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So Apple invented carrier subsidies for cell phone purchases just for the iPhone, and that's why the iPhone worked? Yeah. Solid reasoning there, Ballmer... Th

So Apple invented carrier subsidies for cell phone purchases just for the iPhone, and that's why the iPhone worked? Yeah. Solid reasoning there, Ballmer... They were a thing long before the iPhone. But then again, hugely successful people almost never say: "yeah, I was an idiot who just didn't see it". And he was very successful in terms of increasing revenue and working the markets.

syntheticnature 10y ago
Came here to say exactly this -- of course, at his level of wealth, he probably never noticed that the phones were subsidized as a matter of course (unless you broke your phone) in the US.
legitster 10y ago
They did not line item phones into monthly bills to the extent they do now. And they especially did not for smart phones. I remembered freeby phones, and high end phones you purchased with rebates attached. But the high end consumer phones were certainly not being attached like this.
- jalfresi 10y ago
  In the states maybe but in the rest of the entire freakin world, thats how we paid for phones.
kohanz 10y ago
That said, it still blows me away when I see my friends taking these "subsidies" without understanding that they are basically paying full price for the phone, if not more.
- croon 10y ago
  This. It's in the same way that I don't understand people living pay check to pay check. Live really poor for 3 months, then keep your income/costs above 1, and you'll be able to plan better and never pay for anything through the nose. It got me through college without any help from parents nor loans, and it worked when I was unemployed, and obviously works now that I make a lot more.
- knd775 10y ago
  Carrier subsidies are all but dead nowadays. Carriers are mostly just offering phone leasing or payment plans now.
  - kohanz 10y ago
    Yes, but locking you into a plan in a time when plan features and pricing are almost constantly improving.
- xeromal 10y ago
  T-Mobile is interest free. I'm not sure about the others. T-mobile does charge an insurance fee though.
- the_duke 10y ago
  Where I live there is very high competition in the mobile carrier market, and subscriptions are incredibly cheap. I'm always amazed at how many are actually throwing away money by accepting a 'subsidied' phone which forces you to take a contract 2-3 times as expensive as you would actually need it. Even if you see it as 0% financing, in my quick calculations it always worked out to be more expensive than just buying the phone outright.
  - kohanz 10y ago
    Here in Canada, prices are not cheap yet, but getting better slowly due to increasing competition. What I see is that the subsidized plan makes sense in the moment, in that it's the regular plan + the cost of the phone divided over 24 months, but the problem with that is that cost of a regular plan, or the features (e.g. amount of data, minutes) that are provided by it, are going to improve substantially over the next 6 month and even moreso over the next 12-24 months. If you can afford it, you're much better off buying the phone outright and then going month-to-month with the cheapest plan you can find. The problem is, most of the people doing this can't fathom affording buying the phone outright, but it's easier to stomach as a hidden cost.
- HeyLaughingBoy 10y ago
  For many, many people, cash flow is far more important than total amount paid. Even ignoring personal anecdotes, a perfect example is SaaS: many corporations happily pay a monthly fee even though in total it's far more than it would have been to purchase a similar package outright.
0xCMP 10y ago
Not what he said obviously. He meant you could actually target that price point because people would accept it with carrier subsidies. He thought that direction would fail because it'd be sold like any other computer/tablet/smart phone was sold then.
michaelbuckbee 10y ago
I'm never going to be in that kind of billion dollar bet situation, so I'm always trying to think of how to relate these experiences to my level of execution. To that end I do see a thread of matching product to pricing model: - While I hate it, it's extremely clear that if you're in the mobile space you'll make more money doing free+IAP than charging up front. While some things could change this structure (built in support for time limited or account trials, and better paths to upgrade), it seems like it's here to stay on the consumer side. - Kind of similarly, the innovation of SAAS+PAAS is in many ways that its cheaper + easier to pay by the month than to hire people in house and or sign them up for a six figure bill and 20% support+maintenance in perpetuity.
ryandrake 10y ago
My guess is that he had assistants to do those mundane things for him like purchasing his personal phone and making sure the bills were paid. I'm reminded of the time back in the early 90s when president Bush (Sr.) was amazed at grocery store technology, having likely never shopped for his own groceries for decades [1]. It was really embarrassing and highlighted how he struggled with relating to common people. Executives who live lives of privilege like this need to recognize that their lifestyle is a potential blind spot. Anyone who has worked in a company where the rich top brass made all the product decisions (instead of the lower-level normals) knows what I'm talking about. 1: http://www.nytimes.com/1992/02/05/us/bush-encounters-the-supermarket-amazed.html http://www.nytimes.com/1992/02/05/us/bush-encounters-the-sup...
- no_wave 10y ago
  The Bush thing is almost certainly a fake story. He was playing along with being impressed by some new UPC code reader technology that was being demonstrated that could read damaged UPCs. http://www.snopes.com/history/american/bushscanner.asp http://www.snopes.com/history/american/bushscanner.asp
- flubert 10y ago
  Snopes rates that story as false: http://www.snopes.com/history/american/bushscanner.asp http://www.snopes.com/history/american/bushscanner.asp
  - ryandrake 10y ago
    Hmm, interesting read, thanks. Fooled me. I still stick to the overarching point about it being a potential blind spot. Even if the Bush example is false I've known lower-profile wealthy/privileged people who were totally out of touch with the needs of regular people.
    - no_wave 10y ago
      “Anybody gone into Whole Foods lately? See what they charge for arugula?”
addicted 10y ago
Carrier subsidies were a huge thing in the US market. It was why lay people were able to buy Blackberries in mass before the iPhone in the US. It was also why Nokia had no standing in the US market at all, despite being the biggest seller outside, with phones that were pretty much unparalleled (until BB). They did not want to give carriers the control the carriers wanted (such as gimping features and stuff), which meant they were not subsidized by the carriers, which meant their phones didn't sell int he US.
mc32 10y ago
One of the other poorly executed things he did was the Danger acquisition. It was a dead-end. Didn't contribute to anything and distracted them in mobile, to some extent.

