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Apple's usual strategy to "fix" prices is to not give retailers any room to work with. If they can't buy an iPad for much less than $499, they can't put it on
by smackfu 13y ago
Apple's usual strategy to "fix" prices is to not give retailers any room to work with. If they can't buy an iPad for much less than $499, they can't put it on much of a sale. Why sell it at all if the margins are so bad? Accessories and warranties!
This strategy doesn't work very well with iPhones, since there is a lot of excess carrier profit in the 24-month subsidies, above the $700 or so cost of the iPhone.
- JohnTHaller 13y agoThere's not as much profit as you'd think. And a lot less than lower priced phones from other manufacturers. Plus, the carriers have to assume a ton of risk by agreeing to buy millions of iPhones whether they sell or not. Verizon had an estimated shorfall of $12-14 billion dollars as of July of iPhones they'd have to buy even though they didn't have the sales to warrant it. Not sure how that would up.
- huxley 13y agoThat shortfall was predicted by one analyst and it never occurred: http://www.mondaynote.com/2013/12/15/shameless-carriers/ http://www.mondaynote.com/2013/12/15/shameless-carriers/ http://www.verizon.com/investor/secfiling.htm http://www.verizon.com/investor/secfiling.htm
- JohnTHaller 13y agoAh, thanks. Wasn't aware of that.
- smackfu 13y agoI was thinking more like this... Currently, AT&T charges you $199 for an iPhone 5S, then has to cover $19 of subsidy over the 24 months of the $80/month contract. A new carrier could charge $99 for an iPhone 5S, and make a huge splash. That would require another $4 of subsidy per month, but it would be pretty easy to just raise their plan to $85. Since they aren't just a retailer selling a single product once, it's much easier to move costs around. Similar to how a car dealer can play games with funding to make a car cost less but not really cost any profit.