felt compelled to accept a very low profit margin in the hope of moving enough more units to recoup the difference. Of these, I suspect that 1.) was a little bit true, but not enough to account for a $200 drop, and there’s not very much truth in 2.). That leaves us looking at 3.), or at least a lot of Wall Street analysts seem to think so, since in the hours after Apple’s “The Beat Goes On” show’n’tell where this was announced AAPL has dropped $7.40. Gene says the i-Phone “topped the sales of all other smart phones in July,” but then one has to ask how well the smart phone market is doing in general. Maybe it is sluggish enough that i-Phone sales could top those of Blackberries, etc., and still fail to match Apple’s expectations. I may be wrong, but then somebody else had better come up for a more rational explanation for this price drop.

    4. BobS says:

      Gene Munster also said that his research put iPhone sales on target to make their millionth sale by the end of this quarter. Steve Jobs today confirmed that Apple is on target to sell their millionth iPhone this month. I don’t think that lack of sales factoered that much into the price reduction.

      I think it is more likely that ATT is either subsidizing phone sales or, even more likely, Apple just wants to clean up through the holiday sales period. If Apple is ruly receiving the kind of bounty that has been speculated, they can well-afford to drop the price of the iPhone.

    5. Dana Sutton says:

      Okay, there’s one more possible reason, price-cutting to become a major player in the smart phone arena, grabbing as much market share away from the competition as possible. That’s not impossible, but it raises a major question — if this is Apple’s business strategy, why didn’t they adopt it from Day One? And if they do want to be a major player both here and maybe even more in Europe by stealing market share from the competition, they really need to rethink their policy of entering into single-carrier contracts on a country-by-country basis, especially with carriers like ATT&T that provide mediocre service. In fact, if this is the current plan, it would make a lot of sense NOT to turn their legal beagles loose on the folks who want to sell software to free up the iPhone for use with other carriers. Even though this would mean losing the revenue from kickbacks from the carriers, it might be more profitable not to scare off potential purchasers (such as Gene)

    6. Aaron says:

      I’m one of the people that recently bought an iPhone (about 20 days ago). I am disappointed that this price drop happened, but this is always a risk when buying almost anything (new computer, car etc.). I do plan to go back to my Apple Store and see about returning my iPhone and buying a new, cheaper one. Even if I have the restocking fee, I’m still coming out ahead.

    7. Ilgaz says:

      This happens in every kind of electronics. I must say I am against iPhone until they release a C/C++ framework and add J2ME to it but that $200 drop can happen in any brand, device, whatever you pick.

      Look Sony just launched a 12.8 mpixel monster, I bet it must be same price with lower megapixel Sony cameras which were sold just 2 days ago.

      I would sit and enjoy my device rather than watching its price go up and down. E.g. just yesterday while browsing Amazon.com, their frightening AI advertised iWork ’06 for $80 to me, what if I purchased it just week ago and Apple released iWork ’08 for same price?

      Back in time I was making my own White box computers (Intel). It was same deal, I even remember it. I purchased Pentium 4 1800 for a very expensive price, just 2 weeks after it, Intel guys released a very higher Mhz one adding DDR (cheap) RAM possibility while they were insisting that they will stay on Rambus. I said “eh, bad luck” and continued my life.

    8. John Fallon says:

      We’ll probably never know for sure, since Apple will not disclose sales of individual products. Sales were enormous in July; but I’m sure they know very well what August sales were by now. Not market share, but real sales.

    9. Andrew says:

      The iPhone and iPod Touch don’t do it for me because of the low capacity, but the new iPod Classic has me drooling. I’ve held on to my 2nd gen iPod Mini as no iPod Nano really offered a compelling upgrade for me and the standard iPods didn’t have enough capacity to hold my entire collection AND have enough space left over to play external hard drive.

      All I can say is ONE SIXTY, now its time to give Apple more of my money.

    10. Ilgaz says:

      Surprising (and genius) move from Apple, they give $100 back to those people who purchased recently.

      Check
      http://www.apple.com/hotnews/openiphoneletter/

    11. Surprising (and genius) move from Apple, they give $100 back to those people who purchased recently.

      Check
      http://www.apple.com/hotnews/openiphoneletter/

      Read it carefully. That applies to everyone: “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 towards the purchase of any product at an Apple Retail Store or the Apple Online Store. Details are still being worked out and will be posted on Apple’s website next week. Stay tuned.”

      So if you don’t get your $200 refund because you bought the product within the 14-day deadline, you still get a $100 coupon. That’s eminently fair. Most companies would say screw you for being an early adopter and move on.