syntheticnature 10y ago

Came here to say exactly this -- of course, at his level of wealth, he probably never noticed that the phones were subsidized as a matter of course (unless you broke your phone) in the US.

legitster 10y ago

They did not line item phones into monthly bills to the extent they do now. And they especially did not for smart phones. I remembered freeby phones, and high end phones you purchased with rebates attached. But the high end consumer phones were certainly not being attached like this.

jalfresi 10y ago
In the states maybe but in the rest of the entire freakin world, thats how we paid for phones.

kohanz 10y ago

That said, it still blows me away when I see my friends taking these "subsidies" without understanding that they are basically paying full price for the phone, if not more.

croon 10y ago
This. It's in the same way that I don't understand people living pay check to pay check. Live really poor for 3 months, then keep your income/costs above 1, and you'll be able to plan better and never pay for anything through the nose. It got me through college without any help from parents nor loans, and it worked when I was unemployed, and obviously works now that I make a lot more.
knd775 10y ago
Carrier subsidies are all but dead nowadays. Carriers are mostly just offering phone leasing or payment plans now.
- kohanz 10y ago
  Yes, but locking you into a plan in a time when plan features and pricing are almost constantly improving.
xeromal 10y ago
T-Mobile is interest free. I'm not sure about the others. T-mobile does charge an insurance fee though.
the_duke 10y ago
Where I live there is very high competition in the mobile carrier market, and subscriptions are incredibly cheap. I'm always amazed at how many are actually throwing away money by accepting a 'subsidied' phone which forces you to take a contract 2-3 times as expensive as you would actually need it. Even if you see it as 0% financing, in my quick calculations it always worked out to be more expensive than just buying the phone outright.
- kohanz 10y ago
  Here in Canada, prices are not cheap yet, but getting better slowly due to increasing competition. What I see is that the subsidized plan makes sense in the moment, in that it's the regular plan + the cost of the phone divided over 24 months, but the problem with that is that cost of a regular plan, or the features (e.g. amount of data, minutes) that are provided by it, are going to improve substantially over the next 6 month and even moreso over the next 12-24 months. If you can afford it, you're much better off buying the phone outright and then going month-to-month with the cheapest plan you can find. The problem is, most of the people doing this can't fathom affording buying the phone outright, but it's easier to stomach as a hidden cost.
HeyLaughingBoy 10y ago
For many, many people, cash flow is far more important than total amount paid. Even ignoring personal anecdotes, a perfect example is SaaS: many corporations happily pay a monthly fee even though in total it's far more than it would have been to purchase a similar package outright.

0xCMP 10y ago

Not what he said obviously. He meant you could actually target that price point because people would accept it with carrier subsidies. He thought that direction would fail because it'd be sold like any other computer/tablet/smart phone was sold then.

michaelbuckbee 10y ago

I'm never going to be in that kind of billion dollar bet situation, so I'm always trying to think of how to relate these experiences to my level of execution. To that end I do see a thread of matching product to pricing model: - While I hate it, it's extremely clear that if you're in the mobile space you'll make more money doing free+IAP than charging up front. While some things could change this structure (built in support for time limited or account trials, and better paths to upgrade), it seems like it's here to stay on the consumer side. - Kind of similarly, the innovation of SAAS+PAAS is in many ways that its cheaper + easier to pay by the month than to hire people in house and or sign them up for a six figure bill and 20% support+maintenance in perpetuity.

ryandrake 10y ago

My guess is that he had assistants to do those mundane things for him like purchasing his personal phone and making sure the bills were paid. I'm reminded of the time back in the early 90s when president Bush (Sr.) was amazed at grocery store technology, having likely never shopped for his own groceries for decades [1]. It was really embarrassing and highlighted how he struggled with relating to common people. Executives who live lives of privilege like this need to recognize that their lifestyle is a potential blind spot. Anyone who has worked in a company where the rich top brass made all the product decisions (instead of the lower-level normals) knows what I'm talking about. 1: http://www.nytimes.com/1992/02/05/us/bush-encounters-the-supermarket-amazed.html http://www.nytimes.com/1992/02/05/us/bush-encounters-the-sup...

no_wave 10y ago
The Bush thing is almost certainly a fake story. He was playing along with being impressed by some new UPC code reader technology that was being demonstrated that could read damaged UPCs. http://www.snopes.com/history/american/bushscanner.asp http://www.snopes.com/history/american/bushscanner.asp
flubert 10y ago
Snopes rates that story as false: http://www.snopes.com/history/american/bushscanner.asp http://www.snopes.com/history/american/bushscanner.asp
- ryandrake 10y ago
  Hmm, interesting read, thanks. Fooled me. I still stick to the overarching point about it being a potential blind spot. Even if the Bush example is false I've known lower-profile wealthy/privileged people who were totally out of touch with the needs of regular people.
  - no_wave 10y ago
    “Anybody gone into Whole Foods lately? See what they charge for arugula?”

addicted 10y ago

Carrier subsidies were a huge thing in the US market. It was why lay people were able to buy Blackberries in mass before the iPhone in the US. It was also why Nokia had no standing in the US market at all, despite being the biggest seller outside, with phones that were pretty much unparalleled (until BB). They did not want to give carriers the control the carriers wanted (such as gimping features and stuff), which meant they were not subsidized by the carriers, which meant their phones didn't sell int he US.

mc32 10y ago

One of the other poorly executed things he did was the Danger acquisition. It was a dead-end. Didn't contribute to anything and distracted them in mobile, to some extent.