7 ms·

On the Pricing of Apple Watch

60 points by nnain 12y ago

gjoeworm 12y ago
I think his $5k estimate is much stronger than his $20k estimate. An Apple Editions is not a Patek Phillippe. There is a dramatically different replacement cycle which means that any attempt to cut and paste lux strategies is going to either fail entirely, or narrow the market so thoroughly as to be indistinguishable from failure.
- twoodfin 12y ago
  That's assuming there's no upgrade story to be told at the launch event. I agree it would be a little weird coming from the modern Apple, but I just can't see a marketing pitch that sells even a "merely" $5,000 device that's functionally equivalent to a $350 one and essentially guaranteed to be obsolete within 5 years. Obviously there's a market that can afford to treat such a luxury as disposable, but that doesn't seem like a large enough market to justify creating the Edition line. They're going to sell these things (at least partially) through upgraded Apple Stores, and presumably those stores will have to offer (possibly off-site) jewelry-like fitting and repair services. How much of an engineering obstacle would it be, really, to guarantee that the next N generations of Watch internals will be able to be retrofitted into the Editions? Probably with a nice markup on the labor, too! After all, if there's one thing they're good at, it's continuous miniaturization. I think it would dramatically expand the market for the high end models. If it extended down to the stainless tier, I'd certainly buy a much more expensive Gen 1 version.
  - guan 12y ago
    Or the watches will have significant trade-in value because they can ditch the electronics and melt down the gold.
    - aetherson 12y ago
      Gold currently sells at $1200 per oz. Looks like smart watches are typically around 2oz in weight, though presumably a gold smart watch would be heavier. On the other hand, presumably also a large amount of the weight is non-gold. And you'd obviously pay a penalty for the cost of removing the non-gold bits and recycling the gold. So, overall: The pure commodity value of the gold might significantly defray the cost of a hypothetical $5k aWatch, but not very much of the cost of a hypothetical $20k aWatch.
  - sneak 12y ago
    As long as a watch powers on and shows the correct time, it is not obsolete.
  - gjoeworm 12y ago
    That's absolutely right. I'm assuming that these will have extremely limited upgradability.
- mstolpm 12y ago
  What if the innards would be upgradable? Or owners could exchange the edition models for a newer model in store paying only a "modest" upgrade fee? I'd think Apple is aware that the edition models don't follow the one to two year upgrade cycles of a smartphone. So, some kind of investment protection would be necessary.
- djrogers 12y ago
  The $20k estimate is for an edition watch with a gold link bracelet, which would presumably outlive the watch itself. Without the gold bracelet his estimate is a $10k starting point, which seems crazy but China. I'd also expect one of two things to surface here - either the watch forever remains so incredibly lightweight in what it can do without the phone that upgrades are less necessary, or there will be an upgrade program for the expensive watches. If there's an upgrade program (i.e. replace the S1 with S2/3/4 and upgrade the battery yearly) then I'd actually expect these gen1 edition watches to become quite the collector's items - especially a few years from now when there are only a handful of gen1s around but far more gen2/3/4 watches.
- bornabox 12y ago
  You do realize, that a nice luxury watch costs easily 20k, 30, 50k or even 100k. It's a whole other category. 20K definitely doesn't sound totaly out of the ballpark for a 18K Watch with 18K Gold bracelet.
CJefferson 12y ago
There is one massive different with usual watches. Expensive watches are often sold under the idea you will never have to buy another watch, and neither will your children, or your children's children. I will reasonably surprised if any new Apple Watch hasn't been made forcibly obsolete by Apple within 5 years or so, and shocked if it is still functional in 10. Furthermore (and more worrying perhaps for people paying that much money), once a model of Apple Watch comes out with a better CPU, then your watch is no longer the latest-and-greatest, whereas older watches don't have the same degree of last year's begin inferior (of course, they can still go out of fashion).
- nicpottier 12y ago
  Yes, exactly, this seems so obvious that I don't understand why Gruber is ignoring it. The iWatch will be obsolete in 24 months at most (less if you are the type who values status and want a "$20,000" watch as the next model will probably come out 12-18 months later) Maybe there are enough uber-rich people that are ok buying $20,000 watches every year, but that seems like a really, really small market. Then again, maybe the bands will remain the same, so if the primary investment is in the band, then that could last a bit longer. Even then I'd expect that every 2-3 years they will have a form factor switch that will make all previous bands obsolete. We'll see.
  - Yhippa 12y ago
    In Apple's models there has to be enough people willing to pay that much money for a watch that will likely be made obsolete. That is mind-boggling to me. I have enough friends who have consternations about buying a new phone every two years let alone buying a watch that can be just as expensive to go along with it. Based on my personal experience I bet they're relying on the 5%-ers to make this thing work.
  - txu 12y ago
    Also the first thing came to my mind. Keeping the bands intact makes sense. Given the size of the watch there won't be much gold used in the watch head anyway. And this is purely fantasizing, maybe you can upgrade golden models by paying a comparatively small upgrade fee...return the old watch head and get a new one with upgraded electronic parts... :-D
carsongross 12y ago
It could happen, but that would be very aggressive and experimental. The perfect watch, the Rolex GMT, has a base price of about 8k in steel, and goes for about 26k in 18k gold, for a 3.5x multiple[1]. (Ignore diamonds, etc. Not relevant to this discussion.) So a 10x multiple on plain 18k gold over steel would be quite aggressive. And I don't know of any other watch where the exact same base watch is available at 25x less from plain 18k gold. You can get high-quality swiss movement homages to the GMT at around 1k, but they are clearly different watches and movements. Apple has of course done their homework on it and I have no understanding of the asian market, but if the pricing is that aggressive I would be surprised, particularly with the android competition. [1] http://www.jomashop.com/rogmii.html http://www.jomashop.com/rogmii.html
