If there was anything that could have destroyed today’s iPhone 5s/c launch party, it would have been that one of these beasts was coming out at a $400 off contract price point. Yes, it’s true. If Apple had decided to make a low cost iPhone, which, if you hadn’t noticed, the 3Gs and 4 series are pretty much there now, it would have signaled the end of the reigning smartphone champion. We know that most people give that title to Samsung right now, but honestly, Samsung has about 3 billion variants of the Galaxy line out there and Apple has 3 iPhone models. Doing the math, Apple has to have more market share per model than Samsung does.
That said, why would releasing a cheap iPhone be a horrible mistake? First off, you don’t buy into an iPhone for the phone, you buy into the Apple ecosystem. You purchase your music through iTunes and your Apps through the AppStore. You use iCloud or maybe you still think MobileMe exists… but the facts are, you are an Apple user. You bought the tablet that matched your phone and now you have more invested than before. When it comes time to buy your next device, it’s not even a question, it’s the newer iPhone. Why? Because it works with everything you already have and you are used to it.
Samsung took the opposite approach, and for right now, quantity is out doing quality. We aren’t big fans of that locked down Apple ecosystem. We like that Samsung lets us use Dropbox, or SkyDrive or whatever to back up our files. We like having access to the Play Store or Amazon Store or even just sharing a cracked APK file and side loading it. It’s the flexibility that Apple stole from our smartphones back in the day. Samsung gives the user choices and that is a powerful thing. What they didn’t count on is that devices will only last so long but services last forever.
Apple has played itself into a position where they will be fine for quite some time. They continue to innovate, even in small steps, and out do the competition. Sure, Joe-blow might be selling more smartphones this quarter, but Apple is still selling more services than anyone else. Apple doesn’t need to drop the price of their hardware to compete, they need to keep the prices higher to keep people in the mindset that they are better.
Most iPhone’s can be had for $100-200 with a contract with the extreme storage options going up to $400 for the newest model. $400 over 24 months (if you get a new one every 2 years) works out to $16.67 a month. That is about 15-25% of your monthly bill. If you purchase the new iPhone 5s at $649 off contract and get a $40 a month plan, you are looking at a monthly cost of $67.00 a month. Saving up that $650 may not be easy, but it is worth it. Instead of paying $130 a month for an unlimited contract line, you can pay half of that and upgrade your iPhone every year if you wanted. The phones are not too expensive at the price points they are at, as a matter of fact, they are just right where they should be for something that is so important to so many people.
So, for those that are singing the death to Apple song right now for not creating that $350 iPhone, please stop. That $400 iPhone is right here.