IMHO, everything here sounds like a good step forward except for $.99 ringtone "conversion". I don't see a reason to create an artificial wall between any old audio file and using those same audio files (or 30 second bits of them) as ringtones.
Gee-- even 2 X $0.99 is cheaper than paying the usual $2.50 for ringtones.....
Now everyone can now better understand Apple's pricing stategy: when it released iPhone for $599, everyone concluded that price was ridiculously high, yet many thousands of people still purchased the phones anyway. Now, by lowering the price dramatically to $399, this now makes the price of the iPhone seem like a super steal. My point: if Apple had originally priced the iPhone at $399 from the start, it would not have been able to achieve this steal-price perception advantage. The only way such an advantage could be achieved is by doing what Apple did. Pure genius.
This event shows who's the *innovator* in the digital audio player sphere yet again.
MS chopping the Zune down to $200 looks pretty pointless when you can get one of those cool, video-capable Nanos with Coverflow for the *same* money. OK, the Nano hasn't got massive storage, but solid-state is so much better, so much more damage-proof than a hard drive, that for a portable device it's preferable. And the Nano has the advantage of synching with iTunes/the iTMS.
The iPod Touch is, of course, something else and moves the game on far ahead.
Concerning ringtones . . . everyone should please stop criticizing Apple because it has to charge for ringtones (many expect ringtones to be free). Such a thing is not Apple's call. The music labels own and control the pricing and distribution of all legal music sold as well as the pricing and distribution of all legal ringtones created from that music. And you can be for sure the money-hungry labels are not going to allow ringtones to be made and given away for free by iTunes or anyone else. Sure, Steve Jobs would like nothing better than to have the ability to enable iTunes to be able to automatically convert any iTunes song into any ringtone for free, but he can't do that, that's not his call, and he'd get sued blind by the labels for doing so. The 99 cent price for ringtones (in addition to the price of the song) is simply the specific agreement he was able to reach with the labels in order to sell them. But, understand, it is the labels who forever sets the price of the ringtones, not Apple. The best Apple can do is to try and negotiate the best and greatest deal. So give Apple a break.
Did you notice the Starbucks logo!
Apple has entered the 'general' retail business. Add a Google payment and iPods offer company's a prime location on the iHigh Street. How much are Apple charging for this?
"Apple has lowered the price on the 8 GByte iPhone to $399"
Hmmm, Apple lowered price of 8GB iPhone from $599 to $399, a $200 discount. Maybe it is not selling as well as some are currently predicting. People that said the iPhone was too expensive are vindicated. Instead of too expensive, it is just expensive.
Apple has yet to announce 1 million units sold. But with the price lowered, I suppose it should come pretty soon.
While I do see the Starbucks partnership as positive, I view it as a niche market feature. The real innovation sliding in under the radar here is the impulse purchase engine the Mobile iTunes Store enables. That could almost singlehandedly close the door on any other digital music store of the future.
"Maybe it is not selling as well as some are currently predicting."
I wondered about that myself. Except that the more expensive iPhone sells more units.
I think the goal here is to cement it's dominance with regards to content delivery; to rub salt in the wounds of the idiots at NBC who even now have had to crawl to 3rd rate resellers like Amazon's "unbox" because they crossed Steve Jobs. I think, particularly in video, lots of content makers still have the dumb-a** notion that they can hack together their own distribution system, with their own rules.
"I always say that price is the last refuge of the desperate (or incompetent, depending on how snarky I'm feeling that day) marketer; it's what you sell when you have nothing else to sell."
This statement was so unfair. I don't think that Apple is desperate, for instance.
Yep beanie, I was thinking the same thing. Why lower the price only 2 months after a successful introduction. Well now it's price is pretty par with other smartphones [or whatever it is], but the ATT plans are still cheaper [at least the entry plan] and show great savings in comparison. Still, I live by my 'mon th at a glance with text, calender, Datebk6 and I need to store and view Excel and word documents, nnot view them in email. So I still need to wait. I got great service from ATT and I have $420 in Apple credit, so my trigger finger is itchy. My wife and kids have iPods and Sansa's so it all for me!
Carl,
Snarky and Bill have a point. Just yesterday you said "I always say that price is the last refuge of the desperate (or incompetent, depending on how snarky I'm feeling that day) marketer; it's what you sell when you have nothing else to sell." I don't think Apple is incompetent. But I really wonder if the iPhone was not selling well and Apple wanted to beef up sales with a price drop. I have been to the Columbus, OH Apple Store twice in the last two weeks. No one was looking at iPhones. No one knows what the real sales are except Apple. But then Apple's stock took a nose dive after the announcement. What's your take? Did Apple really drop the price for the holiday season? Or do you think the iPhone just wasn't selling?
Tom, I think that the 8GB iPhones sold better than the 4GB model since you get twice the storage for another 100 bucks. The Marlton, NJ [Sagemore] store is always packed with people. Mt two friends [hard core Windows users] both purchased an 8GB iPhone there. I always thought that selling millions was a lofty goal, but I have seen more iPhones in person than Zunes. I bet that the Euro-Asia sales will go past 1 mil iPhones at initial sales, especially if it gets upgraded. There are simply a lot of people waiting for it over there.
Holy Crap for the competition out there. I mean, no company had even come close to matching the current iPodiTunes line up. The iPhone has been blowing up the market place. Mobile manufacturers haven't had a real chance to respond and now this iPhone price reduction.
