John Gruber, Daring Fireball:
I created a bit of a stir the other day when I suggested the OLED iPhone “Pro” could start at $1,500.
Let’s take a serious look at this. $1,500 as a starting price is probably way too high. But I think $1,200 is quite likely as the starting price, with the high-end model at $1,300 or $1,400.
And:
You can’t talk about iPhone specs and pricing without considering scale. It’s not enough for Apple to create a phone that can be sold for $649/749/849 with 35 percent profit margins. They have to create a phone that can be sold at those prices, with those margins, and which can be manufactured at scale. And for Apple that scale is massive: anything less than 60–70 million in the first quarter in which it goes on sale is a failure — possibly a catastrophic failure.
In short, new iPhones aren’t defined by what Apple can make for a certain price, but by what Apple can make for a certain price at a certain incredibly high quantity.
What follows is a relatively long logic chain, but one that is well worth making your way through. By the end of John’s post, I was convinced that Apple will indeed be introducing a deluxe iPhone tier this fall, or soon thereafter.
UPDATE: Fascinating response to Gruber’s post from Philip Elmer-DeWitt [H/T Jason Hooper]. At its core:
Is Gruber speaking for Apple for himself when he defines terms and describes bundles?
I put the question to him this morning, but I don’t expect a candid answer. He’s a man who knows how to keep a secret. Besides, a good journalist will protect his or her sources, even when their names are out of the bag.
Gruber responds: “I have no inside information in this regard [2017 iPhone pricing]. Nada, none, zilch. Feel free to quote me on that. I have no comment regarding my tweets on inductive charging and can’t believe you even asked about that.”
“$500? Fully subsidized? With a plan. That is the most expensive phone in the world. And it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good email machine.”
This comment by Gruber seems either out of touch or incomplete:
“Furthermore, why shouldn’t there be a deluxe ‘Pro’ tier for phones? For many people, phones are every bit as much an essential professional tool as their laptops. For some people, even more so. “
This ignores consumer refresh rates. People buy new laptops or tablets every 5-7 years. So a Pro version makes sense in order to remain productive over that time. OTOH, people buy new phone every 2-3 years on average. Especially with the death of carrier subsidized phones, this sort of move would seem to provide short term juice, but would end up hurting total revenue in the long term, as it would lead to longer consumer refresh rates.
On the pricing point, Gruber was wrong (he said $500 was too cheap) and Ballmer was right. Apple dropped the price on the iPhone by $200 within 2 months.
If you think pros buy new laptops and ipads only every 5-7 years, you’re out of touch. None of the pros I know are still using the old unibody MBPs. The original iPad is only 7 years old now – how many people are still using those?
Most “pros” I know get a new MBP every 3-4 years. In the past when they were refreshed more frequently and there was more reason to upgrade, it was every couple of years.
If Apple can produce a compelling iPhone Pro, there will be plenty of people on a 2-3 year upgrade cycle.
…PED claims this, but where is it presented as fact? Even PED’s linked piece from 2015 doesn’t clarify how this is fact, only that Schiller was on his show.
Not so — we’ve discussed this aplenty on AppleInsider’s forums, and many of us pros buy a fully-loaded iMac or MBP and then run it for 6-8 years, thanks to the long support lifespan of Apple gear. I’m a pro software dev and my desktop is a fully loaded 2011 iMac. Thanks to its SSD, 20gb ram, and 2gb vram, it’s still running my dev environments, VMs, etc… Others on the forum were in a similar boat. It’s one of the reasons why Apple is making the iMac Pro.
Non-pros buy MBPs, for example, me. Non-pros will buy Pro phones. If Apple wants to sell 40 million of these a year, they’ll need to sell to more than just pros.
And are those people buying the iPhone Pro on a 2-3 year cycle formerly people who were on a 1 year upgrade cycle? I’m not saying that there won’t be folks on a shorter cycle, but it will have the effect of slowing the upgrade cycle significantly.
Glad your iMac is still useful, but I said “laptops and ipads”.
7 years ago, the only iPad you could buy was the original. The state of the art MacBook Pro was the unibody MBP with no SSD and a Core 2 Duo. I don’t know a single “pro” who is still using that stuff as a primary machine, and I hardly ever see gear that old in coffee shops, on airplanes, etc. Indeed, almost any “pro” running a MBP from that era is doing a disservice to his/her customers.
No doubt a lot of old Mac Pros from 7+ years ago are still in use by the original owners. Apple hasn’t offered a truly improved one since then.
Okee dokee.
So you disagree that there was 1/3 price cut on the iPhone shortly after launch? That implies that Apple misread the market on pricing.
http://www.nytimes.com/2007/09/07/technology/07apple.html
There is a segment of the iPhone market that will pay more on an annual basis for a better iPhone. It makes sense to try and tap into that. The ASP went up after they intro’d the Plus models… seems likely it would go up again for an even more premium model.
