Paying Through the Nose for the Next iPhone?

February 9th, 2017

Except for the very first iPhone that sold for the full price without subsidies or special carrier deals, most any iPhone can be mostly affordable. So if the unlocked purchase price, which starts at $399 for the entry-level iPhone SE, is daunting, you can always put it on our credit card or take advantage of special lease/purchase deals from the carrier or, if you prefer, Apple.

Such leasing programs as AT&T Next allow you to upgrade your gear on a regular basis, say 12 or 18 months, before the device is paid off. You only need to return it to the carrier when you buy a new model. This particular program, if kept up, would lock you in to buying new gear regularly, thus guaranteeing continuing sales for carriers and handset makers.

Although some of Apple’s critics would love to see the company sell cheaper iPhones, that’s not in the cards. The only way to make them cheaper would be to sacrifice profits, and that’s not Apple’s plan either, except by tiny amounts.

But with rumors spreading about a special iPhone to honor the product’s 10th anniversary, a published report in Fast Company claims it’ll be the most expensive one yet.

Now if you can believe the features listed so far for a product variously known as the iPhone 8 or the iPhone X, it’ll have an edge-to-edge OLED display, a 5.1-inch or 5.2-inch display, curved glass, glass backing, an A11 processor and wireless charging, plus the usual enhancements to the cameras and other components.

Since the raw components may be more expensive, Fast Company claims, based on an alleged source familiar with Apple’s marketing plans, that the price will soar to over $1,000.

So the first question is whether the enhancements listed above are worth adding at least $250 to the usual purchase price of a “Plus” series iPhone. Or whether it will even happen.

Don’t forget that such an iPhone wouldn’t be the first mobile handset to feature an edge-to-edge OLED display or wireless charging. Although it’s been heavily discounted, and will soon be replaced by a newer model, the 5.5-inch Samsung Galaxy S7 Edge has the edge-to-edge OLED display and wireless charging. Prices start at $849. Also bear in mind that premium Samsung smartphones are usually priced in the same league as iPhones ahead of those two-for-one sales.

More to the point, would the enhanced hardware justify such a higher price? It doesn’t seem so.

I wouldn’t dispute the possibility that it must cost more, perhaps $100 or thereabouts, consistent with the price increase of the roughly equivalent Samsung handset compared to regular Galaxy smartphones. If that’s the case, a 256GB iPhone 8 — or whatever it’s called — could cost $1,069, which would be $100 more than the equivalent iPhone 7 Plus. The standard 32GB version would be $869. So maybe the story is credible even if it overlooks some details.

The problem with stories of this sort is that they can generate fear. You’ll have all those goodies in the next iPhone — features that many buyers would crave — but you’d have to pay through the nose for them, so start saving your pennies.

It also fits with the meme that Apple gear is overpriced, that you can easily buy comparable or better products for far less. Well, unless it’s a Microsoft Surface PC that is often priced higher than roughly equivalent Macs. Clearly Microsoft knows where to market its products to endure maximum profits.

Now I suppose that Apple could make the 10th anniversary iPhone a premium model with a single maxed out configuration; thus 256GB storage. That would not make it necessarily overpriced, though I’d think Apple would want to offer them in several configurations to better meet the needs of customers. Some might be perfectly willing to trade storage for a lower price.

But the argument over Apple’s price policies will never end. The company historically makes fairly high profits on its products. That does not mean they should be cheaper, or that making them cheaper would meet the needs of Apple and its shareholders. I’d love to see cheaper Macs, for example, similarly equipped to the models available now.

You might suggest that the latest MacBook Pro is overpriced, because it costs several hundred dollars more than the previous model. The 13-inch version with a Touch Bar carries a $300 premium over the model without that feature. But the Touch Bar version has other upgrades, including a faster processor, a speedier memory bus, better graphics, and two additional Thunderbolt 3 ports. That’s probably enough to cover at least part of the price increase. So I suppose you could say it still costs too much, although the price of admission doesn’t seem to have hurt sales much.

It’s also true that Apple has a tendency to charge higher prices for the first year or two of a brand new product’s lifecycle. Take the 27-inch iMac with 5K Retina display, which began life at $2,499 but quickly got cheaper as more configurations were added. Don’t forget that the first MacBook Pro with Retina display, which appeared in 2012, was introduced at prices comparable to present levels. So maybe refreshes will be cheaper.

As to other Apple products: The argument that the Apple Watch is too expensive doesn’t wash anymore since it owns the market. Even its biggest competitor, Fitbit, bought two companies, including Pebble, to better compete in the smartwatch space, but is now shedding employees after a soft holiday quarter.

I’d love to see Apple charge less for its gadgets. You might think competitive pressures would force them in that direction, but clearly not yet.

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