iPhone Faces Uncertain Market

48 hours have passed since Steve Jobs's MacWorld keynote and the reality distortion field is beginning to wear off. Lists of the drawbacks of the announced iPhone are sprouting all over the Net (and there is the occasional defense by true believers). Now narramissic writes, "The iPhone may be poised to take over the high-end cell phone market, but is it a market worth taking? Not if an InStat survey from July is any indication: Of 1,800 consumers surveyed, just 21 had spent more than $400 for a cell phone. Prices for the iPhone, admittedly more of a handheld computer than a cell phone, start at $499 for the 4G-byte version with a required two-year contract with Cingular. So, is Apple pricing it right? Analysts quoted in this article seem to think Apple's going to have a hard time getting the 1% of market share that Jobs called for."

Is it possible...

[ack154 (591432)]

That most people won't spend over $400 on a phone because there aren't any phones worth spending that much on? The high end market may be small... but there's no reasoning given for not spending so much... maybe it's just because nothing (until now, IMO) has been worth the extra $$?

Re:Is it possible...

[eln (21727)]

Maybe, but I think it's that the average person is reluctant to spend 500 bucks on a gadget, no matter what it is. You limit yourself primarily to early adopters and gadget freaks. This may also be a big reason the PS3 is having difficulty gaining traction.

If Apple can generate the buzz to make this into a fad item like the iPod, they could sell millions to young people and damn the cost. However, if it ends up being grouped in as just a superior Smart Phone, you aren't going to get anyone but the gadget freaks to buy one at that price.

Re:Is it possible...

[Gr8Apes (679165)]

Yep, that would explain the large number of premium-when-released iPods, the Treo and Palm pilots, flat screen TVs, HDTVs, nVidia 8800 Gxx's (not even a complete gadget!!!) Macbook (Pro)s, Alienware anything, etc etc etc.

The PS3 is having difficulty because, in a word, it sucks. It's more than a day late and a dollar short.

I'll give you a different take on the "Smart Phone" limitations. I, for one, haven't bought one because of the size, power requirements, and sheer onconvience of using and carrying one. Along comes Apple, and appears to make this simple, easy to use, intuitive, and, to top it off, good looking. Oh, and need we mention that you can also run your familiar interfaces on it provided you like Macs to begin with? No special "browser" needed. No new learning how to browse the web. A PDA you can actually use. My current LG phone's calendering option is so convulted to setup that I don't use it. The contact list is "locked", or they think it is, so I cannot manage it easily nor sync it with my computer. The iPhone does away with all of that. It will appeal to a large group of people that are carrying both a cell phone and an iPod, if you add PDA and/or pocket PC to that, you'll just add to the attraction.

...or is this an attempt to define a new category

[Rob Y. (110975)]

I think Apple isn't all that interested in 'taking over' the high-end cellphone market as much as they're interested in defining a new category of communications device that's not thought of as a cellphone.

This thing is just a first stab, and it's being aimed at the high-end cellphone market, if only because that's a market that exists, and to communicate, you've got to have people to communicate with. But perhaps Apple's betting that, though it may make phone calls, the gadget of the future won't be though of as a phone.

Re:Is it possible...

[the_humeister (922869)]

Personally, I refuse to spend that much on something I know will somehow eventually end up in the washing machine and dryer, twice!

Re:Is it possible...

[siphonophore (158996)]

You're right.

Look at the iPod: Before that product, the market for $300 mp3 players was relatively non-existent.

The iPhone will probably do the same thing: Create its own market and then dominate it.

Re:Is it possible...

[nine-times (778537)]

That was my thought exactly. I, for one, have never owned a "smart phone". I can afford to spend $400-$600 on a phone, and in fact my company has offered to buy me a Motorola Q or Blackjack, but I don't want them. I sure would like to get a smart phone, but whenever a new model comes out, someone at my company gets one, and I usually get a chance to play with them. You know what? They stink. Really, they're terrible.