I don’t see the downside here, provided they can build a compelling product.
A commenter over at the PED article says,”Shame on Gruber for questioning your journalistic instincts (which were, btw, spot on).”
Besides being smart and thoughtful, Gruber is unfailingly honest, and seems impervious to embarrassment, when he is proven wrong he owns it. He will say “a little birdie” told him when he has some inside information. Makes PED’s instincts sound like a bit of professional jealousy in this instance.
I would agree that irony is a tricky concept.
PED’s long track record for throwing spitballs at tech he doesn’t fully understand and carelessly speculating about Apple speaks for itself. If he’s attempting to tear down Gruber’s analysis, it sounds as though he has no real ammunition for it.
I no longer read Elmer Fudd’s stuff unless it’s quoted by Macalope.
Let’s be clear, Gruber didn’t suggest the next iPhone might cost $1500. What he actually said was that he “hoped” it would cost that much. Yeah, that rubbed people the wrong way. Gruber has become more than a little out of touch with the average Apple consumer. Most aren’t collecting $5,000 watches and hoping for $1,000 increases on iPhone prices “just to see what Appel can do.” They’re hoping for the best value possible (value doesn’t mean cheapest).
And what, Gruber is now above being asked questions by a journalist? Okay.
Uh, Gruber isn’t hoping the iPhone increases in price. He’s arguing that Apple COULD and SHOULD offer a new tier of iPhones.
There will still be new iPhones offered at current prices, and that will be targeting the “average Apple consumer.” Grubers talking about making an iMac Pro equivalent to the iMac. An entirely new entry in the lineup, akin to a supercar.
An iPhone enthusiast is intrigued by the idea of an uber iPhone targeted at iPhone enthusiasts.
Not sure why this should rub the average Apple consumer the wrong way any more than the existence of the NSX rubs the the average Acura consumer the wrong way.
Any “non-pro” buying Pro-priced gear, probably isn’t tooooo concerned with the cost….ya know? They want bleeding edge at whatever it costs. And they’ll surely keep doing that if Apple continues to offer them compelling choices in the future.
MBP is a poor example, since Apple has MBPs targeting the avg user price points or within its reach. Mac Pro is a better example, and iMac Pro will be an even better one. Lets see how many “non-pros” buy the iMac Pro. I’m willing to bet there won’t be many.
I stopped liking Gruber personally when he bailed on his old podcast partner suddenly and without explanation — though clearly with a lot of forethought. His blog is great, but “integrity” is not the first word I think of when I think of him.
Not a good analogy, as Acura, as most car makers has always made a variety of vehicles and very different price points. It would be more like my saying, as a fan of film, that I hope they start charging $100 for movie tickets as I’d love to see what they could do with the theater experience at that point.
And “hoping” that they do something is different than the “aw shucks, I guess I caused a stir by suggesting they might” do something.
Yes, he is. Or rather he SAID that.
“If it’s true that Apple is going to release three new iPhones, my bet is that they’re named the iPhone 7S, iPhone 7S Plus, and iPhone Pro. And I hope the iPhone Pro starts at $1500 or higher. I’d like to see what Apple can do in a phone with a higher price.”
https://daringfireball.net/linked/2017/07/03/kuo-iphone-2017-touch-id
That raised the hackles of a bunch of folks since that post and his subsequent one (and tweets about them) failed to explain or even speculate on what we might get for that price.
The problem with Gruber’s line of reasoning as stated is that there’s little to no benefit to the buyer. OLED screen. Less/no bezel. If that’s all you get in the Pro model then Apple would be making the same mistake the did on Watch Edition, making it all about fashion and looks.
If they do something analogous to the iPad Pro where you get get a better display that also allows new features (Pencil support and now ProMotion) then you get something that is actually better. Someone may or may not care about those features, but that’s just individual needs and preference, however the iPad Pro undeniably does add actual capabilities to the line. An iPhone Pro needs to do that as well.
Apple has made a variety of Macs at different price points for 30 years. They make a variety of iPhones at different price points. They make a variety of iPads at different price points.
Acura made a variety of cars at different price points, then they made a low volume, very expensive halo car. Not sure why the idea of Apple doing essentially the same thing with the iPhone gets peoples’ shorts in a twist.
1) When you buy a tricked out Mac, you get more functionality – more RAM, faster CPU, more/faster disk. The iPhone Pro will need to add meaningful features too.
2) The slowing of the upgrade cycle is potentially a negative trade-off for Apple. I expect that they’ve modeled this if they’re really thinking of a Pro that’s substantially more expensive, but I wonder where the breakpoint is.
Plus brought me something real – bigger screen.
