Sometimes business just ain’t pretty

Today saw a million angry iPhone worshippers all cry out at once as Apple revealed the ‘shocking’ news that they won’t be giving each customer hundreds of pounds worth of hardware for free. Or at least, not this time…

A number of thoughts strike me on this.

One, the free upgrade of last summer served its purpose; it sent the userbase through the roof and opened the door to a long term cash generator in the App Store. At the time, many laughed and claimed Apple were reacting to disappointing uptake at the £275 launch price.

However, in reality this early adopter tax filled the coffers while they waited for the real money-making dynamic to arrive. With these observations, how should we consider this year’s launch?

At the risk of sounding like an echo, there’s the current “difficult economic climate.” Consumers are rallying around this fact and claiming O2 is mad to set such a high price.

In reality, they’d have to be insane to subsidise another handset at this time. Considering the greater number of owners now, it would certainly take a big bite out of an underbelly surely already starting to sting.

From another perspective, there’s the fact that Apple doesn’t need to change its mind on this. Yes, there has been a lot of fuss from a vocal minority (there always is) but come December when the original 3G contracts come to renew, I can’t see many turning down the prospect of a new toy.

Whether this will extend beyond the early adopters however, is still to be seen.

But of course, I don’t necessarily expect this to happen.

Because that’s the thing; If they decide it will be profitable to have people upgrading, O2 have 6 months to work out how to persuade the complainers to do it. If they grumble about paying the contract off to get their new toy, only a stubborn few will insist on paying the price to jump ship.

All in all, Apple will be fine, O2 will be fine and the world will keep spinning. Sooner or later, the plebs will have their shiny new compass.

- Max Tatton-Brown

June 9th, 2009

  • Crossy

    Will you be a pleb though Max…? I think we know the answer…

  • nick.dillon

    Hey Max – good first post.

    Regarding your comment that O2 discounted the 3G iPhone to drive app store sales, I dont think this is likely though. O2 don't actually make any money from the Apps Store – that 30% cut goes straight to Apple. In fact, they probably loose money with each application sold, as they have to deliver the extra data traffic within the current monthly plan.

    I think they are going to have problems shifting the new version, even with the allure of a shiny new compass 🙂

  • Maximilian Tatton-Brown

    Ah yes, that was actually supposed to refer to Apple, apologies for the confusion.

    I definitely agree that sales will struggle for now but like I said, there's no rush with this one – early adopters provide large margins while there's always the original 3G for those on a budget.

  • tomstandage

    I take your point. But doesn't Apple risk offending its most devoted customers(all of whom have iPhone 3Gs) by doing this? The biggest iPhone fans are people who already have iPhones, by definition.