Apple iPhone Price Drops $200

September 11, 2007

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Apple is dropping the price of a new iPhone from $599 to $399 – and the early adopters have been might unhappy about it. Steve Jobs personally answers them in an article on the Apple website:

…even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these.

Therefore, we have decided to offer every iPhone customer who purchased an iPhone from either Apple or AT&T, and who is not receiving a rebate or any other consideration, a $100 store credit…

http://www.apple.com/hotnews/openiphoneletter/

What do we learn from this?

1) ATT has the market power here; without ATT, the iPhone is dead. Apple was unable to “turn around” the market. That exclusive deal with ATT did not help much as it is giving ATT the market power. They can now basically dictate the prices.

2) The iPhone seems to be either a cool gadget (and purchased by geeks at $599) or a very expensive phone (and hence purchased by not so many at $599). The mass market does not buy expensive phones. They like affordable phones.

3) The $100 voucher announced in a letter by Jobs indicates that something went really really wrong. Apple did not expect this kind of market reaction. (Also, the discount is apparently coming from Apple only, so ATT seems to say: “Apple, this is YOUR product. We don’t care whether your early adopters paid too much or not.”)

Nice try, Apple.

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