The OS is unresponsive, the email clients have a hard time connecting, and the various applications crash too much. The interface stinks. There are too many buttons and jog wheels and doo-dads. They're all just toys, and pretty much everyone I know spends more time trying to get theirs to do something than they spend time using it.

If someone would just make a cell phone with an e-mail client that wasn't completely frustrating, I might spend $500 on the phone and an extra $20 a month *just for that*. Yes, I've tried Blackberries, and I've even supported Blackberries. I can't stand them.

Also, you have to consider that people have shown a willingness to spend $300 for just an iPod. Let's say Apple made an iPod with a screen as big as the screen on the iPhone. Would people be willing to spend $300 on it? Yes. If you made a smartphone as slick as the iPhone without the iPod components, would people spend $200 on it? Certainly. So why are people saying that no one will pay $500 for the iPhone?

One more thing...

[earnest murderer (888716)]

If you've been considering upgrading to the new Treo 750, you're going to spend $500 with a two year contract. And it only comes with 64 MB of ram and a best case expansion of 2 gig which puts the price at $550 and is obviously inferior on paper.

I'm just saying Apple isn't breaking ground on cell phone price points in this category.

iPod + Phone

[geoffrobinson (109879)]

If you are looking for an iPod and a phone, or if the phone is a bonus, the price may be worth it to you.

I'm not familiar with the specs of the iPhone, but it isn't as simple as "this is a really expensive phone."

Wireless, More Space Than Nomad...

[XxtraLarGe (551297)]

Just remember what everybody was saying about the iPod when it first came out. You may not like them, but I'd say Apple has been pretty on the mark over the last 5 years or so...

Re:Wireless, More Space Than Nomad...

[richdun (672214)]

Bingo. Even as a big fan of what Apple can do in general, I'm not calling this one until it comes out. Apple is bad about not wanting to get into short upgrade cycles, so if by June something strange happens and 3G is suddenly huge, they'll put it in there rather than waiting for v2 a year or so down the road. iPod, (apple)tv, the switch to Intel - everything Apple has done recently has been criticized, but then the stock flies through the roof and sales are at record levels. Too many people underestimate the willingness of the general public and even those in the know about technology to pay extra for something that hits enough of the tech high points and "just works," regardless of whether it has all the bells, whistles, and radios it needs to be completely state-of-the-art.

Re:Wireless, More Space Than Nomad...

[winkydink (650484)]

When the iPod first came out, the mp3 market was still very small and still is in comparison to the cell phone market. There are over 2 billion cell phones in use today, with the big players having huge market share; Nokia's is currently over 30%. It's a low-margin, commodity business... not an area where Apple has expertise (niche products, high margins).

SO, I wouldn't base the past success of the iPod as an indicator of the future success of the iPhone.

Cingular Service plan will kill it

[TrippTDF (513419)]

If you look at Cingular's current plans for blackberrys, their voice and data packages start at about $80 per month. You can bet they will charge at least that for the iPhone service, if not more. even if it is just $80 a month, you are going to wind up paying $2520 over two years (including $600 for the phone), and that's before fees and taxes.

So that $600 price tag is really closer to $3000.

If Apple is really smart, they've already locked Cingular to a reasonable cell plan. They might be able to capture the high-end market with the iPhone, but without cheaper plans, they will never get the majority of people.

Re:Cingular Service plan will kill it

[garcia (6573)]

If Apple is really smart, they've already locked Cingular to a reasonable cell plan. They might be able to capture the high-end market with the iPhone, but without cheaper plans, they will never get the majority of people.

If Apple had been smart, they would have went to T-mobile (or Cingular) and worked with them to get a rate plan similar to the T-mobile branded Sidekick. $20.00/month for unlimited data and SMS with a phone plan or $29.99 without. You can't use the device as a modem though...

I refuse to pay the astronomical data plan rates that other providers offer. I especially won't go to Cingular after how I was treated during their switch from AT&T.

