Sponsored Link:
iPhone Price
The Smart Profits Report: Issue #456
Friday, September 14, 2007
iPhone Price: Steve Jobs Scrambles As Vodafone Launches MusicStation
By Martin Denholm
Managing Editor, Mt. Vernon Research
Just 11 weeks to the day that tech titan Apple (Nasdaq: AAPL) launched its much-ballyhooed, hyped-to-the-max iPhone, some punters are already riled up.
Contrary to fears, it’s not because it has a ton of early bugs, or because the service is patchy (and with exclusive carrier AT&T having spent $16 billion on network upgrades and locking iPhoners into a two-year deal, I’d certainly expect stellar service!) From what I’ve heard, the device has justified the hype so far, with many owners happy.
The problem: Some customers are miffed because Apple CEO Steve Jobs abruptly slashed the iPhone price. And with the iPhone set to hit the European markets in November, he’s had to scramble to save face with this unsettling news…
iPhone Price: One Million Sales And A Messy Apology
Last Sunday, Apple had sold its one-millionth iPhone a full month ahead of schedule. A great achievement in just 74 days, for sure. But it was tempered because of some front office shenanigans. Without warning, Apple slashed the iPhone price of the 8-gigabyte iPhone from $599 to $399 and discontinued the $499 4-gig version.
Cue lots of smoking keyboards, as ticked-off customers fired complaints to Apple. Okay, timeout. Sure, Apple was a little shifty and the speed of the iPhone price cut took people by surprise. But these folks knew what they were doing when they breathlessly bought their iPhones.
As with all new products (particularly in the cellphone industry), you know the price is going to decrease eventually and you’ll always pay top dollar if you can’t wait to get your hands on the latest, flashy gadget so you can show it off to your mates.
Nevertheless, Steve Jobs didn’t break the news very well. He initially told annoyed customers to “go back to the store where they bought it and talk to them. If they bought it a month ago, well, that’s what happens in technology.” Nice.
Once the sensitivity trainers got hold of him, however, he changed his iTune the next day, promising to “… do the right thing for our valued iPhone customers.” We need to do a better job taking care of our early iPhone customers [who] trusted us and we must live up to that trust.”
And right now, for Apple, this is a major issue…
Hey iPhoners, Here’s $100… Can Apple Have Your Trust Back?
Those who bought iPhones within 14 days of the iPhone price cut are eligible for a $100 credit if they opened the box, and a full refund if they haven’t.
Okay, fine. But I’m pretty sure that Apple knew what it was doing from the start…
- Steve Jobs & Co. aren’t dumb.
- They had to know that early buyers would be unhappy with a hefty iPhone price cut just two months after the launch.
- They probably already had the $100 credit in mind to make them look generous. But it doesn’t do anything for those “early” customers that Jobs mentioned.
The more important question is whether this has damaged Apple’s thus-far pretty spotless image. There’s no doubt that Apple slashed the iPhone price to broaden the customer base and sell more phones, once it thought it had fully tapped the initial wave of excited buyers. That could propel iPhone sales this holiday season.
But will loyal customers - the all-important trendsetters - who feel stiffed trust the company with future product launches? They may be less likely to buy early again if they suspect the price is going to sink just weeks later. This situation could result in weaker product launches. And that’s not what Apple wants, with the iPhone building for a major European launch in Britain, Germany and France.
And here’s one iPhone/Apple alternative you may want to consider…
Vodafone Says “No” To Apple’s Big Bite Of Revenues
Earlier this summer, Vodafone was vying to be the exclusive British carrier for the iPhone. But the bigwigs at Vodafone HQ quickly nixed the idea once Apple demanded too much revenue, as well as restricting content.
When it comes to mega telecommunications companies, you don’t get much bigger than Vodafone Group plc (NYSE: VOD). Through its subsidiaries in Europe, Asia, Australia, South America, Africa, the Middle East and in the U.S. with Verizon Wireless, it’s got a vice-like grip on the industry across the world. As of June 30, 2007, the firm had 232 million customers. The stock trades on both the FTSE-100 in London and the NYSE, boasting a market cap of £89.6 billion and $180.9 billion respectively.
Instead, Vodafone backed off and left Britain’s O2 to partner with Apple in the U.K., while T-Mobile and Orange will become iPhone carriers in Germany and France respectively. But that doesn’t mean Vodafone is sitting on its hands - far from it. Rather than getting into bed with Apple, it’s going into all-out battle with it instead…
Apple’s iPhone vs. Vodafone’s MusicStation
Just as the iPhone will hit Europe in time for Christmas, so too will Vodafone’s new MusicStation product - a music subscription service, designed to appeal to the company’s 17.4 million British customers, who will be able to access it on existing Vodafone handsets, plus new customers.
The difference is that unlike the iPhone, where you’re forced to cozy up to Apple alone because it’s not 3G data network-compatible, MusicStation uses multiple operators’ networks and allows for more choices.
It’s the brainchild of Rob Lewis, CEO of tech firm Omnifone, and a group of other British dotcom millionaires, who have agreed to a deal with Vodafone. The service is subscription-based, charging £1.99 ($4) a week for unlimited downloads from major record labels like Sony, EMI, Warner Music and Vivendi. Lewis says, “We hope to do for mobile music what the Blackberry did for e-mail.”
To sweeten the pot, Vodafone has also launched a new range of smart phones from Nokia and Samsung, which will also hit the market in time for Christmas. And not only do they offer web browsing, they will do so faster than the iPhone, without the iPhone price cut. The only catch is that once subscribers stop paying, the music becomes unplayable. But Vodafone is hoping to attract customers who would ordinarily stick with the service and who are also keen to avoid running up a large tab on downloaded music. For $4 a week, they get as much as they want.
So can Vodafone compete with the iPhone price in Europe? With unlimited music downloads, more choices from other operators, smart phones, and faster Internet speed, I think it can. It may not beat it, since the iPhone is certainly not going to flop in Europe, but Steve Jobs & Co. haven’t done themselves any PR favors recently and Vodafone offers a viable alternative. And if you fancy a flutter, the stock trades in New York and London under the symbol VOD.
Have a great weekend,
Martin Denholm
|
Today’s Smart Profits Action Center
- According to Nokia, there are 3 billion mobile subscriptions worldwide - a number that will grow to 5 billion by 2015 when two-thirds of the world’s inhabitants have cellphones. And while developed markets currently represent the bulk of revenues for global telecommunications firms like Vodafone, the company also has a strong presence in developing regions like Africa. And recent figures suggest this could be a rich source of future growth.
- Quoted in BusinessWeek, Leonard Waverman, chairman of the economics faculty at London Business School, figures that a 10% increase in a developing country’s mobile-phone penetration adds 0.6 percentage points to the economic growth rate. Indeed, the International Monetary Fund says the African economy will grow 7% this year, to a 25-year high. In 2001, the 134 million population of Nigeria had just 500,000 telephone lines between them. But today, Nigeria has 30 million cellphone subscribers alone.
- And in Kenya, carrier Safaricom (40% owned by Vodafone) has set up the hugely successful M-Pesa e-commerce service, where customers can use the service to execute tasks like wiring money. Right now, 6,000 people a day are signing up for Safaricom - and Vodafone is thinking of extending the service into the massive India market.
Related Articles:
Apple’s iPhone: “iDay” Is Here… Can You Play This New Tech Boom?
Cutting-Edge Technology: The Hottest Trend Of 2007
Investing In Tactile Feedback: Haptics And Other Groundbreaking Touch Technologies Rumble With Investor Profits
Sphere: Related Content
