The iPhone: Apple's First Flop 33 comments
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The company has had a string of hits since it introduced the iPod and its shareholders have benefited sending shares from $7 in 2003 to the $100 they sit at today. The introduction of the iPhone will be the first miscue for the company and send its shares, priced for perfection tumbling. "Why?" - you ask.
More Isn't Always Better
The beauty of the iPod was and is its simplicity and singular purpose. It enabled even the most tech phobic of us to operate and enjoy it. Because of this, sales have been phenomenal. There are several versions of Mp3 player phones out there and none of them are big sellers. The reason? The market does not want them together. I do not want to have to turn off my music to get a phone call. If I am driving my family in my car and we are listening to the iPod, having to turn off the music to answer my phone becomes a major hassle. The same holds true for any event where I play the iPod. Why would I pay $600 for this, or, buy an iPod in addition to this, in order to avoid the hassle?
One Carrier
All of have cell phone agreements and have a cancellation fee. This varies from $100 to $150 dollars. This price need to be added to the costs of the iPhone for those who want it right away or it will cause a lag in initial sales. This lag will allow cell competitors to create their own, cheaper versions to compete, hurting future sales.
Touch Screen
Being able to make a call simply by pointing a finger at a number is a feature touted for the phone. How is this any different or accurate from scrolling on my blackberry? This feature will lead to frustration, as users who do not point at exactly the number they want will keep initializing errant calls.
"All In One" Historical Issues
How many people have had TV/VCR or DVD combos or the dreaded all in one fax, scanner, copier? Now, how many regret that decision? When you have an all in one, you then become a slave to that device. If either breaks, the both units must be replaced. If a newer, better version or either comes out, you cannot purchase it because it then entails buying both again at considerable cost. Now, when you consider the unimpressive reliability history of the iPod and the cost to attempt to repair them (usually it is cheaper to just buy a new one), it is not an unrealistic stretch to consider that you may be purchasing one of these every two or three years. An expensive proposition.
What Should Apple Do?
This is the easiest part. There is no reason to have an 8GB iPod on the phone. Give us a 2GB capacity so we can put our favorite stuff on it and listen when we want, cut the price to $299 and you may have something. A $599 phone will not gain mass acceptance no matter what it does, especially when people can still get its functionality from their existing devices. Also, the exclusive deal with AT&T Inc. (T) was not a very bright idea. Until it is expanded to all carriers, you will have nothing more than a little niche product.
The real winner in all this? AT&T , not Apple or its shareholders.
AAPL 1-yr chart:
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This article has 33 comments:
And to believe that the pricing will be static and that there will be no other future models addressing lower price points is naive.
Also, have you seen how the economics will work? I haven't, but Apple has announced they will book payments from AT&T as they get them. What payments? I would guess something like $5 per user per month. Remember that Apple is amortizing the revenues of the devices over 8 quarters because they are positioning this as a service and the end user will constantly be getting free updates to improve functionality. Apple wants get paid for this service.
AT&T is the only US carrier but they will launch abroad by year end. Verizon wouildn't play ball because they have such a tight grip on their network. AT&T was smart to let Apple be Apple and time will bear this out. You should put your money where your mouth is and short Apple. I'll happily lend you some of my shares.
Apple knows this. The iPhone automatically fades out the music when you place/receive a call and resumes it when the call's complete.
"users who do not point at exactly the number they want will keep initializing errant calls."
If there's one thing Apple's good at it is user interfaces. I haven't used the iPhone, but I will bet that this is not a problem. The technology used in the touchscreen is more sensitive than other touch-screens we've seen before. This sensitivity coupled with Apple's expertise at developing interface software will likely eliminate this "problem."
"it is not an unrealistic stretch to consider that you may be purchasing one of these every two or three years. An expensive proposition."
The target customer already owns phones and iPods, an equally expensive proposition.
"Give us a 2GB capacity so we can put our favorite stuff on it and listen when we want, cut the price to $299 and you may have something"
Wrong again. Cutting capacity is unlikely to significantly reduce the price of the iPhone. Apple gets fairly good prices on its memory - it's the combination of many different technologies that makes the phone expensive. Additionally, you can't pitch the iPhone as an iPod replacement with only 2 gigs.
I'd like to point out that I am not an Apple fan. The iPhone may fail. But I don't think your reasons will be the reason it fails. Nobody's made a phone like this before, we have to see what pricing the market will bear, but I am fairly confident in Jobs that Apple looked this over before embarking on a multi-million dolalr mission to bring this to market.
