As they did with the iPod, Apple will continue to reduce the barriers to entry over time. The tarrifs will get better, the price will come down somewhat (though there will still be a premium – you wont find the iPhone for free), 3G and an excellent camera etc… we can expect all of this within a year. And then suddenly you would be hard pressed to find a reason for buying a competitor. I can’t see Nokia, SE or Moto coming anywhere near to pulling of an interface as nice as the iPhone. Then there is the syncing with itunes/iCal/iPhoto etc factor. Just an all round better experience. Apples job is now to fill in the gaps.

When it comes to the pricing issue – you do have to stop for a moment and think about why o2 launched the iPhone at that RRP.

In the UK the economy in general has recently seen a downturn in overall sales of products but an upturn in overall value of said market(s). Consumers are fleeing the every day, mass-produced, mass-market products and are saving their cash and investing in the latest luxury ‘designer’ items.

Therefore there’s a school of thought that o2 knew exactly what they were doing when they launched at £269.99 + contract. They were pricing the every day ‘common man’ consumer *out*.

Instantly making the iPhone tap into that hidden snob inside us all, (well, not us, but normobs).

I was at dinner recently and the two gentlemen at the next table were talking; discussing work etc… and halfway through one exchange the gentleman diagonally opposite to me produced and iPhone from his pocket, waved it sufficiently around to make sure that everyone saw and then placed it on the table in front of him.

Conversation stopper right there. Follwoed by gasps of

“You’ve got one?! Where from? OMG it’s gorgeous! Does it do email?”

Etc etc…

The iPhone has been subconsciously marketed as a luxury device. By having one you are instantly making a statement.

It’s *cool*, outside of this industry we all move in. Yes we think it lacks key features… that’s because it does.
And yes we think it is over-priced.. well that’s the point.

o2 don’t want every Tom, Dick and Harry to have one.
o2 want every Tom, Dick and Harry to WANT one.

And trust me, they do.

This is precisely what I’m talking about. First, let’s clarify that the important thing here is GLOBAL marketshare. Given the Q4 results that Nokia shared recently, they LOST marketshare in the U.S., but managed to increase profits AND marketshare globally.

The notion that Apple is going to come in with one, even 2-3 handsets and make a lasting effect on Nokia, much less the other manufacturers, is laughable. Let’s take a look at Motorola. They’ve had the best selling handset in the past decade, the V3 RAZR. They’ve released it in nearly a dozen different colors, on every carrier and MVNO nearly, and for free in most cases. And yet, even with this ONE handset, not to mention the dozens of other models that they offer, Motorola has not been able to even come close to Nokia’s massive lead on the rest of the global market. In fact, I believe at one point Motorola was overtaken by Samsung for a Quarter in global marketshare.

Thus, if Motorola, the company with the most popular mobile handset in the past decade, which STILL (for some odd reason) sells gangbuster, and which ALSO offers multiple versions of their handsets, on every carrier on the planet, couldn’t match Nokia’s quantity, how on EARTH do you believe, truthfully, that Apple is going to come in with ONE handset, locked to a SINGLE carrier (in most cases), and do any amount of damage? Even if Apple launches an iPhone 3G and iPhone Nano later this year, they STILL won’t be able to do what you’re asserting.

If you’re merely asserting that they’ll swipe a single marketshare point from Nokia, well, sure, I could give you that. However, the notion that Nokia should be the *most* worried about Apple in the global mobile phone industry is laughable.

If Apple sell 10 million iPhone by the end of 2008, I reckon they have a good chance of selling another 50 million in 2009. Still only a small fraction of Nokia’s sales, but a significant number nonetheless, especially for a smartphone.

In other words, it’s early days for the iPhone.

According to Steve Jobs’ keynote speech the sales figure for 2007 was 4m iPhones worldwide, with about 3.4m being sold in the USA. Taking into account the previous quarter’s figures (approx 1.2m sales in USA) this suggests the sales figure for the US market in Q4 was 2.2m and not 900,000 – there are clearly a large number of people unlocking their iphones and choosing alternative service providers. Taking this a bit further, each European territoriy seems to be selling around 100,000 units (locked and unlocked) on a monthly basis. Even if Apple doesnt enter new territories and sales remain constant, Apple should easily sell around 10m in 2008 alone – however there are clear signs that they intend to expand and I imagine the actual sales figure will be much higher than this.

Still, I agree with the sentiment. The business plan is pants. Their locking/bricking strategy has cast a shadow and this will alienate people. On the other hand, if they sell iPhones at £100 they will lose their entire iPod sales overnight and the iPhone brand will lose prestige. It is a difficult balancing act but Apple are not stupid and they have made waves and will continue to do so when the time is right. At some point in the future the iPhone will replace the iPod line but this will take time and I guess this is why they signed a 5 year contract with ATT. I believe this is when they will sell it unlocked.

1) It showed the handset manufacturers that if you make something simple, with a great UI, folks will understand how to use your phone and will utilize your features.

2) It showed the carriers that consumers will enjoy their data packages if unlimited really means unlimited. In addition, it proved that if appropriately priced, (and I am not saying this one is), then consumers will browse.