I'm sure all the usual complaints about "I can't believe Apple would leave this out" or "you can get a cheaper xxx brand mp3 player with more features". None of those things has mattered to date.
The complaints about the ringtone charge comes a result of not understanding the market place. They are still less than the mobile carriers $2.50 charge.
I would even go slightly out on a limb and speculate that a $499 16 Gig iPhone is likely not far off. I would also speculate that a $599 3g iphone is coming before a euro launch. Doesn't take an analyst to see those things coming.
With the iPod touch and the high capacity Classics out there and this new pricing on the iPhone, the competition had better move fast.
I definitely find the current Apple line-up strong; however, I find it also puzzling. Perhaps behaving just like any other CE vendor, gone is the simplicity with different SKUs sporting different features. Although in terms of future roadmap, it is clear that the iPod touch is the way to go, I do not understand why Apple did not include WiFi in the Classic and Nano versions. Do you really want to take advantage of the Starbucks partnership? Then do offer Wi-Fi on most SKUs.
Same thing applies to the larger screen. Right now I miss Apple's minimalistic approach.
Is Apple going to make money off of the $299 8GB iPod touch?
If the answer to that is "yes," then the 8GB iPhone, which uses much of the same most expensive parts (screen, 8 GB Flash RAM), will probably still be making Apple money at $100 more.
What would have happened to sales of iPhones if the 8 GB model had remained at $599 when one could get all of the same iPod and WiFi Internet tablet functionality for $300 less? Even worse, when you could have gotten the same but with twice the storage, at 16 GB, for $200 less?
To introduce the 8 GB iPod touch at $299 Apple HAD to drop the price of the 8 GB iPhone.
Now the question, if you want one of the hottest products of the second half of 2007 and you've got $400 to spend, is: Do you want to spend $100 over the price of an 8 GB iPod touch for the best consumer mobile phone features on the market, or for 8 GB more storage?
My prediction is that the 8 GB iPod touch is going to be the least popular model. It will remain available through xmas, merely to draw people in through its sub-$300 price point. It will then be discontinued at MacWorld 2008 in January--much like the $100 cheaper-for-half-the-storage 4 GB iPhone was just discontinued. People will go in to the stores thinking they might get a $299 8 GB iPod touch, but quickly start thinking "Only $100 more... 16 GB, or 8 GB+iPhone? 16 GB, or 8 GB+iPhone? 16 GB, or 8 GB+iPhone? Decisions, decisions..."
Beyond the necessary price/value adjustments needed for the iPhone to synchronize it with the prices of the 8 GB and 16 GB iPod touch, any question that slow sales of the iPhone were the cause for the price drop is preposterous, considering recent sales estimates, and Steve Jobs quote at the special event today that Apple was on target to meet its 1M sales goal for the quarter.
At MacWorld Expo 2007 in January, Jobs said Apple's goal is to capture 1% of the mobile phone market in 2008.
iSuppli's recent report estimated that Apple's July iPhone sales accounted for 1.8% of the U.S. market, which has already exceeded Apple's 2008 goals by 80% in the U.S.
iSuppli was quoted as saying they thought Apple's sales might come in a bit under the 1M estimate given by Steve Jobs for the quarter (reported by the very anti-Apple Troy Wolverton in the SJ Merc). At Apple's special event today Jobs said that Apple was on track to meet their 1M goal by the end of the quarter. iSuppli's calculations lead them to quote that that's going to bring Apple in just UNDER their sales goals, but if Steve Jobs says that Apple's going to meet their quarterly sales goals, that means that Apple's calculations (based on real internal data) are showing BETTER than iSuppli's estimates, which were already 1.8% of the total U.S. mobile phone market in July!
Also, don't forget Apple's recent history has been filled with them lowballing their sales/profit expectations. This price drop should ensure they beat the quarter's 1M estimates handily.
Claudio:
WiFi is a power hog. A hard drive is a power hog. A big screen is a power hog.
The nano needs to have a small form factor (that's its raison d'etre).
Mobile iTunes needs a big screen (how are you going to search for arists/songs/etc. without a keyboard?).
Add those up:
Hard drive + good playing time = no big screen and no WiFi on iPod classic.
Small form factor = no big screen = no Mobile iTunes = no WiFi on iPod nano (+ longer playing time).
Based on yesterday's announcements, lots of new directions for Apple were made known:
1. Partnering for wifi access - Starbucks is just the first step. Apple shows its willingness to partner with retail to increase wifi access everywhere. Panera Bread, McDonalds, etc. And this aligns as well with Google.
2. iTunes WiFi Store - mobile retail breaking the walled gardens of telecom. Music is just the first step. Apple could start aggregating and selling lots of content or services, that today is sold from multiple places on the Web. Its the new mobile portal.
3. Your own content anywhere - Not really shown yet but surely when Leopard is released with a new .Mac, you get access to your own computers from anywhere. Much more to come here. This might also signal why Apple chose to give the iPod touch has 16GB flash instead of 160GB HDD, thus, valuing incremental battery life over additional storage (e.g., "you have wifi so you will use it anyway so why bother with more storage, just save it for wifi usage.")
2 questions:
(1) Does the price cut to $399 -- imply that Apple is looking to each more than 10M customer in the first 12-months?
-- or are the 10M customers cost based on current prices?
(2) What are the Contribution Margin on this? -- presumably all analysts had higher margins costed into their 12-month share price?
Commenting by HaloScan