car 12y ago
Considering the rapid obsolescence of electronics, why would I put a quickly decaying piece of hardware my wrist? In the luxury/heirloom department, I much prefer high end mechanical wristwatches. Those have an appeal that will last much longer (decades) then quickly outdated hardware (months). I only have to look at the replacement cycle for cell phones, which is already insane.
- Steko 12y ago
  The point is you aren't most people and most people simply don't give a rip about mechanical watches. Just like most people didn't use blackberries in 2007 even though that was the most popular high end phone. The people that did have blackberries by and large preferred their blackberry's features -- just as the people who like mechanical watches prefer mechanical watches -- but that didn't mean Apple's new product didn't/can't find a market.
wodenokoto 12y ago
I think it is interesting how Apple might bring and entire industry into the general public. I mean, I knew you could get very, very expensive watches, but now this is suddenly that is brought in front of everybody.
radley 12y ago
A $20k (or even $5k) gold Apple watch will be a litmus test for me - anyone I encounter will automatically be someone I wouldn't do business with. The idea of a gold Apple watch is akin to gold-plated cars / guns for drug dealers. The only value it adds it to show you have money. The fact that Apple would even consider it only demonstrate the corrosion of values and vision to me.
- solutionyogi 12y ago
  Are you suggesting that you never do business with people who wear Rolex? I don't know how that makes sense. I would never pay 5k for a watch but I do wear shoes which costs 1300$. That doesn't make me a bad person, just that I like to spend money on shoes. I can completely understand that someone may want to spend 5k on Apple Watch.
  - radley 12y ago
    Would you pay $5k-20k for a gold-plated version of those shoes? Regarding Rolex (which I also feel are also overpriced antiques) they at least have a lasting value. They're often heirlooms passed down to children, partners, etc. A 100 year old watch is awesome. A 200 year old Rolex will be amazing, but possible. But I just can't imagine Apple supporting a first-gen iWatch 50-200 years after release.
    - MrPepperman 12y ago
      Just a small correction: It will be solid gold, not plated. Your point still remains in tact.
    - radley 12y ago
      Heh - I was assuming it would be hard to walk in solid gold shoes ;-)
    - bornabox 12y ago
      The whole heirloom argument doesn't ring right. I mean, sure, this happens and is part of the market. But I'd wager it's a small part. There are many watch-guys and rich people who buy 20, 30K watches because they can and like them. Not because they might give them to their kids in 30 years.
rndn 12y ago
Eww, that just reminds me of the fact that some people are wealthy enough to spend 20K for some status symbol, a sum of money I would try to build awesome stuff with. At the same time, I realize that those who can't afford a MacBook might think in similar terms about me, so thank you Apple for making me feel bad and to remind us once again how fucked up everything is.
tessierashpool 12y ago
when Jobs returned to Apple, he gave a big speech about how market share never mattered to BMW, and that Apple should become the BMW of personal computers. it did, and it went on to become much, much more. but its huge fame today is pushing the Mac away from being BMWs. all of which makes me desperately wish there was a Lamborghini or Ferarri of personal computers. most people might only need a computer to look at Facebook, but if you're doing animation, making electronic music, and building web applications - all of which I am personally doing, often - then you absolutely need a great GUI and a Unix-like foundation. if you're reading HN because you want to do a startup, please, give us the Lamborghini of personal computing. we will buy. Apple knows it, but they don't have time to care, because they're going to make so much more money selling digital watches to the people who drive actual Lamborghinis.
- publicfig 12y ago
  The Mac Pro is pretty much exactly that though. If you need a more specialized machine, you'll probably need to consider building your own machine in the first place with your specific needs.
moeedm 12y ago
10 years from now Apple won't be a tech company, they will be an international luxury brand that creates products in many different areas. This is just the first step.
- twoodfin 12y ago
  I don't think they'll ever make anything that isn't fundamentally a computer or an accessory in support thereof. Of course, you're right that over time that will mean creating products in more and more different categories.
js4all 12y ago
This speculation is insane. An Apple watch is no mechanical masterpiece like luxury watches in this price region. No watch lover will pay such prices for cheap Chinese electronics. If Apple pulls that stunt, the are geniuses in marketing.
- greedo 12y ago
  Sounds like what the cellphone makers were saying about Apple when rumors of the iPhone began to circulate. And I would disagree entirely with your argument. An iPhone [1] is truly a masterpiece of engineering and programming. An Apple watch will have a lot of that heritage, and will sell accordingly. [1] I would classify most of the highend Android smartphones the same way.
  - js4all 12y ago
    I am really not sure, but maybe people will value the watch that way. We will see.
aetherson 12y ago
If you buy a Rolex for $20k, it's not just that your watch will continue to be functional for 20 years or more. It's also that you can believe with a fair degree of confidence, based on a long history, that your 20 year old Rolex will still be a classy piece of jewelry at that time. Whereas even if there's some kind of upgrade program to prevent computer-part-obsolesence, nobody knows if smart watches will even be a thing in five years. Maybe in five years, Microsoft HoloLens will have blown away the smartwatch market to the point that every important wearable is glasses, not a watch. Or maybe they will be watches, but they'll have moved to a snap-bracelet deal where there's a much wider screen. Or maybe wearables will just be dead, dead, dead. Nobody knows.