3) It showed a fairly uninformed U.S. consumer what IS possible on a mobile phone, thus spurring innovation and excitement, finally!

We never saw this GPRS/2.5g phone as the end all to phones. We DO see it as the beginning of a movement to open up the mobile device to the normobs.

Anyway, I don’t think its cheap to look at a deal, compare it to the market and decide on the merits.
The way I see it is….

Plus Points.
1. Fantastic interface (probably the best so far)
2. Web access is amazing
3. Great looking.
4. Its an IPod too.
5. £269 (uk) or whatever the US price is for it is worth it. Some may disagree but I’m alright about the price

Minus Points
2G means prosche engine, tractor tyres
Camera is at best very poor
Package price is just not as good value as I’m getting with my current N95. Why should I pay more to run the thing?

But the big thing is (and I may be wrong but the person on the customer support line told me) that you cannot take your sim card out and put it another phone. I have an E61 and an N95 and I swap the sim between the two phones depending where I’m going. I don’t have 2 contracts because I dont need two contracts. I want to use one number but swap my sim in a number of phones. I was told by O2 select customer support that my apple sim would not work in any other phone…. That killed it dead for me.

What the consumer’s in general is thinking i belive, and this is Ewan’s point , is i don’t want is to be short- changed.

Imagine if you are only 6 months into an 18 month contract with Orange at £25 per month. Do you say well i must have an iphone so you cancel your contract and lose £300.
Then pay for the iPhone
and then pay the monthly contract of £35 with O2?

Me? I would rather give that money to chariity and make do with the N95 for another year.

Don’t get me wrong, the product looks good and it has created excitement in the mobile industry that is welcome. It is the greed of charging such as high fee through one operator that is the problem.

Let’s remember 50% of the U.K mobile phone users do not have a contract phone. immediately those people are excluded form th eiPhone. How many of them have an iPod? I know at least 20!

I am sure those people are not all poor people, the thing is, consumers like choice.
The iPhone dictates.

So me, my 20 friends and Ewan’s 20 freinds will wait. Because… we can!

2 things…

1st. This is the first phone Apple have ever produced, in many ways it’s very must just a ‘toe in the water’, as you pointed out, Apple never claimed to be diving in head first! As a trial product the iPhone has proved, almost conclusively, that Apple can make solid phones that people enjoy using.

2nd. The iPod Pathway. The iPhone is increasing looking to be following the same sales path as the iPod. With the iPod, Apple systematically removed the barriers of ownership, one by one they came down, to the point where the majority of potential buyers became owners. Apple are doing exactly the same thing with the iPhone. How much longer before the price and network barriers tumble? No more than 2 years surely? If the iPhone isn’t £169 by this time next year I’ll be stunned.

As an aside, it’s important to remember that Apple clearly believe that the iPod Touch and iPhone combined make an entirely new platform. As with any platform, it has to be strong, secure and spacious before you can ever consider building upwards.

Ricky’s right: the sales have done what Jobs said he wanted.

But…

The iPhone may be your idea of telephony nirvana (it’s certainly mine for now), but for the masses trying to feed/clothe children, pay a mortgage and put petrol in the car, £269 + £35 for 18 months is just waaaaay too much, at any bundle size. Hence the title of the post. it will take a major rethink of price/tariff for it to ever sell more. I don’t care how many new apps come along with the SDK, it_doesn’t_matter: financial reality is just that, and kids/house/car are more important than fruity phones in most people’s hierarchy of needs.

They showed wat is possible, and as we speak legions of handset vendor engineers are fine-tuning their iPhone killers for imminent release. Call it an industry arse-kicking, a wake-up call, whatever: It’s all good.

Mike

I have to agree that the iPhone is a bit player, but also agree with dave above – you’re thinking is very short-term in this instance.

If I said to you in June 2007 that:

* a brand new phone manufacturer was going to launch its first phone
* that phone would generate more buzz than any other device on the market
* the interface would make all other manufacturers re-think the usability of their devices (even if they had something similar in developement that wasn’t yet public)
* AND that manufacturer would screw a tariff kick back from carriers

You may well have said, “Don’t make me laugh!”

The iPhone as an idea and in execution has already been an industry-changer. The current iPhone device does not have cost or feature parity, but I think that will rapidly change over the next couple of years.

So my rejoinder to your is, “Watch this space”.

Cheers
Matt
http://www.allaboutiphone.net

@dave: Cheap? OK I’ll bite I can have a N95 8GB for free on a near-identical tariff to an iPhone for the same length contract. That makes the iPhone look ~ US$538 more expensive here in the UK. I have one and I love it. I’m just not surprised when people call it expensive.

This is why Apple Fanboys crack me up when they say stuff like, “The iPhone is going to be the number one handset in the world” or “Nokia’d better watch out, Apple’s going to take them over.” I’ll be the first to admit that the iPhone is cool, and it did a real number on the industry, in dozens of ways, and it’s certainly sold well. But let’s keep things in perspective, shall we?