Category Archives: apple

What’s Next with the iPhone with Apple & AT&T?

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Yesterday Apple announced a major update across the iPhone line, as well as big price-cuts to the iPhone. It’s interesting to consider what this means for the future of the iPhone.

Briefly, for context, the Shuffle gets more colors, the Nano gets a bigger screen and video playback, the hard disk iPod’s get even more capacity, and the iPod touch is a lot like the iPhone without the phone for $100 less. These updates are relatively uncontroversial, other than, perhaps, the fact that there isn’t a hard disk based iPod with a large touch screen for all the video you can cram on it.

What is controversial is that Apple also cut the price on the iPhones by $200, which makes the 8gb model a $399 item, and drops the 4gb to $299 while supplies last. This is, of course, great news for anyone who wants an iPhone. It is rather upsetting though to some of those who already have an iPhone to have the price on their shiny new toy drop so much so soon. There has been a lot of huffy complaining in online forums. Meanwhile, people who bought their iPhone recently are able to get credits under Apple’s 14 day price protection. Some early adopters also report success getting full or partial credits for the price difference, though many others have not.

I think it is unfortunate that Apple didn’t better anticipate the upset this move caused wasn’t better prepared to assuage unhappy early adopters. Offering a $200 credit towards Apple merchandise up front would have been a brilliant move that would have a positive ripple effect across all of Apple’s product lines. The true Apple faithful would be excited to have $200 to spend on more Apple stuff. PC users would have strong inducement to further explore their newfound taste for Apple products by picking up a new iPod for their spouse or significant other, or perhaps a new Mac for themselves. In the end, the hit on Apple’s revenues would be minimal, especially since they are taking revenue from the iPhone over 8 quarters.

Apple also announced that they’d be selling iPhone ringtones through the iTunes store. They will run $0.99 on top of the $0.99 to buy the track in the first place and you’ll be able to select which portion of the track you want for your ringtone. It is, of course, outrageous that we are expected to pay extra for a track that we’ve already purchased to use it as a ringtone, but it is even more outrageous to pay $2 for a ringtone and not get the whole track.

Now though, lets step back and look at the whole landscape and what the implications might be.

By dropping the iPhone $200 and phasing out the 4GB model, Apple has clearly made room for at least one more product in the iPhone product line.

  • A 16GB iPhone at $499 is the most obvious candidate, especially since the 16GB iPod Touch is available for $399, the same price as the 8GB iPhone.
  • A less likely possibility is that they will debut an iPhone capable of 3G speeds at the top of the line. The iPhone is yet to be launched in Europe and most people there would expect something like the iPhone to support 3G, rather than just the pokey speeds of EDGE. In addition, AT&Ts 3G coverage continues to improve (slowly) and a new generation of 3G chips should bring down power consumption and increase battery life. A 3G iPhone would also get a lot of early adopters to upgrade, especially if they had $200 in Apple store credit, or, perhaps if they could use their contract subsidy from AT&T for a new iPhone…
  • AT&T could start offering the iPhone at a subsidized price. Current iPhone customers already have a credit worth, effectively, $250 on their account for a free or heavily subsidized phone for signing a 2 year contract. With the new pricing, AT&T could offer the iPhone to new customers for $150, or less, which is the same price as their version of the latest Motorola RAZR. They’ve picked up a lot of new customers thanks to the iPhone, and they’d be smart to keep that momentum going by taking full advantage of the iPhone price cuts. This would also drive a lot of existing iPhone customers to upgrade if an iPhone upgrade comes out soon.
  • Apps for sale for the iPod touch and iPhone. The announced featureset of the iPod touch leaves it with only 7 icons in the top part of the main screen. This creates an empty and snaggletoothed look that is very unapple-like. It makes me strongly suspect that either Apple will have at least one more application at launch, or that they will soon be selling games and other apps for the iPod Touch and the iPhone. I’m sure some iPod Touch users would like the iPhone’s e-mail client and/or an IM client even if they could only use them over WiFi.
  • Bluetooth DUN support in the iPod Touch. This one is a long shot, but letting the iPod Touch pair with someone’s existing cell phone for internet access over the phone’s data connection would be a very cool feature, it would also provide a bit of an end run around exclusivity agreements with AT&T regarding the iPhone. There are totally unsubstantiated rumors that the Touch already has a Bluetooth chip. At the very least, Bluetooth would be cool for wireless headphones and simplified car stereo connections
  • Apps with Rendezvous support. I’m really surprised this hasn’t happened yet, but at this point, there is really no network-effect with having an iPhone, or an iPod touch. There aren’t any cool things I can do if my friends also have an iPhone or an iPod touch. Microsoft was stupid to overemphasize “The Social” as part of the Zune launch, but I think it will soon be time for Apple to offer, at the very least, some networked games.

I expect pretty much everything, except the 3G iPhone and the Bluetooth networking, would happen in plenty of time for the Christmas buying season. I’d guess they’ll be metered out over the next two months or so to keep the iPhone and Apple in the news. I wouldn’t be surprised if we saw some sort of integration with the AppleTV soon either.

I’m worried though, that if Apple moves to start selling apps for the iPhone, that they will start deliberately making life difficult for the authors of 3rd party apps being developed now without official support from Apple.

iPhone Backlash

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I was looking at Techmeme today and noticed a breakout of iPhone backlash. VC Fred Wilson noted that he still hadn’t opened the iPhone he bought and that he, in fact, didn’t want it.