60 points by nnain 12y ago

I think his $5k estimate is much stronger than his $20k estimate. An Apple Editions is not a Patek Phillippe. There is a dramatically different replacement cycle which means that any attempt to cut and paste lux strategies is going to either fail entirely, or narrow the market so thoroughly as to be indistinguishable from failure.

twoodfin 12y ago
That's assuming there's no upgrade story to be told at the launch event. I agree it would be a little weird coming from the modern Apple, but I just can't see a marketing pitch that sells even a "merely" $5,000 device that's functionally equivalent to a $350 one and essentially guaranteed to be obsolete within 5 years. Obviously there's a market that can afford to treat such a luxury as disposable, but that doesn't seem like a large enough market to justify creating the Edition line. They're going to sell these things (at least partially) through upgraded Apple Stores, and presumably those stores will have to offer (possibly off-site) jewelry-like fitting and repair services. How much of an engineering obstacle would it be, really, to guarantee that the next N generations of Watch internals will be able to be retrofitted into the Editions? Probably with a nice markup on the labor, too! After all, if there's one thing they're good at, it's continuous miniaturization. I think it would dramatically expand the market for the high end models. If it extended down to the stainless tier, I'd certainly buy a much more expensive Gen 1 version.
- guan 12y ago
  Or the watches will have significant trade-in value because they can ditch the electronics and melt down the gold.
  - aetherson 12y ago
    Gold currently sells at $1200 per oz. Looks like smart watches are typically around 2oz in weight, though presumably a gold smart watch would be heavier. On the other hand, presumably also a large amount of the weight is non-gold. And you'd obviously pay a penalty for the cost of removing the non-gold bits and recycling the gold. So, overall: The pure commodity value of the gold might significantly defray the cost of a hypothetical $5k aWatch, but not very much of the cost of a hypothetical $20k aWatch.
- sneak 12y ago
  As long as a watch powers on and shows the correct time, it is not obsolete.
- gjoeworm 12y ago
  That's absolutely right. I'm assuming that these will have extremely limited upgradability.
mstolpm 12y ago
What if the innards would be upgradable? Or owners could exchange the edition models for a newer model in store paying only a "modest" upgrade fee? I'd think Apple is aware that the edition models don't follow the one to two year upgrade cycles of a smartphone. So, some kind of investment protection would be necessary.
djrogers 12y ago
The $20k estimate is for an edition watch with a gold link bracelet, which would presumably outlive the watch itself. Without the gold bracelet his estimate is a $10k starting point, which seems crazy but China. I'd also expect one of two things to surface here - either the watch forever remains so incredibly lightweight in what it can do without the phone that upgrades are less necessary, or there will be an upgrade program for the expensive watches. If there's an upgrade program (i.e. replace the S1 with S2/3/4 and upgrade the battery yearly) then I'd actually expect these gen1 edition watches to become quite the collector's items - especially a few years from now when there are only a handful of gen1s around but far more gen2/3/4 watches.
bornabox 12y ago
You do realize, that a nice luxury watch costs easily 20k, 30, 50k or even 100k. It's a whole other category. 20K definitely doesn't sound totaly out of the ballpark for a 18K Watch with 18K Gold bracelet.