Not enough information

[ivan256 (17499)]

Quite honestly, we don't know enough about the device yet to make any informed commentary. We're going to have to deal with six months of analysts talking out of their ass about it, and Apple fanboys/haters blathering on about how wonderful/awful it is without more than a basic overview of its functionality and no hands on UI experience. The 'specs' from Apple are a joke, and don't reveal the most basic of needed information. The details of the restrictions that will be placed on the device by Cingular are completely unknown. Until those things are known, it could go in any direction.

Anybody who talks about what is going to happen with the iPhone in certain terms at this point is an idiot.

Success will come a little later

[pieterh (196118)]

Apple tend to launch a product and then fork it into a product family that covers a nice price range. This format could expand to include a hard drive and become a real portable hand-held, the new Newton. It could also shrink to become a simpler phone. Expect the actual release model in June to have much more memory, and better battery life.

The biggest problem with all smartphones today is that UI design is generally terrible. If Apple can get this right, and make a family of phones that react quickly and are fun to use, they will sell a lot of them.

Further, it seems to me, phone or not, that this is what the iPod will look like in 2 years time. The wheel is no longer needed, and this format makes video a pleasant reality.

So it's quite possible that the "phone" part of this product is less significant than the large-screen, no-button, Apple-inside format.

That's because they're surveying the wrong people

[Frag-A-Muffin (5490)]

Think about it. Most people who buy phones just want a phone that works. That's not the market Apple's going for. They're going for the guys that keep upgrading their expensive iPods with more expensive and newer iPods. Now, they'll get the latest "iPod" but it'll have a phone built-in too. If you look at the sales of the most expensive iPods, you'll see that there's more than enough people there to get Jobs' 1% market share that he wants out of the gates. Don't underestimate the loyalty that the Apple brand garners. It's much like Nintendo's. They'll buy whatever is the latest and greatest.

Kind of a short sighted view....

[8127972 (73495)]

1. Apple releases iPhone 1.0 (ApplePhone after Cisco gets through with them?) in 4GB and 8GB sizes
2. Apple Fanboys will buy this version because "17 50 7074||y ru|35 4nd w1|| pwn 7h3 m4rk37 dud3!"
3. Apple will release version 2.0 with way more storage (1.8" hard disk or SSD) for half the price. This will happen in about 18 months, But not actually ship for another 4 - 6 months after it is announced. (so as not to piss off Cingular)
4. Joe Sixpack will buy that version in droves. Fanboys who have version 1.0 rush to upgrade because "17 50 7074||y ru|35 4nd w1|| pwn 7h3 m4rk37 dud3!"
5. Profit!

Regular people don't buy smartphones

[duffbeer703 (177751)]

Businesses do.

Except for gadget geeks, probably 80% of the Blackberrys, Treos, etc are purchased by companies for employees or by business owners.

Apple is hoping to extend that market by taking a typical consumer/parent who is about to buy a $300 iPod anyway and convincing them spend another $200 for a phone that has unique internet capability. The reasoning behind this is that a person who is ready to by a $300 device is far more likely to spring for a $500 device.

The typical phone buyer considers the phone to be almost disposable. If you come into a store to buy a $50 RAZR after rebate, you're not going to get them to spring for $499. So Apple is taking advantage of the iPod buzz to upsell iPod consumers (the average iPod buyer has already owned 3) into iPhones.

This is sales 101. That's why half the people who show up to buy a Toyota Corolla drive away with a Prius. ("Hmm... $5000 more and I have a hybrid AND get bluetooth and that neato screen")

On the flip side, they'll get businesses to buy some too. Enterprises will stick with Blackberries because they use Exchange and like the security aspects of the device, but there are plenty of mid-level managers with purchase authority to spend $500-600.

I think they'll do it

[Azathfeld (725855)]

If anyone knows how to achieve a 1% market share, it's Apple.

1% of the market

[mfender9 (725994)]

Of 1,800 consumers surveyed, just 21 had spent more than $400 for a cell phone

Well, that's more than 1%...