"There are several versions of Mp3 player phones out there and none of them are big sellers. The reason? The market does not want them together. "
There were hundreds of MP3 players available when the iPod was released, Apple just did it better. I can't believe I have to explain this.
"This lag will allow cell competitors to create their own, cheaper versions to compete, hurting future sales"
Again, the same was said with the iPod. See Zune sales figures if I haven't made my point yet.
"Being able to make a call simply by pointing a finger at a number is a feature touted for the phone. How is this any different or accurate from scrolling on my blackberry?"
If you don't know, you don't know. Look at the demo on Apple's site. The scroll function is gesture responsive. Meaning that if you need to get down the list quickly you swipe at the list and it rolls like a slow slot machine, when you get close, you touch your finger and it stops. There's also an A-Z index on the side of the screen that allows for quick navigation. All of these things are built to be user-centric, where the Blackberry is engineering-centric. This means that the iPhone works with you, versus the Blackberry, where you work with the phone.
As well, the address book will be sync-able with Apple's Address Book app, and Windows equivalents. Not anything new necessarily, but if you use .Mac this will make the Apple experience that much sweeter. You'll have the same numbers and addresses on your webmail, Mac, iPhone, and iPod. I do it and I can't live without it. I change a number in one place and it cascades through all of my address books. It's not always perfect but it's a hell of a lot easier than doing it manually. This will create .Mac interest among non-subscribers. A small piece of the pie, but one with a lot of chocolate in it.
"...it is not an unrealistic stretch to consider that you may be purchasing one of these every two or three years."
Yup. What's your point here? We're already spending this much on new phones and players every few years. Welcome to consumerism. The wonderful myth of the iPhone is that we might actually like what we buy, instead of thinking about throwing it against the wall after a month. It's a myth I'm happy to believe in because Apple hasn't let me down in the past. [Well, ignoring 1996-1998, we'll call those Apple's early 20's]
And in case you hadn't noticed, we're already slaves to our machines.
Why might the iPhone flop? Simple. Over-promised features, bugs in the system, some catastrophic security issue, the touch-pad dies after six months... But honestly, none of these risks are new or unheard of. This kind of behavior is du rigeur for most phones. What is new is the promise of a phone that gets the industry to rethink the annoying POS's they currently sell. In this respect, the iPhone has already been wildly successful.
The iPhone COULD flop. But I have a couple of grand (a lot for me) betting it won't.
How about having to try to turn down the colume on the radio while getting a phone call is a pain, the iphone does it automatically, and i get to resume right where the song was when i took the call, rather then missing the song.
And COME ON, do a LITTLE research before you try to be the hero and claim that apple will fail, get the pricing right.
Secondly... Do you know why Nokia pumps out so very many new models year after year? 1st gen iPhones will be replaced rather quickly... And those units will, barring major defects... fetch sellers nearly 50% of what they paid for them. And as for the "unimpressive" unreliability of iPods?.. If they were that bad... I'm sure that sales would have taken a hit. My old 3G ipod is still my favorite and other than a new battery... It still works just fine.. I won't even mention how many other brands of mp3 players my kids have destroyed in months if not weeks.
Your article strikes me as a play for hits... Well ... You got em.
Thanks.
The first iPod was more expensive at launch for a 5 gigs brick... and it was just an mp3 player... Did you write anything about it at that time ? Besides, ever heard about any other phone so much talked about in schools all over the world ? A lot of people won't care about the introductory price and we all know this first edition is just the tip of an iceberg...
See you in July after one month sales figures :)
Laughable.
Regardless of whether apple is a good investment or not, at least forge a real argument.
Mostly, people still don't understand what it is that Apple does. They take their time, they do their research, and they work hard to create simple products that are useful. Blackberry, Microsoft, etc just play the PowerPoint game of talking points and feature lists without ever creating anything that's been thought through and well-designed. With a few specific products like the XBox being a possible exception, yet even those fall to the corporate titans eventually.
You hit the nail EXACTLY on the head here. And, you know, that is INCREDIBLY difficult to achieve.
As for the purchase price, in two years, when you upgrade your iPhone, you will be able to resell your old iPhone for about 50% of what you paid for it, if the iPod and Mac resale markets are any indicator.
