6 ms·

Nokia’s price for exclusivity

65 points by coob 14y ago

aik 14y ago
I wonder if this is also why providers can price the Lumia 920 so aggressively at $149 with a 2 year contract (iPhone and the Galaxy III are both $199 at the least). I'm curious what price point they can buy the phones at...
- cletus 14y ago
  See now this is an example of how US cell phone consumers have been successfully brainwashed. A $50 difference on the subsidized cost of a handset is not "aggressive" discounting; it's inconsequential. Chances are you'll be paying $60-100/month for 24 months when you take out any smartphone service (or less if you go with T-Mobile or Sprint). Assuming $80 that's: $199 + 24 * $80 = $2119 vs $149 + 24 * $80 = $2069 which is less than a 3% discount. Now the service obviously costs something and you may not have it for 24 months (which probably means you're paying an ETF anyway) but that should definitely be how the consumer looks at it: would you rather pay $2119 for an iPhone and service or $2069 for a Lumia and service? Even worse, I see people who will pay $2119 for the iPhone 5 and $2019 for the iPhone 4. It makes no sense. Here's another way of looking at it: that $199 iPhone 5 costs ~$650 unsubsidized. Your ETF is (IIRC) $350 (-$10/month on the contract). If you terminate immediately you've paid $200 + $350 + probably $80 so basically full price anyway. If you do so after a year you pay $200 + $230 + whatever you've spent on service. $430 from $650 means they've discounted the phone $220 for you but you've also spent $960 on service. To compare: when I got my iPhone 4 in Australia the 64G model was A$1000 at the time (the exchange rate was at the time a lot worse than it is now). Also, that includes tax (10% GST). Instead I bought the phone on a Telstra Business 24 month contract which was $50/month and $299 for the phone with a $100 store voucher (from JB Hifi), so $199 + $50 * 24 = $1399 - $1000 retail cost means I really only paid $400 for 2 years of service or alternatively the phone was discounted $800. Either way that is "aggressive" discounting. Seriously, cell phones are an utter ripoff in the US. It still astounds me how expensive it is. Oh and in the US you pay to receive calls. Not true in Australia and most of Europe that I'm aware of (certainly not the UK, Germany or Switzerland).
  - PeterisP 14y ago
    The most common cellphone plan here in eastern europe is $10 per month with unlimited voice/sms and 0.5gb of data. If you want an included iPhone and more data, then it's like $40 since the phone is expensive, but how can you get up to $80 is quite a mystery that only monopolist lobbying could explain.
  - beagle3 14y ago
    You are absolutely correct about everything. Two additional points: 1. While the brainwashing is there, and is very effective, the major carriers (AT&T, Verizon) will make you pay the same monthly charge whether you bought a "subsidized" phone from them or not. So instead of subsidized phone vs. unsubsidized phone (the way you have it in most of the world), what you have in the US is sucker-with-a-lower-price-tag ($200), vs. sucker-with-a-higher-price-tag (e.g. $650 if bought from Apple) - your service cost will be the same (with the exception that if you brought your own phone, you won't pay an ETF if you leave early). 2. Yes, it is exclusively in the US that you pay for incoming - and that's for historical reasons. Unlike essentially everywhere else, there is no special area code for mobile, so you can't tell if you're calling a mobile phone, so -- back in the days when calls to mobile cost more everywhere -- there was no other way to handle this. But the US public has gotten used to it, so no company is thinking of changing that - people here think its normal to pay for a received text message (SMS) as well... Mobile phone service in the US is a ripoff, but it will not change because the public is not aware that is the case, and congress is bought and paid for.
    - jacalata 14y ago
      I'm pretty sure that the 'no special code for mobile' and 'recipient pays' concepts were part of the same plan - companies worried that nobody would call a mobile if they knew it was different or more expensive, so they made it look exactly the same to call one, and make the assumed 'high powered exec' cover the cost difference in order to receive calls. I'm not sure why this only happened in the US - was it the first country to have consumer mobile phones?
      - beagle3 14y ago
- gambiting 14y ago
  Sorry to say,but $149 for a phone is not aggressive pricing. That's typical of carriers in the US. Lumia 920 is offered for free on pretty much every 2-year contract in UK/Germany/France. You can get S3 for free on a 2-year, $50/month contract, and that already includes unlimited internet(with tethering allowed and no fair-use policy) and unlimited text, and 2000 minutes.
- mtgx 14y ago
  Only because they know their phones don't offer as much "value" (nothing to do with component costs) as their competitors, so they have to cut into their profits to compete. This is funny, because I remember the old Nokia executives saying they would have to do this if they would use Android, because it would "commoditize" them. And yet they are being commoditized much faster by WP8, since all phones look alike (software wise) and their ecosystem of apps is much smaller, so they have to account for that in the price. The Galaxy S3 has been selling for $99, too, but only for short periods of time. But as others have said, those prices are pretty irrelevant on a contract.
deleted 14y ago
[deleted]
Osiris 14y ago
It always surprised me that Nokia made such a public announcement that they would be killing an existing product line that was selling fairly well (at a solid profit from what I understand). While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder. Yahoo's approach seems better to me. I'm sure that Marissa has a game plan for products that they'll EOL and directions that'll change but they're keeping it close the vest to not shake things up publicly too much.
- Zigurd 14y ago
  Hernan Cortez didn't burn his ships because it was prudent. He did it to give his crew no choice but to follow him. Had Cortez and his men died in the jungle, that would not have been regarded as a bold act of leadership.
- elithrar 14y ago
  > While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder. From what I understand, Nokia did this because of the "warring factions" and duplicated effort across the company. Killing it early was likely seen as a strategy for reducing cultural problems later.
- ChuckMcM 14y ago
  I agree this will be studied like the Osborne Executive gets studied in business schools. I've seen these sorts of transitions managed in different ways, they all have their risks. Commodore-64 to Commodore Amiga (unsuccessful), Apple II to Macintosh (successful), Emulex Storage to Networking (not successful), IBM Mainframes to software consulting (successful). It is a tricky tricky thing to do, to take your company's most profitable product and build a replacement inside its market internally.
  - ido 14y ago
    Commodore-64 to Commodore Amiga (unsuccessful) Actually the Amiga was a lot more successful than you'd think looking at the American market (it was mostly successful in Europe: http://www.amigau.com/aig/sales.html http://www.amigau.com/aig/sales.html - there is no reliable public data about exact numbers but its somewhere around 4+ million units, most of which in Europe). With the success of the Amiga 500 commodore had a decent chance at staying alive and even prospering, if not for extreme mismanagement & very questionable business decisions (that started before the time of the Amiga).
i386 14y ago
Page seems to be down. Anyone have a mirror?
- algolicious 14y ago
  The best mirror I could find (nyud.net and Google let me down): http://substancedigital.com/2012/10/21/nokias-price-for-exclusivity/ http://substancedigital.com/2012/10/21/nokias-price-for-excl...
- coob 14y ago
  Looks like the whole site is down. Here's a text only copy from my RSS reader's cache: http://pastebin.com/MRNg2GPu http://pastebin.com/MRNg2GPu
chris_wot 14y ago
Er... this is now giving a 404?
ableal 14y ago
The Asymco.com site seems to have had a hiccup. Text, but no charts, at the Google cache: http://webcache.googleusercontent.com/search?q=cache:m1lNim-lyJsJ:www.asymco.com/2012/10/22/nokias-price-for-exclusivity/+&cd=1&hl=en&ct=clnk&client=firefox-a http://webcache.googleusercontent.com/search?q=cache:m1lNim-...