      Peace,
      Gene

    12. Ian says:

      About the price drop – in two weeks time millions of iPod touch(es) are going to go on sale. They happen to share alot of the same components as the iPhone itself. That means that those components are going to be sold even cheaper which of course results in a cheaper iPhone. I personally am going to wait untill after Christmas and above all after the iPhone is released in Europe. Thats the reason why the iPod touch does not have a mail client or a microphone. Apple does not want to scare the European telcos too much.

      Ian

    13. Dana Sutton says:

      In his open letter to previous iPhone purchasers, Steve tips his hand when he says ” 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.” That’s probably the most definitive explanation of the price drop we’re going to get. Okay, that makes sense, and Apple’s treatment of early purchasers (giving them $100 credit at the Apple Store) is fair and reasonable. But it raises a question: if Apple has persuaded itself that lowering profit margin in exchange for bigger market share is a good strategy for selling iPhones, why doesn’t it draw the same conclusion about computers?

    14. In his open letter to previous iPhone purchasers, Steve tips his hand when he says ” 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.” That’s probably the most definitive explanation of the price drop we’re going to get. Okay, that makes sense, and Apple’s treatment of early purchasers (giving them $100 credit at the Apple Store) is fair and reasonable. But it raises a question: if Apple has persuaded itself that lowering profit margin in exchange for bigger market share is a good strategy for selling iPhones, why doesn’t it draw the same conclusion about computers?

      A lower-cost product is more of an impulse purchase. As a matter of fact, a Mac mini end-cap display might push those boxes, if there’s an aggressive price, or a special bundle with Apple keyboard and mouse, perhaps?

      Peace,
      Gene

    15. John says:

      I’m not upset. I’ve had a blast and a lot of practical benefit using the iPhone for the last couple of months. This has been a historic sea change in technology. I’m glad I had a chance to participate. Now that we’re getting back $100 I feel even better.

      I don’t know why Apple cut the price $200. I don’t think it was because sales were slow. I suspect that Apple knew something about the competition or the market and they felt they needed to capture a lot of share before someone else came in with a copy. Or maybe they needed a couple of months of sales at $600 to establish the iPhone as a high end item so that it would sell truck loads at the lower price.

      Apple has been developing this for several years. Their marketing guys have been studying this for at least as long. The price cut was not a casual decision. I’m not saying they made the right move, I’m saying they are in a high stakes poker game and we barely know the rules or the players or the stakes. I can’t wait to see the next play.

    16. Ilgaz says:

      Of course they have their own agenda as a huge company but this is a genius PR move and I couldn’t find any such example.

      People taking those $100 rebate products will feel they are loved by Apple. I mean the majority.

      If I were them and I would use the chips/screens whatever on new products, I would announce it publicly too. Why? Well, people finally started to figure the environment issues. People should look up how much water/energy etc. needed to make a silicon chip to get amazed.

    17. Jon says:

      IMHO, we’re going to see the iPod classic disappear by this time next year and, by MacWorld ’08, we’re going to see the iPod touch and iPhone with more memory.

    18. Regarding iPhone pricing: Less equals more. 🙂

    19. IMHO, we’re going to see the iPod classic disappear by this time next year and, by MacWorld ‘08, we’re going to see the iPod touch and iPhone with more memory.

      One hopes. My son tells me that his iPod requires a minimum of 20GB for his existing music library and he is not willing to sacrifice a single song for his traveling playlist. So the iPod touch isn’t a candidate for him until storage expands — or there is a removable Flash card. But that takes us to another article 🙂

      Peace,
      Gene

    20. Ian says:

      One hopes. My son tells me that his iPod requires a minimum of 20GB for his existing music library and he is not willing to sacrifice a single song for his traveling playlist. So the iPod touch isn’t a candidate for him until storage expands — or there is a removable Flash card. But that takes us to another article 🙂

      Gene, while I can understand the “need” to want to take ones entire music library for ones “traveling playlist”, people should realize that the iPod Touch/iPhone is a whole new device segment. It’s more a combination PDA and entertainment device than a “music player” which achieves its effectiveness by being synced with a workstation/notebook. Your son needs to get real. The entire iPod line is useless without a computer and that’s why apple offers so many versions. Consumers have to weigh their needs with what’s available. To expect a one size fits alls is just unrealistic.

      What worrys me ist that apple feels the need to cripple the iPod Touch softwarewise. I understand why but I honestly believe that both iPod Touch and iPhone can co-exist in the marketplace. I even think they could go it alone without a TelCo which would mean forsaking the special voicemail feature and of course the data revenue. Time will tell of course.

      I live in Germany and it looks like the iPhone will finally bring with it an affordable data plan and while according to rumors my moblie provider is not going to be the one to carry the device it is going to have to establish a similar plan to be able to compete. in any case I would prefer an iPod Touch.

      Also as far as the iPod Touch and the iPhone are concerned, if apple were to use larger flash drives they would be even more expensive.

      Ian

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