My take on the price tag for the iPhone
I didn’t ever really think I would post anything about the iPhone here on RightOn! but I’ve had about a dozen conversations with people who are screaming about its price tag.
The iPhone will set you back anywhere from $499-$599 depending on the storage capacity (4GB-8GB). According to websites like engadget we’re being raked over the coals for a cell phone.
Ok, so here’s my take on this whole thing…
So what if the iPhone costs (in parts) $264. You think a company like Apple wakes up one day with a product that they can sell? What about research and development costs? What about shipping? What about the support staff training? What about that liberal dirty word… PROFIT!?
Apple buys the parts for (for the sake of argument I’ll use the magic number via engadget) $264.85 (8GB model). Now they have a pile of parts… who/what puts them together to MAKE the iPhone? Chances are there are people AND machines involved. Now the people have wages that have to be paid by Apple, and the machines cost money to engineer and build. All of that costs millions of dollars. Now that Apple has BUILT the iPhone, it must then put it in some fancy packaging (which also requires engineering and design). Apple now has to build up interest in their product, so they have to pay someone to develop an advertising campaign.
Outside of the hardware, what both engadget and isuppli (the company responsible for the component tear down costs) fail to take into account is the software on the phone that performs all those nifty iPhone magical features. The iPhone runs a customized build of Mac OS X. So you’re talking about a COMPLETE rebuild of your key OS to make it compatible with a mobile device. On top of developing the OS to even RUN the phone, you have to still develop an upgrade to iTunes for both Mac OS and Windows so that it will work with the iPhone. You even have the costs of developing an infrastructure for AT&T because, lets face it… this is THE first phone anyone has done that activates out of the store.
So right about now you’re talking MILLIONS of dollars being spent and the product is still unavailable to the public.
Now, here you are, facing a heaping pile of demand for this product due to the excellent job marketing the product (not to mention word of mouth evangelism thanks to your user base), so you have to set a price that will both a)sell the product and b)not deplete your supply channels.
So Apple set the price to $599 (8GB model)… made you stop and think about WHY you need the phone didn’t it? Would you have stopped for a nanosecond if Apple had slapped a price tag of $299 on that bad boy?
Gee people, it seems like we’ve ended up on my favorite topic… Supply and Demand. There is ENOURMOUS demand for this product, and as things are Apple can only make them so fast, thus capping the supply chain at so many iPhones available as they are made. If Apple had set the price of the iPhone too low, not only would they NEVER be able to recoup their expenses in bringing you the product… they would run out of supply faster than you could say “iPhone”… in turn causing a MASSIVE influx in bad press that could potentially harm sales across the board.
Yes the iPhone is expencive and yes the PARTS don’t cost much, but there’s a lot more in the picture than the parts. Ever stop to think how much the PARTS for your BMW cost?
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Comments
I loved watching all the hype over the iPhone.
I don’t have a problem with the price… I do have a problem with AT&T/Cingular. (The service sucks where I live. I don’t know anyone who has their service, everyone has left for other providers.)
I would love to get one when they are working on more/better service providers.
I also have been putting thoughts/research into OpenMoko’s phone the Neo 1973.
http://www.openmoko.com/index.html
Great post. I see nothing wrong with the price of the iPhone.When the funds become available I will be purchasing one.
It’s first generation technology and the first phone of it’s kind.
People also need to keep in mind the amount they have spent on advertising and marketing to get the word out about this phone.
Apple has every right to sell this phone for this price, if they need to justify the price, look at the sales, there are reports of 500,000 units being sold in the first week alone!