65 points by coob 14y ago

aik 14y ago

I wonder if this is also why providers can price the Lumia 920 so aggressively at $149 with a 2 year contract (iPhone and the Galaxy III are both $199 at the least). I'm curious what price point they can buy the phones at...

cletus 14y ago
See now this is an example of how US cell phone consumers have been successfully brainwashed. A $50 difference on the subsidized cost of a handset is not "aggressive" discounting; it's inconsequential. Chances are you'll be paying $60-100/month for 24 months when you take out any smartphone service (or less if you go with T-Mobile or Sprint). Assuming $80 that's: $199 + 24 * $80 = $2119 vs $149 + 24 * $80 = $2069 which is less than a 3% discount. Now the service obviously costs something and you may not have it for 24 months (which probably means you're paying an ETF anyway) but that should definitely be how the consumer looks at it: would you rather pay $2119 for an iPhone and service or $2069 for a Lumia and service? Even worse, I see people who will pay $2119 for the iPhone 5 and $2019 for the iPhone 4. It makes no sense. Here's another way of looking at it: that $199 iPhone 5 costs ~$650 unsubsidized. Your ETF is (IIRC) $350 (-$10/month on the contract). If you terminate immediately you've paid $200 + $350 + probably $80 so basically full price anyway. If you do so after a year you pay $200 + $230 + whatever you've spent on service. $430 from $650 means they've discounted the phone $220 for you but you've also spent $960 on service. To compare: when I got my iPhone 4 in Australia the 64G model was A$1000 at the time (the exchange rate was at the time a lot worse than it is now). Also, that includes tax (10% GST). Instead I bought the phone on a Telstra Business 24 month contract which was $50/month and $299 for the phone with a $100 store voucher (from JB Hifi), so $199 + $50 * 24 = $1399 - $1000 retail cost means I really only paid $400 for 2 years of service or alternatively the phone was discounted $800. Either way that is "aggressive" discounting. Seriously, cell phones are an utter ripoff in the US. It still astounds me how expensive it is. Oh and in the US you pay to receive calls. Not true in Australia and most of Europe that I'm aware of (certainly not the UK, Germany or Switzerland).
- PeterisP 14y ago
  The most common cellphone plan here in eastern europe is $10 per month with unlimited voice/sms and 0.5gb of data. If you want an included iPhone and more data, then it's like $40 since the phone is expensive, but how can you get up to $80 is quite a mystery that only monopolist lobbying could explain.
- beagle3 14y ago
  You are absolutely correct about everything. Two additional points: 1. While the brainwashing is there, and is very effective, the major carriers (AT&T, Verizon) will make you pay the same monthly charge whether you bought a "subsidized" phone from them or not. So instead of subsidized phone vs. unsubsidized phone (the way you have it in most of the world), what you have in the US is sucker-with-a-lower-price-tag ($200), vs. sucker-with-a-higher-price-tag (e.g. $650 if bought from Apple) - your service cost will be the same (with the exception that if you brought your own phone, you won't pay an ETF if you leave early). 2. Yes, it is exclusively in the US that you pay for incoming - and that's for historical reasons. Unlike essentially everywhere else, there is no special area code for mobile, so you can't tell if you're calling a mobile phone, so -- back in the days when calls to mobile cost more everywhere -- there was no other way to handle this. But the US public has gotten used to it, so no company is thinking of changing that - people here think its normal to pay for a received text message (SMS) as well... Mobile phone service in the US is a ripoff, but it will not change because the public is not aware that is the case, and congress is bought and paid for.
  - jacalata 14y ago
    I'm pretty sure that the 'no special code for mobile' and 'recipient pays' concepts were part of the same plan - companies worried that nobody would call a mobile if they knew it was different or more expensive, so they made it look exactly the same to call one, and make the assumed 'high powered exec' cover the cost difference in order to receive calls. I'm not sure why this only happened in the US - was it the first country to have consumer mobile phones?
    - beagle3 14y ago
gambiting 14y ago
Sorry to say,but $149 for a phone is not aggressive pricing. That's typical of carriers in the US. Lumia 920 is offered for free on pretty much every 2-year contract in UK/Germany/France. You can get S3 for free on a 2-year, $50/month contract, and that already includes unlimited internet(with tethering allowed and no fair-use policy) and unlimited text, and 2000 minutes.
mtgx 14y ago
Only because they know their phones don't offer as much "value" (nothing to do with component costs) as their competitors, so they have to cut into their profits to compete. This is funny, because I remember the old Nokia executives saying they would have to do this if they would use Android, because it would "commoditize" them. And yet they are being commoditized much faster by WP8, since all phones look alike (software wise) and their ecosystem of apps is much smaller, so they have to account for that in the price. The Galaxy S3 has been selling for $99, too, but only for short periods of time. But as others have said, those prices are pretty irrelevant on a contract.

