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iPhone price cut a costly call for Jobs?

Apple’s iPhone came at the mobile phone market as if the cell phone hadn’t been invented yet. While the iPhone isn’t entirely without faults, it’s clear that the boundaries of what can be achieved within the confines of a mobile device have been nudged that little bit further. However, what Apple seems to have failed to ensure the people managing their finances keep in step with the designers. To one man, a $200 price cut is music to his ears, certainly nothing to get hung up about. While to another, it’s a pretty bad call…

Buoyed by the initial success of the iPhone, Apple were in a position to make a pivotal announcement on Wednesday the 5th of September.

In a relatively short amount of time, Apple cut the price of the iPhone by $200, which is a non-trivial sum of money.

On the one hand, if you’re a new buyer, this is fantastic news. However, if you’re looking at the Apple iPhone news through similar eyes to Cade Metz: “[Steve] Jobs just insulted each and every person who’s purchased an iPhone over the past 68 days.”

It’s worth pointing out that Cade, along with some other contributers to The Register are fast making what was once a hugely entertaining source for informative, if tongue-in-cheek IT news into The Sun of the tech’ news world.

He’s got a point, but his sensationalist writing style and puerile “We told you so!” verbiage just buries the one point he did have under a tiresome tirade.


Back to the point he did have: “He’s also robbed them of $200. He spent months telling those one million souls they should spend nearly six hundred smackers on a new user interface, and now, he’s admitted this was nothing more than a con job.”

OK, so you winced you way through reading that like I did, but it does certainly look that way, doesn’t it?

But what would the alternative be? Would it have been more appropriate for Apple to hold off and not cut the price until some suitably distant period? Say, just before the holiday season?

Oh yes, I’m sure Cade et al at El Reg would have loved that! I can see the headline now: “Apple Gouge Gullible iPhone Owners!”

But what I will say is, Apple must have known they were onto a winner, so why not take an initial hit on the cost up front when the iPhone was first released? An analysis of the Apple iPhone from teardown firm Portelligent “estimates that the new smartphone costs Apple a mere $220 to make.”

That number is broadly consistent with the other numbers I found. With that in mind, could we argue Apple really were gouging gullible iPhone owners?

In the end, Apple issued an open letter to all of their iPhone customers which totally acknowledged the poor timing of the price cut and made the offer of a $100 rebate to all existing iPhone customers.

However, this wasn’t enough, and to some, this gesture by Apple with regard to the iPhone price cut merely added insult to injury:

“Apparently, offering a cash refund was out-of-the-question. And with one million iPhone buyers walking the streets, we can understand. But couldn’t he pony up a store credit for at least $200? That’s how much the company pilfered from all those gullible souls over the past month and change.”

I’ve seen this kind of thing happen all too often. I’m damned if I can find an example right now, but I’m pretty sure that in any such instance, the backlash from the media wouldn’t have been anywhere near as harsh.

I’ve seen for myself first-hand just how ‘bumpy’ the ‘technology road’ really is, and having read the open letter from Apple, those experiences come flooding back: “There is always change and improvement, and there is always someone who bought a product before a particular cutoff date and misses the new price…”

Just how many times has Apple got something like this wrong? And on the balance of things, do we think the backlash from the technology media really is justified?

I don’t think it is.

I’ve been around long enough to smell the Apple bashers from a country mile in driving rain. Eager to pull out Steve Job’s business obituary and tack on the obligatory: “Apple are no more!” headline.

Either that, or it was a slow day for technology news…

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By Wayne Smallman

Wayne is the man behind the Blah, Blah! Technology website, and the creator of the Under Cloud, a digital research assistant for journalists and academics.

6 replies on “iPhone price cut a costly call for Jobs?”

I would have been pretty gutted if I had shelled out an extra $200 just to say I was one of the early adopters.

It’s almost as bad a slap in the face as having an improved version released. I wonder how long it will be before Apple spring that one?

Hi Brian, I think the timing has been a little poor, to say the least.

My feeling is, the iPod Touch has been over-shadowed by the iPhone, not least because of the cost-cutting debacle.

I’m sure Apple could have split these two items up in separate events.

An example of this over-shadowing is the lack of commentary on the wireless edition of iTunes.

Hardly anything has been said about that, which is a shame…

Perhaps, the iPhone popularity paid the Design Engineering Costs sooner than Apple expected even though $200 seems to be a high mark-up for Design costs!

Hi Debbie! Thanks for the comment and thanks again for the contact on MyBlogLog.

I just think Apple got the timing wrong on this one.

It’s a shame, because it’s created some degree of bad faith, not helped by the bad press.

But, we live and we learn, eh?

Designers are famous for the enormous mark-ups…just look at the mark-up on that 2012 Olympics logo. Maybe you’ve set your rates too low Wayne!


Hi David, visual design is a good example.

I sit between both 2d & 3d design, so I get to see how either side is justified.

From a product / industrial design point of view (3d) you have much less room to be pretentious about your work. Although that didn’t stop Philippe Starck.

So part of the reason that the London Olympic logo went so awry is because the designers dressed it up as art, with some utterly vacuous justification that means very little, but cost a fortune to produce.

Typically, this would involve some “research” element, whereby they send their designers off to some mountain top hot spring in Japan for a week or six to find their inspiration.

In reality, there’s very little room for out-and-out art as design in product design…

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