The point of the article wasn’t to provide a list of every feature the iPhone Pro would have – he was just using a couple of the most frequent rumours to frame the concept of a high-end, low-volume device . Seems reasonable to expect it would have some other stuff (like you say, pro motion. Or maybe a better camera or battery life, nicer materials, whatever).
I’m not sure how big a deal OLED would be, but I really like the idea of a smaller bezel. The Plus is too big to use one handed, but the a Plus-sized screen in a regular sized body would be nice.
It’s not that he didn’t provide a list of every feature… he didn’t provide a list of ANY features. An OLED screen and no bezel is nice… but arguably aren’t features as such (they’re design, they don’t let you do things that you can’t do otherwise like the iPad Pro Pencil support does for example) and… would you or many people you know pay $500+ for those two things and nothing else? Or would you at the very least wait a year and see if the 2018 models get that for ‘free’?
Some people buy higher specced gear specifically to refresh less often. Buying low end means your gear is obsolete out of the box, buying high end means you can wait another upgrade cycle or two without obsolete gear.
ASP went up, but sales growth all but disappeared. Q1 2017 was the only YoY quarterly growth in the last 6 quarters. Due to ASP, revenue has been growing at a nice clip, but the current high end phones already appear to be pushing the limits of consumer demand.
Re-read his post, he actually hopes it’ll be even higher…
” And I hope the iPhone Pro starts at $1500 or higher. I’d like to see what Apple can do in a phone with a higher price.”
I think I should have said he believes he is being honest. Nothing to do with truth or integrity. I’m sure that PED believes what he is saying as well. While Gruber may be honest in his comments about various apps or products, buying anything solely off his recommendation is a sure path to regret.
Right, but the iPhone has always been more or less one price point (save configuration differences). Apple has gone the NSX route before, and (I’ll admit my memory may be omitting something) I don’t think it’s ever worked out well:
2oth Anniversary Mac – Fire Sale
Solid Gold Apple Watch – Scrapped for a $1500 ceramic version, all boutique stores shuttered
I’m not sure doubling or tripling the price on their most popular, best selling item is the way to go. Yeah, you can point out that you can still buy a cheaper model, however I’m not sure longtime iPhone customers are going to be cool with all the latest and greatest features now confined to a model they can no longer afford. I could be wrong, it could be a smash, but unlike Gruber I’m not “hoping” for a $1500 or higher price point. I’d much prefer Apple keep innovating and improving at the high, yet still competitive, end of the spectrum.
I don’t think the iPhone Pro precludes innovation at the “high, yet still competitive, end of the spectrum”.
If the rumours are to be believed, there’s also going to be a 7S this year. It will probably be priced the same as the 7, and will provide improvements comparable to previous S generations. This will be the phone for the majority of Apple customers, and it will be a great phone.
Getting a much bigger screen on the same-sized phone is something I’d pay more for. I don’t know what all the implications of OLED are – if its simply brighter colors, I probably wouldn’t pay much for it. If it means better battery life, I’d be willing to pay. Would I pay $500 more for just these two things? Probably not, but I very much doubt that is what will happen.
I’ll be getting a new phone this year. Whether its the 7S or Pro will come down to the details. If the Pro has a compelling set of useful features, I’ll buy it. I’m not interested in an iPhone Edition (ie same device in a gold case).
Right, we want to see some actual benefit. I have a 6S Plus. If the 7S Plus is, say, $749 and the Pro gave me the same screen but in a bezel-less design and thus was smaller and had a better screen I might go to $949. But $1500 or even $1200? Hell no.
Things I can see the Pro adding over the base models (aside from the above):
You’re right, and then he had a follow-up elaborating what he means by that. Which is exactly what this is all in reference to.
Once again, he doesn’t hope the iPhone itself increases in price. Notice how he says “iPhone Pro.” Not, iPhones as a whole.
I don’t think I should even need to explain this, as Gruber explained himself pretty clearly. He thinks there should be a new premium tier, with premium prices, while business as usual continues for the existing tiers.
Its amazing to me that people have such a problem with this. Back in the “good old days” of Apple, the PowerMacs were far more expensive than the iMac, and far better/more capable machines. The iPad is now experiencing this diversification. Why not the iPhone too?
Gruber’s analysis seems consistent with Apple’s announcement pattern this year, where is seems to be trying to re-establish regular announcement cycles for the iPad, Mac, and iPhone that are offset from one another and not all on 12-month update intervals. Smooth out the cash flow and avoid one announcement from overshadowing others.
it does speak to maybe being a little out of touch.
Sales are flattening out on smart phones in general, including Apple.
The iPhone’s ASP dropped with the introduction of the iPhone SE.
They’ve had good revenue uplift on iPads and possibly Macs with by releasing new/updated Pro versions.
Therefore it’s probably a safe bet that there will be a Pro iPhone.
