Rafi Mohammed

The Apple iPhone: A Great Value for the Price...

Posted on June 30th, 2007 (2 Comments)

On Thursday I appeared on CNBC’s “On the Money” show to comment on the new Apple iPhone. I was very pleased with the interview - thanks to Melissa Francis for making the interview so much fun. For those of you that missed the interview, I thought I’d summarize some of my key points.

For the last few days, there’s been a literal media frenzy over the iPhone. Much has been made about the iPhone’s “high” prices: $499 or $599. The only difference between these two models is the $499 one holds 800 songs while the $599 model stores 1,800 songs.

In my segment, I argued the iPhone is a great value for the following reasons:

  1. Really…what price can you put on hip? The iPhone has received rave reviews for its revolutionary style and features. There’s a great deal of value in owning this latest “must have” product.
  1. If you subtract out the cost of the iPod component of an iPhone ($200), you’re only really paying $299 for the iPhone. $299 is in line with prices of other top-of –the-line smartphones like the $299 Treo or $349 Blackberry.
  1. Owning and using smartphones like the iPhone or Blackberry involves two part pricing. In addition to hardware costs, owners have to pay monthly cell/data service fees. AT&T (the exclusive service provider for the iPhone) is aggressively pricing its service: they’re offering an introductory plan for $59.99 per month. While TMobile also offers a $59.99 plan, both Sprint’s and Verizon’s introductory plans (with unlimited data) are priced at $79.99 ($20 more than AT&T’s service). So by switching to iPhone’s AT&T service, Sprint and Verizon introductory plan customers will save $480 over two years.
  1. Finally and most importantly, as Walter Mossberg of the Wall Street Journal aptly put it, the iPhone is a true “handheld computer.” It has far more capabilities and potential to create value than other smartphones. In addition to cellular, text messaging, and music – the iPhone allows its owners to truly surf the web while on the go (service is spotty now, but it’s bound to improve) – which opens up a host of new opportunities. In addition, new services are on the horizon (e.g., rumors of GPS service).

Have I convinced you that an iPhone is a great deal yet? If not, here’s the icing on the cake. I am a classic late adopter. I don’t own a TiVo and when my friends Gordon & Atsuko gave me an iPod a few years ago for my birthday, I looked them in the eye and said “return it, I’m perfectly happy with my cassette Walkman”…now looking back, that’s totally insane! So if I’m going to brave the crowds this weekend to purchase an iPhone…you know it must offer tremendous value!

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Readers' Comments on This Blog Entry

From Steve on June 30th, 2007
Man, what a celebrity wannabe. A few minutes on TV and you think you're Walter Cronkite. Aside from one gramatical error you did very well. (What you didn't think I'd watch?) I agree totally with your position. Remember, what happens in California eventually happens around the world. Did you see the lines out in front of the Grove in LA? Unbelieveable!!! You would have thought Paris Hilton was making an appearance.
From Oldgrue on July 1st, 2007
You've missed certain points: 1.Most users already have an iPod - duplication of hardware isn't exactly attractive to consumers. 2.The available service plans are in no way in the consumer's advantage. The available plans for this device are not competitive. The mid range family plans are 25% more expensive than other carriers. Apple's phone would sell faster if it was carrier independent. 3."what price is hip?" under the same logic, the 'hip' playstation3 should have sold like hotcakes - also under the $500 'barrier' Apple has a number of also-ran products that priced themselves into oblivion. Its not the darling of the market yet - just new.