The iPhone is just a smokescreen

[Dzimas (547818)]

Here's a bold prediction: The iPhone that Apple Inc. introduced yesterday won't be a runaway success. It will never sell tens of millions of units, nor is it intended to. In reality, it's a flagship product intended to define the high-end of Apple's new ultraportable media computer lineup. Let's face it, the classic iPod has reached the end of its natural life. Even the most recent fifth generation iPods are showing their age. The screen is small, the OS extremely limited. To make things worse, Apple's competition has been nipping at their heels with rapidly improving devices such as SanDisk's tiny Sansa [sandisk.com] flash players and the Creative Zen Vision:M [creative.com].

The iPod line needed a reboot, and the iPhone was splashiest way to do it. In fact, this device is the logical evolution of the Newton MessagePad [retrothing.com]. Think about it. Apple realized that boring contact lists, calendars and handwriting recognition won't encourage the Unwashed Masses to adopt portable computers. People are far more media-centric than that.

The rejuvenated iPod lineup will tempt you with music, movies and games, while offering an addictive combination of go-anywhere Wi-Fi browsing and email. And you can bet that Apple is planning to open up third-party development as quickly as possible.

As for the iPhone device, the bleak reality is that it is slightly larger than a 5G iPod. Too big to slip into the pocket of my jeans, which means it's too large to use as my everyday phone. My hard drive-equipped iPod usually lives in a messenger bag on my shoulder or in a jacket pocket, simply because it's too bulky to function as an "everywhere" communications accessory. I wouldn't be willing to carry something as large or expensive as the iPhone with me everywhere I go. I'd look like a dork with my calculator on a belt clip. Besides, mobile phones are expensive enough to begin with and many people (especially students) will balk at the idea of committing to a 2 year $1000+ mobile voice/data/voicemail contract after shelling out $599 for the iPhone itself.

No, the real magic will happen when Apple releases a $299 version of this device - the next generation iPod - that retains everything but the GSM + EDGE phone technology. At that point, the iPod will be perfectly positioned to become everyone's favorite teeny-tiny ultraportable computer.

Re:iPod Overpriced

[Protonk (599901)]

Exactly. The key complaint about the iPod was that it was too expensive. That no one would buy one when they could have a Creative r579X250 or whatever instead. i'm amazed that these complaints KEEP showing up. Apple is in the business of selling people hardware/software combos at a premium. it is WHAT THEY DO. The powerbook and ibook lines were both much more expensive than the direct competition, but they sold poorly when the software/hardware mix was diluted or uncompelling (early/mid nineties) and exceptionally well when the mix was more distinct

The iPhone will be the same way. This isn't apple fanboyism, this is grudging respect. look at the iPod. look at the cheif complaints about mobile phones in general. Not the slashdot complaints, but the complaints among the predominance of users.

1. Poor UI
2. Poor or shoddy design.
3. inability to use features on the phone, or limitations on the interoperability of those features.

Apple fixes these problems for a living. They fix them and then establish the solution at a high pricepoint, and people pay for it. No. it's not going to be unlocked, it's not going to run linux, it's probably only going to support limited software development, if any at all. But people will buy it, at least 10 million people, if not more.

Re:I'm in the market for a cell phone

[Midnight Thunder (17205)]

...and the iPhone is exactly what I want. But I'm not buying it. It's cool, but it's not $500 cool.

Well I am not going to make any analysis based on what people on /. say they won't pay, since in many cases the readership seems to want stuff for cheap or free (I know I am generalising, so don't take this personally). The market is not about the sort of people who say they love a Mac, but wouldn't even fork out for a Dell because it costs too much. The market is about people who are willing to a price for a well designed product, that works well, looks good and is easy to use.

From the summary

[Overly Critical Guy (663429)]

48 hours have passed since Steve Jobs's MacWorld keynote and the reality distortion field is beginning to wear off.

You mean the FUD campaign initiated by frightened competitors is flaring up. This story makes it seem like everyone is suddenly deciding not to buy the iPhone after "coming to their senses." Hardly the case. This thing will sell like crazy, and the fact Slashdot is posting a story saying it won't just means it will. Remember the iPod? The iPod mini? Slashdot said they'd fail.