CJefferson 12y ago

There is one massive different with usual watches. Expensive watches are often sold under the idea you will never have to buy another watch, and neither will your children, or your children's children. I will reasonably surprised if any new Apple Watch hasn't been made forcibly obsolete by Apple within 5 years or so, and shocked if it is still functional in 10. Furthermore (and more worrying perhaps for people paying that much money), once a model of Apple Watch comes out with a better CPU, then your watch is no longer the latest-and-greatest, whereas older watches don't have the same degree of last year's begin inferior (of course, they can still go out of fashion).

nicpottier 12y ago
Yes, exactly, this seems so obvious that I don't understand why Gruber is ignoring it. The iWatch will be obsolete in 24 months at most (less if you are the type who values status and want a "$20,000" watch as the next model will probably come out 12-18 months later) Maybe there are enough uber-rich people that are ok buying $20,000 watches every year, but that seems like a really, really small market. Then again, maybe the bands will remain the same, so if the primary investment is in the band, then that could last a bit longer. Even then I'd expect that every 2-3 years they will have a form factor switch that will make all previous bands obsolete. We'll see.
- Yhippa 12y ago
  In Apple's models there has to be enough people willing to pay that much money for a watch that will likely be made obsolete. That is mind-boggling to me. I have enough friends who have consternations about buying a new phone every two years let alone buying a watch that can be just as expensive to go along with it. Based on my personal experience I bet they're relying on the 5%-ers to make this thing work.
- txu 12y ago
  Also the first thing came to my mind. Keeping the bands intact makes sense. Given the size of the watch there won't be much gold used in the watch head anyway. And this is purely fantasizing, maybe you can upgrade golden models by paying a comparatively small upgrade fee...return the old watch head and get a new one with upgraded electronic parts... :-D

carsongross 12y ago

It could happen, but that would be very aggressive and experimental. The perfect watch, the Rolex GMT, has a base price of about 8k in steel, and goes for about 26k in 18k gold, for a 3.5x multiple[1]. (Ignore diamonds, etc. Not relevant to this discussion.) So a 10x multiple on plain 18k gold over steel would be quite aggressive. And I don't know of any other watch where the exact same base watch is available at 25x less from plain 18k gold. You can get high-quality swiss movement homages to the GMT at around 1k, but they are clearly different watches and movements. Apple has of course done their homework on it and I have no understanding of the asian market, but if the pricing is that aggressive I would be surprised, particularly with the android competition. [1] http://www.jomashop.com/rogmii.html http://www.jomashop.com/rogmii.html

car 12y ago

Considering the rapid obsolescence of electronics, why would I put a quickly decaying piece of hardware my wrist? In the luxury/heirloom department, I much prefer high end mechanical wristwatches. Those have an appeal that will last much longer (decades) then quickly outdated hardware (months). I only have to look at the replacement cycle for cell phones, which is already insane.