Apple sold 100 million iPods in the first 5.5 years. The iPhone sales will break that record.
You heard it here first.
I'm not a Beetles' fan or even a fan of the genre but that is not only a hot prediction,
it would make a lot of sense especially considering the talks between Apple Inc. and Apple
Corp.
Keys.
You are correct that “featuritis” and “all-in-ones” are often jacks of all trades but masters of none. My wife and I both have Windows mobile-powered HTC-designed PDA-smartphones (O2 Mini and O2 XDA IIs) which suffer from exactly this ailment. They’ll do just about anything and run almost any software but I am getting to the stage of loathing mine as it is the worst phone/PDA I have ever used. The OS crashes and freezes daily, texting, the address book, connecting to wifi, launching apps, the blasted start menu etc are all some of the worst-designed pieces of software I’ve ever seen. Physically my XDA IIs has so many plastic buttons and a slide-out keyboard half of which don’t work anymore that I am about to go back to using my old Sony Ericsson P900 PDA phone which despite it’s own problems is so much better as a phone and PDA it’s like night and day.
However, you don’t seem to be aware that simplicity and elegant integration is Apple’s mantra meaning that this issue will be at the forefront of all of the design considerations with the iPhone. Haven’t you noticed that despite the elegance and ease of use of the iPod, it actually does have a huge number of extra features including video playback, games, calendar, address book (all synchronised with your master computer), alarm clock, stopwatch, world clocks, equalizer, password-protected volume limiter, etc etc. The difference is in the design and details. For example, Apple has elegantly made sure the FM radio controls only appear when you plug in the optional FM radio remote control, the audio recording menu only appears when you plug in a Belkin or MicroMemo microphone adapter, etc so they don’t clutter up the interface when not in use. Apple takes the time to make all of the elements masters of the trade – not chucked in bloat like most Microsoft designs.
As far as people not wanting a device that does everything – you couldn’t be more wrong. I have a 60GB video iPod that I just don’t use anymore because I got fed up carrying it and my cell phone with me all the time. People do want to carry around a device that does all the tasks you might want to do when mobile as long as all the functions work well individually and together. Not hacked-together with an awful mess of an interface like Windows Mobile and to a lesser degree Symbian or Palm.
As far as your comment that Apple should sell the iPhone with only 2GB of storage – are you crazy? About the only reason I may not get the initial version of the iPhone is because it doesn’t have <b>enough</b&... storage to store all my music photos and video. Haven’t you seen the recent ChangeWave survey that indicated the main reason people wanted an iPhone was because it had so much storage capacity! The number one reason for wanting the iPhone is storage for crying out loud!
Sheesh.
-Mart
Guys?
Guys...?
While I haven't seen or touched the iPhone yet, neither has Todd Sullivan. Which makes everything he says more than merely suspect. It makes it worthless.
Although I'm not quite sure that Apple will meet it's target of 10 million, I will say that because the Apple users out there are more than pleased with what Apple delivers (it's the reason that the platform has flourished and remains unrivalled in it’s following) it is already safe to say that there is just one segment that understands that iPhone contains the strength and functionality we don’t get from our Treo’s and other smartphones. I bought my first Mac in ‘’96 and made my money by fixing PC’s for years following. You just come to understand that “they just get it”. And you mean to tell me these people are making phones now. It’s a done deal.
What company parallels the consistent ingenuity of software coupled with the simplicity and aesthetics of its hardware design (while you’re thinking, I’ll continue).
Now as for flopping, every one knows that every product they have brought to the market was not a success. X amount of years ago there was something called the “Cube” several years before that there was something called “Newton”. Apple like every other innovative company does not find success with everything it brings to the market. The fact that they have completely minimized the hardware so all facets can be upgraded/improved very easily unlike your Blackberry, is just one of many reasons that Apple is extremely well poised with what they’re releasing.
Some years ago someone came up with the technology or concept of “multi-touch”. Anyone that has come into contact with it knows how fascinating it actually is. Apple and Microsoft decided to harness this technology. One company decided to use a the table format and the other brought it via it’s phone. Both companies however acknowledged that to harness it meant setting at the drawing board because it just may not be practical for the way in which we use our computers now. As we can see with the iPod, they’ve done much more with less. Are you sure you want to bet against them now?
“It is wrong for anyone to suggest that using a hands-free phone while driving is safe.”
From the Royal Society for the Prevention of Accidents.