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Old #1 - 04-21-2007, 09:20 AM
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RSS The iPhone is overpriced and will still sell like hotcakes.

As the launch of the iPhone approaches, I've been thinking a lot about the strategy behind the pricing and realizing how absolutely brilliant it is. The vast majority of people believe the device is over-priced at $499 and $599 for 4GB and 8GB models. I think they've hit the real sweet spot.
There's plenty of inane and negative analysis of these issues out there right now. People complain about the iPhone pricing, the "closed" nature of the platform, the memory, the fact that it can only be purchased on one carrier (Cingular). I'm here to tell you though, and you can take this to the bank, that I remember many of the original arguments against iPod when it came out and that hasn't turned out so badly for Apple, now has it? The original iPod was $400 for a single model, only worked on Macs, was black and white, 5GB, with a moveable scroll wheel. It launched into a market with many jukebox competitors and was still able to charge a premium. A lot has changed on the iPod but I doubt Apple feels badly about starting the pricing as high as it did.
All of these areas of complaint will soften over time and Apple has the option of working on any, or all of them, at any time. My guess is that they'll be operating at capacity trying to serve the early adopter market for a little while. Analysts need to understand this event as the creation of a new product ecosystem with variables that shift over time rather than review the initial static offering.
The only other thing I wanted to bring up, and this is purely idle speculation, is regarding the lack of a contract discount on the iPhone from Cingular. Is it possible that psychologically, people are more apt to "switch" to the phone if there's no contractual discount reason not to? Let's say that I'm 6 months into a 2-year contract at Cingular. Am I more likely to purchase the iPhone right away since there is no incentive associated with waiting it out? I think in my case, knowing my behavioral tendencies that that's true.
So will I be purchasing an iPhone right away? Not bloody likely. I remember buying the initial iPod and seeing where it went within a year. I'm going to hold off until the quirks are worked out. I'd buy it in a heartbeat, however, if it had push email from Exchange and were supported by security at my work (currently only Blackberry and Windows Mobile devices). I'm also very interested in a non-phone version of the iPhone, a glorified video iPod.

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