Then someone at the Silicon Alley Reporter picked up on the post, amped it up a bit, and then sucked up to his boss by quoting him as he “reported” assertions that there is growing dissatisfaction with the iPhone by it’s early adopters.

Whatever, I’m not surprised there is iPhone backlash. In fact, when I got the thing, I fully expected it would have broken my heart by now. After almost two months with it, I wish the data network was a little faster, and I wish it had a decent IM client (or any IM client at all), and that it would support RTSP video streaming, and dozens of other things, small and large.

What surprises me is the degree of attachment my iPhone owning friends and I still feel towards the thing. We find ourselves using it for tasks that would be more easily accomplished at our computers, often when our computers are powered up and less than three feet away.

Apple gave me a polished, sexy, easy to use device that gives me access to nearly the whole web from my pocket. Many of its shortcomings can be fixed by software updates (though I expect some may not be in order to stay on good terms with AT&T). Maybe Google or someone else will come along and release a device that’s even better for a lower price. If they do, that will be cool, I’ll probably get one, but I’m not holding my breath.

What’s new in the iPhone Update 1.0.1

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Apple released their first update for the iPhone a few days ago. The only changes they’ve identified publicly are 4 security updates to Safari and the frameworks it uses, but they’ve clearly made other updates. I’ve published a long list of user identified iPhone fixes and enhancements over at my Iphone blog with the spammy domain name.

iPhone vs iPod: It’s called up-sell, not cannibalization, idiots.

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I apologize for yet another iPhone related post, but I still have something I need to get off my chest. For months now, various stock analysts have been attracting press coverage and garnering free publicity for their firms by publicly worrying that iPhone sales would “cannibalize” sales of the iPod, that people would buy iPhones instead of upgrading their iPods.

I’m sure that dynamic has played out in a number of cases, but if you take a step back and think about Apple as a whole, it is clear that this isn’t cannibalization, its up-sell. The most expensive iPod goes for $349. The cheapest iPhone is $499, while retaining nice healthy margins.

In other words, if someone forgoes an iPod for an iPhone, Apple is getting even more money! This is not something to worry about.

It might have made sense to worry that iPod sales would slow while people waited for the chance to by an iPhone, but apparently this was not the case. iPod sales grew faster than expected in the last quarter.

iPhone Sales, Perhaps Not So Dissapointing After All

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Yesterday, Apple announced they sold 270,000 iPhones in their last financial quarter. This is no doubt giving conniptions to people who were, only days ago, calling iPhone sales disappointing.

Earlier in the week, some members of the press seemed to be having second thoughts about their profession’s participation in the iPhone hype storm, so some of them lept upon a little fact from an AT&T earnings call that they’d only activated 140K iPhones in their last quarter, the last 30 hours of which overlapped with the iPhone’s debut.

This was terrible terrible terrible, because it was only a few weeks ago that they were hyping reporting the most breathless predictions that 700,000 or even one million iPhones had been sold shortly after launch. So they eagerly compared this information about iPhone service activations with AT&T over a 30 hour period to the most optimistic estimates for iPhone sales (ie, they compared oranges to apples) for the entire weekend. They also ignored or downplayed the fact that a lot of iPhone customers had trouble getting their phones activated that weekend, because AT&Ts systems couldn’t keep up.

Predictably, the same people who bought the earlier hype, happily swallowed this “news,” and Apple’s stock price, which had recently shot up on the positive spin, sank due to the negative spin. This drop then lead to more stories about how disappointing the iPhone was and reassured the press that they still have some influence.

Well, Apple stock is back up again. It’s recaptured everything it lost two days ago after the AT&T earnings call. The latest numbers hold up well against earlier estimates of earlier iPhone sales, many of which were in the range of between 300,000 and 500,000. Even if Sunday’s sales were 1/3rd of what they were for Friday evening and all of Saturday, it’s likely that Apple sold over 350,000 phones in the first weekend, and it looks like sales during the following week were also quite strong as most stores sold out of the phones almost as quickly as they received new shipments. I should note that even these estimates would probably have been considered optimistic back in June.

My Take on Someone Elses Take on One Month With the iPhone

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Dave Weiner writes about his first month with an iPhone. I generally share his criticisms, but he gets off to a rough start by resorting to a common but intellectually dishonest journalistic touch at the beginning

He uncritically restates the overly simplistic headline of a NY Times story, (thereby reinforcing it) and takes it at face value as a segway into the rest of his own piece.

The NY Times reports that iPhone sales are disappointing, I’d like to add that the product itself is disappointing.

This is a problem, because the NY Times story draws shakey conclusions based on suspect and incomplete data. The only data available when that story was written was the # of iPhone activations on AT&Ts service over the first 30 hours after launch. That number is not the same as the number of phones Apple sold in the first weekend, it doesn’t count Sunday, July 1st, and it doesn’t take into account the phones that people didn’t activate immediately, either because of AT&Ts systems problems that first weekend, or because the buyer didn’t have time right away.

The NYT compares the 142K phones activated in the first 30 hours to the most wildly optimistic estimates of iPhone sales for the entire weekend.

As to his critique, I agree that rendering full web pages intended for desktop browsers isn’t the ultimate mobile web experience, but I don’t think Apple thinks that is the whole story. By making the web at large practical for mobile users, Apple brings more mobile users to the web at large. This creates a larger installed base, which creates incentive for publishers to invest more effort in creating optimal experiences for users of small-form-factor devices. Plus, mobile safari gives them a rich platform for developing that experience. Apple has provided a mobile device with backwards compatibility on the web, while also providing the incentive for 3rd party developers to take advantage of the new features provided by the platform.