Fire Sale

by on September 6, 2007 · 8 comments

For reasons I don’t really understand, Apple has slashed its high-end iPhone from $599 to $399. You know what that means? If you move fast you can get the old, discontinued, 4 GB model for $299. That sound you hear is Jerry groaning.

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About Tim Lee

Timothy B. Lee (Contributor, 2004-2009) is an adjunct scholar at the Cato Institute. He is currently a PhD student and a member of the Center for Information Technology Policy at Princeton University. He contributes regularly to a variety of online publications, including Ars Technica, Techdirt, Cato @ Liberty, and The Angry Blog. He has been a Mac bigot since 1984, a Unix, vi, and Perl bigot since 1998, and a sworn enemy of HTML-formatted email for as long as certain companies have thought that was a good idea. You can reach him by email at leex1008@umn.edu.

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  • http://www.jerrybrito.com Jerry Brito

    As a habitual early adopter, I’m used to it. I’d be groaning if I had gotten my iPhone a couple weeks ago. Since I got it on the launch day, though, I feel I’ve gotten something for the extra $200. (Am I rationalizing?)

  • http://www.manifestdensity.net Tom

    I think I can see why Apple did this. After the ROKR they must have been wary of getting back into the cellphone market. They priced the iPhone high, counting on at the very least making back part of their investment. And much of the R&D could doubtless be applied to other products no matter what.

    But the iPhone was a hit, and now they see an opportunity to sell a platform rather than just a product. They slashed their prices to near-cost, and are counting on volume and services to pay off in the future. It’s no coincidence that the price cut was announced minutes after the integrated iTunes store.

  • http://www.techliberation.com/ Tim Lee

    Tom, that’s probably right. Still, it seems like they could have dropped the price by $100, raked in an extra half-billion dollars over the holiday season, and done another $100 price cut in January. More profits, fewer disgruntled early adopters.

    But maybe they’ve got research showing they’ll sell a whole lot more phones at $400 than at $500, and they want to nab those customers before other companies have time to get knock-offs to market.

  • http://jerrybrito.com Jerry Brito

    As a habitual early adopter, I’m used to it. I’d be groaning if I had gotten my iPhone a couple weeks ago. Since I got it on the launch day, though, I feel I’ve gotten something for the extra $200. (Am I rationalizing?)

  • http://www.manifestdensity.net Tom

    I think I can see why Apple did this. After the ROKR they must have been wary of getting back into the cellphone market. They priced the iPhone high, counting on at the very least making back part of their investment. And much of the R&D; could doubtless be applied to other products no matter what.

    But the iPhone was a hit, and now they see an opportunity to sell a platform rather than just a product. They slashed their prices to near-cost, and are counting on volume and services to pay off in the future. It’s no coincidence that the price cut was announced minutes after the integrated iTunes store.

  • http://www.techliberation.com/ Tim Lee

    Tom, that’s probably right. Still, it seems like they could have dropped the price by $100, raked in an extra half-billion dollars over the holiday season, and done another $100 price cut in January. More profits, fewer disgruntled early adopters.

    But maybe they’ve got research showing they’ll sell a whole lot more phones at $400 than at $500, and they want to nab those customers before other companies have time to get knock-offs to market.

  • http://www.wbklaw.com Mike Sullivan

    I suspect the real reason was to get their competitors — the wireless handset makers — working on “iPod killer” phones that would be competitive at the $600 price point. Now the rug has been pulled out from under the competitors’ feet, because target price point has been slashed by a third, and it will be much harder for a comparable phone to be sold for a competitive price.

  • http://www.wbklaw.com Mike Sullivan

    I suspect the real reason was to get their competitors — the wireless handset makers — working on “iPod killer” phones that would be competitive at the $600 price point. Now the rug has been pulled out from under the competitors’ feet, because target price point has been slashed by a third, and it will be much harder for a comparable phone to be sold for a competitive price.

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