Steko 12y ago
The point is you aren't most people and most people simply don't give a rip about mechanical watches. Just like most people didn't use blackberries in 2007 even though that was the most popular high end phone. The people that did have blackberries by and large preferred their blackberry's features -- just as the people who like mechanical watches prefer mechanical watches -- but that didn't mean Apple's new product didn't/can't find a market.

wodenokoto 12y ago

I think it is interesting how Apple might bring and entire industry into the general public. I mean, I knew you could get very, very expensive watches, but now this is suddenly that is brought in front of everybody.

radley 12y ago

A $20k (or even $5k) gold Apple watch will be a litmus test for me - anyone I encounter will automatically be someone I wouldn't do business with. The idea of a gold Apple watch is akin to gold-plated cars / guns for drug dealers. The only value it adds it to show you have money. The fact that Apple would even consider it only demonstrate the corrosion of values and vision to me.

solutionyogi 12y ago
Are you suggesting that you never do business with people who wear Rolex? I don't know how that makes sense. I would never pay 5k for a watch but I do wear shoes which costs 1300$. That doesn't make me a bad person, just that I like to spend money on shoes. I can completely understand that someone may want to spend 5k on Apple Watch.
- radley 12y ago
  Would you pay $5k-20k for a gold-plated version of those shoes? Regarding Rolex (which I also feel are also overpriced antiques) they at least have a lasting value. They're often heirlooms passed down to children, partners, etc. A 100 year old watch is awesome. A 200 year old Rolex will be amazing, but possible. But I just can't imagine Apple supporting a first-gen iWatch 50-200 years after release.
  - MrPepperman 12y ago
    Just a small correction: It will be solid gold, not plated. Your point still remains in tact.
  - radley 12y ago
    Heh - I was assuming it would be hard to walk in solid gold shoes ;-)
  - bornabox 12y ago
    The whole heirloom argument doesn't ring right. I mean, sure, this happens and is part of the market. But I'd wager it's a small part. There are many watch-guys and rich people who buy 20, 30K watches because they can and like them. Not because they might give them to their kids in 30 years.

rndn 12y ago

Eww, that just reminds me of the fact that some people are wealthy enough to spend 20K for some status symbol, a sum of money I would try to build awesome stuff with. At the same time, I realize that those who can't afford a MacBook might think in similar terms about me, so thank you Apple for making me feel bad and to remind us once again how fucked up everything is.

tessierashpool 12y ago

when Jobs returned to Apple, he gave a big speech about how market share never mattered to BMW, and that Apple should become the BMW of personal computers. it did, and it went on to become much, much more. but its huge fame today is pushing the Mac away from being BMWs. all of which makes me desperately wish there was a Lamborghini or Ferarri of personal computers. most people might only need a computer to look at Facebook, but if you're doing animation, making electronic music, and building web applications - all of which I am personally doing, often - then you absolutely need a great GUI and a Unix-like foundation. if you're reading HN because you want to do a startup, please, give us the Lamborghini of personal computing. we will buy. Apple knows it, but they don't have time to care, because they're going to make so much more money selling digital watches to the people who drive actual Lamborghinis.

publicfig 12y ago
The Mac Pro is pretty much exactly that though. If you need a more specialized machine, you'll probably need to consider building your own machine in the first place with your specific needs.

moeedm 12y ago

10 years from now Apple won't be a tech company, they will be an international luxury brand that creates products in many different areas. This is just the first step.

twoodfin 12y ago
I don't think they'll ever make anything that isn't fundamentally a computer or an accessory in support thereof. Of course, you're right that over time that will mean creating products in more and more different categories.

js4all 12y ago

This speculation is insane. An Apple watch is no mechanical masterpiece like luxury watches in this price region. No watch lover will pay such prices for cheap Chinese electronics. If Apple pulls that stunt, the are geniuses in marketing.

greedo 12y ago
Sounds like what the cellphone makers were saying about Apple when rumors of the iPhone began to circulate. And I would disagree entirely with your argument. An iPhone [1] is truly a masterpiece of engineering and programming. An Apple watch will have a lot of that heritage, and will sell accordingly. [1] I would classify most of the highend Android smartphones the same way.
- js4all 12y ago
  I am really not sure, but maybe people will value the watch that way. We will see.

aetherson 12y ago

If you buy a Rolex for $20k, it's not just that your watch will continue to be functional for 20 years or more. It's also that you can believe with a fair degree of confidence, based on a long history, that your 20 year old Rolex will still be a classy piece of jewelry at that time. Whereas even if there's some kind of upgrade program to prevent computer-part-obsolesence, nobody knows if smart watches will even be a thing in five years. Maybe in five years, Microsoft HoloLens will have blown away the smartwatch market to the point that every important wearable is glasses, not a watch. Or maybe they will be watches, but they'll have moved to a snap-bracelet deal where there's a much wider screen. Or maybe wearables will just be dead, dead, dead. Nobody knows.