First, I am the quintessential Apple “fanboy” (btw I hate that term); I and my family are surrounded by Apple products and I’ve owned all but two iPhones on day of their release. I can also afford a more expensive iPhone Pro, BUT, it seems that a lot of what I am hearing is: the 7S/7S+ will cost the same as 7/7S and the Pro IPhone will establish a new level of iPhone. The problem with this argument, is that the Pro’s improvements over 7/S, as has been rumored, are the smaller body with a bigger screen (typical yearly upgraded cpu/gpu, etc. are to be expected and are not upgrades as keeping up with the times). There are Android phones already doing this. There are Android phones that have had these “features” for a few years. I don’t understand how Apple wishes to bring an iPhone to the market with these features, 1.5-2.5 years late AND also raise the price by 25-33%! Excuse me, but even I will consider getting an Android phone. At some point, you pay so much more that you really begin to ask “why”?
Precisely. If Apple can deliver something really awesome for the bump in price I’d be thrilled. If it’s just bezel-less design and a better screen I think it will be a fail. I’m fine with Apple trying this – their business and all – but I think for it to succeed it either needs to offer something truly compelling or the price premium needs to be ~$150-200 and not $500+
In the end, the middle ground is what will probably happen. I expect that the Pro will be priced in line with the Plus model, and then some. So the current Plus models are:
iPhone 7 Plus 32 GB: $769
iPhone 7 Plus 128 GB: $869
I therefore expect a 64GB Pro to cost $899, which as you can see, is more than the 128GB Plus, and is approximately a $100 (prob a little more) increase over what a compatible 64GB Plus would cost.
Anything more and I think Apple will drive away a good portion of their biggest followers. These are not only the people who buy all the newest, most expensive, Apple gear, on a yearly basis; but these are also the people who then recommend or convince friends and family to buy other Apple stuff. Apple doesn’t want these people to start switching to Android, and in a short time start telling all their friends/family, “you know what, this Android stuff isn’t half bad, and a lot of it is a lot cheaper, and there are many more options, etc., etc.”
Oh I don’t see it driving people away as long as the 7S and Plus are the usual bumps in capabilities. People will just buy those.
What will happen is that the Pro would fail, like the gold Watch Edition did.
I guess this is my main frustration with Gruber et al when they talk about this. They all say “I’d like to see what Apple could do with this…” but I’ve not heard any really interesting, compelling ideas that could only be done at a higher price and lower volume (he rightly notes that Apple can’t add a feature to the iPhones now unless the components enabling that feature can be produced at ~40 million/quarter). I’m at a loss as to what a new, cool feature could be, though. Love to hear speculation.
“Back in the “good old days” of Apple, the PowerMacs were far more expensive than the iMac, and far better/more capable machines. “
It’s the highlighted part that’s the difference. The PowerMacs had some real, easily discernible benefit for the price hike. Neither Gruber nor (as far as I can tell) anyone else has elucidated what the iPhone Pro would have that would provide a similar justification for the premium.
The average user may buy the 7S. But the enthusiast will not. Many skipped the 7, and will balk at “having” to buy the 7S or being forced to pay more for the Pro. As I said, I am a perfect example, I had every iPhone except the 5S, my carrier was offering me the 7 for free, no strings attached. No lock in, no higher monthly cost. I refused it. It is largely a disappointing iPhone. I am surrounded by, and rely on, the Apple ecosystem, but I would seriously consider leaving it.
I have to question how much of an Apple enthusiast one can be if someone abandons the iPhone simply because the Pro doesn’t excite them.
The 7 series is a very nice phone. What you’re seeing is the maturation of iPhones and smartphones in general. We have excellent screens, very fast computing, very high speeds if you’re in an LTE service area and cameras that really can’t get to much better given the lens form factor (and which don’t really need to get better for most of the market).
That’s why, I think, Gruber would like to see if using more niche components that might be at the cutting edge of tech would let Apple deliver something that jumps forward. I’d like to see that too, but I’m at a loss as to what it could be.
Believe me, the level of my Apple enthusiasm would not be in question if you knew me personally. And the fact that someone who is as apple-crazy as I am, is considering leaving Apple, is exactly my point.
Btw, you misunderstand. The Pro excites me very very much. What doesn’t excite me is the unjustifiable price that is being rumored for the device. Given what we know, the price is not justified.
Very simply, the 4.7″ screen is too small by today’s standards. The 5.5″ screen is a decent size but it is in a phone that is a brick in size and weight. Competition is fitting bigger and better screens into much smaller bodies. Exactly what the rumored 8/Pro is supposed to be doing, albeit 2 years later than the competition. At very least, Apple should be able to “catch-up” to the competition, and do it at roughly the same price as that of the competition, and that which it has offered in the past.
And I agree with you, I do not know what else could be stuck inside the phone that would make it so cutting edge.