deleted 14y ago

[deleted]

Osiris 14y ago

It always surprised me that Nokia made such a public announcement that they would be killing an existing product line that was selling fairly well (at a solid profit from what I understand). While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder. Yahoo's approach seems better to me. I'm sure that Marissa has a game plan for products that they'll EOL and directions that'll change but they're keeping it close the vest to not shake things up publicly too much.

Zigurd 14y ago
Hernan Cortez didn't burn his ships because it was prudent. He did it to give his crew no choice but to follow him. Had Cortez and his men died in the jungle, that would not have been regarded as a bold act of leadership.
elithrar 14y ago
> While switching from Symbian to WP7 may have been a good idea, to publicly announce that you're dumping the platform of your best selling phones seems like a pretty big blunder. From what I understand, Nokia did this because of the "warring factions" and duplicated effort across the company. Killing it early was likely seen as a strategy for reducing cultural problems later.
ChuckMcM 14y ago
I agree this will be studied like the Osborne Executive gets studied in business schools. I've seen these sorts of transitions managed in different ways, they all have their risks. Commodore-64 to Commodore Amiga (unsuccessful), Apple II to Macintosh (successful), Emulex Storage to Networking (not successful), IBM Mainframes to software consulting (successful). It is a tricky tricky thing to do, to take your company's most profitable product and build a replacement inside its market internally.
- ido 14y ago
  Commodore-64 to Commodore Amiga (unsuccessful) Actually the Amiga was a lot more successful than you'd think looking at the American market (it was mostly successful in Europe: http://www.amigau.com/aig/sales.html http://www.amigau.com/aig/sales.html - there is no reliable public data about exact numbers but its somewhere around 4+ million units, most of which in Europe). With the success of the Amiga 500 commodore had a decent chance at staying alive and even prospering, if not for extreme mismanagement & very questionable business decisions (that started before the time of the Amiga).

i386 14y ago

Page seems to be down. Anyone have a mirror?

algolicious 14y ago
The best mirror I could find (nyud.net and Google let me down): http://substancedigital.com/2012/10/21/nokias-price-for-exclusivity/ http://substancedigital.com/2012/10/21/nokias-price-for-excl...
coob 14y ago
Looks like the whole site is down. Here's a text only copy from my RSS reader's cache: http://pastebin.com/MRNg2GPu http://pastebin.com/MRNg2GPu

chris_wot 14y ago

Er... this is now giving a 404?

ableal 14y ago

The Asymco.com site seems to have had a hiccup. Text, but no charts, at the Google cache: http://webcache.googleusercontent.com/search?q=cache:m1lNim-lyJsJ:www.asymco.com/2012/10/22/nokias-price-for-exclusivity/+&cd=1&hl=en&ct=clnk&client=firefox-a http://webcache.googleusercontent.com/search?q=cache:m1lNim-...