Did Apple screw iPhone early adopters?

We’re still on vacation, currently in Milwaukee, but we’re staying in a hotel that has free WiFi so I had to check in on what Apple announced yesterday.

If you haven’t heard, they announced a new line of iPods, a (limited) music store where you can buy iTunes tracks via your iPod’s / iPhone WiFi connection, and a lame system for buying custom ringtones for your iPhone.

You can watch the announcement here.

I’m going to gloss over all of this for now, and talk about the other announcement Apple made. They dropped the price on the 8GB iPhone to $399 (down from $599). They also discontinued the 4GB model, but they’ll be selling them for a reduced price of $299 (down from $499) while supplies last.

The price drop has stunned more than a few people, myself included. I can’t remember a time when Apple dropped the price by so much, so quickly after introducing a new product. As we all know, the iPhone was only introduced just over 2 months ago, on June 29th, 2007.

I personally am a little pissed off about this. After reading some other blogs and forums, it’s clear I’m not alone. This seems like a slap in the face for all of us who were willing to shell out the $599 (and wait in line on opening day) just two months ago.

On some of the other sites that I’ve been reading complaints, there have been others who basically call us whiners. They say things like, “you knew the price would go down eventually”, or “if you think $599 was too expensive you shouldn’t have bought it”, or “you paid the $200 for bragging rights”. To all of these things I say, BULL SHIT!

I am very happy with my iPhone, and I think it is worth $599. It’s not that they dropped the price that pisses me off, it’s the size of the price drop, and the fact that they only introduced the iPhone 2 months ago.

Based on Apple’s history, I expected that about 10 months after they introduced the iPhone, they would come out with a 2.0 model, that would cost $399-$449. Knowing that Mobil phones tend to drop in price faster than many products, at worst I expected a $100 price drop about 6 months after the launch. Either of these would have been perfectly acceptable. I wouldn’t be mad in the least. But, to drop the price almost in half just 2 moths after it launches is insulting.

I’ve also heard this situation compared to buying a G5 right before Apple announced the transition to Intel. I would say that this is not at all the same. The G5 was a long-standing product. If you happen to buy one right before the Intel announcement, that’s just bad timing. This is different because the iPhone is a brand new product.

I have a hard time believing that the market has changed so much in two months that Apple can drop prices this much and still maintain their margins. I find it more likely that Apple intentionally inflated prices for the first two months just incase the iPhone was a flop.

I think this kind of crap is ultimately going to hurt Apple. I think the next time they introduce a new product, the early adopters will be much more cautious about jumping in. They’ll say, I’ll just wait 2 months and see what happens.

7 thoughts on “Did Apple screw iPhone early adopters?”

  1. When I was about 13 I bought a Nintendo64 on launch day. I queued up for it early in the morning and paid £250 for it. About 3 months later the price dropped to £150. I had saved up that £250 with my brother for months. You can imagine how we felt when the price went down! I generally try and avoid buying expensive things on launch day so I don’t get burnt again.

  2. I have to say that I would be so pissed off had this happened to me, I completely understand. There really isn’t any way to explain it except that the price was initially inflated, but even that is odd because I can easily see Apple selling an overpriced product, especially the way the iPhone was selling.

    On a brighter note, the price drop has allowed me to buy one, so I’m a little bit chippier about it than others. But I didn’t buy one to start with because I figured the price would drop by about Christmas anyway.

  3. Hey Paul,

    Lets take away the iPhone part of this price drop, and replace it with the good old iPod Video. If you were one of those who bought the Video when it first came out (Which in this story you did), then when the other people who buy it when its at a discount you should understand because sooner or later there will be something new.

    Paul, you now and I know a ton about Apple. It doesn’t take a moron to realize that this was coming. Probably not as quickly, but we have to realize that this sooner or later was going to come to pass. Partially, the price gauge is for the Holidays, and that there is some new tech for the iPhone that must be added. In the end, the 100 bucks did buy you bragging rights.

    In the end, you really didn’t get screwed hard, the real people who got screwed were the iPod Touch people (Idiots!!!)

  4. First off, they didn’t drop the price in half as you stated. The price was $600 and they dropped it to $400. But that’s neither here nor there at this point.

    Rumor has it that Apple’s margins on the iPhone were nearly 50%. That’s unbelievable in virtually any industry. If that rumor is true (or even close to true), then Apple had a lot of room to mess with price to begin with.

    Now figure in the fact that since they are now only having to manufacture one version of the phone instead of two, the cost of manufacturing most likely went down quite a bit.

    This equates to a heavy price drop – and just before the holiday season, no less.

    The media made much more of this than I suspect there really is. A few hundred or maybe even a few thousand upset people on the Web doesn’t mean squat to Apple. And the $100 gift certificate isn’t costing Apple a whole lot because you have to spend it in their own store… so they’re getting that money back anyway (that Steve Jobs… he sure do know how to make money, eh?!!!)

    It sucks if you’re a person who purchased the iPhone early. But I must side with the customers who simply aren’t voicing their opinion on the Web when I say “that’s technology.” Not only do I fully expect prices to drop quickly on new products, but I also expect there to be many bugs and “issues” to deal with. Both reasons keep me from buying any new tech product upon release. I prefer to let others beta test for me.

  5. By the way, does anyone besides me think that the iPod Touch is nothing more than a “tempt” to get you to buy the iPhone? It costs about as much as the iPhone, but lacks the phone. If I’m going to spend that much on an iPod that has little storage, I might as well just get the iPhone.

    And just watch what happens to the cost of the Touch around November. I can smell it coming already.

  6. Yeah I don’t really get how apple does that, they make amazing products and this is known. But at the same time it seams that they intentially screw the very people who recognize them for creating great products. Another thing they seem to be doing is putting out good products that they know their hardcore fans will all go out and get but then put out an even better product that renders their existing products all but obsolete.

    Love their products, hate their tactics…

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