I want to write about the $699 iPhone 11. I think this is the most interesting product that Apple has launched in the past three years.
It’s not the specs. The specs are super boring. It’s the same phone as the previous generation. I would consider to be a refresh model with just a second camera, but the price tag of $699 is very interesting. At that price point they are literally leaving billions of dollars on the table.
So here’s the thing. We recently saw the sales figures of the top 10 smartphone models sold around the world in the first half of 2019.
This chart has the best selling phones to the 10th best selling phone. And at the top of that List is the iPhone 10. That is a phone that’s sold for $749 US. If that phone had sold for one dollar less, just $1 cheaper for the customer to buy. Apple, would have made 26.9 million dollars less money this year.
The iPhone 11 is selling for $699. That’s $50 cheaper than the previous year. And if you take $50 and multiply it by that sales figure, that’s over 1.3 billion US dollars. That Apple is willing to leave on the table.
Obviously, that number is going to be affected by carrier subsidies, but point being it’s a lot of money. And that’s only six months of sales figures. If you go for the course of the year it’s like who knows how much that is. Point being, Apple willingly, knowingly, lowered the price on their phone and just left that money on the table. And even though Apple is a super rich company. A billion dollars is still a lot of money for them. Especially in a market where a percentage gained here, percentage loss there, is a big deal. People pay attention to that stuff, and it affects Apple’s stock price.
Leaving a billion dollars out there is a big business decision. What I think we’re seeing here is two factors come into play:
Number 1 – I think that Apple is finally feeling market pressure.
This is a company like, if you think about what Apple has been doing over the years. When other companies were releasing $300 flagship killers Phones, Apples was like, boom here’s my thousand dollar iPhone 10, that’s Apple.
They rarely fold to market pressure. But maybe it was all the cheaper Samsung phones out there. Maybe it’s like the cheap phones from Xiaomi or maybe I don’t know OnePlus or Pixels 3 devices finally got under their skin.
It doesn’t matter what happened, but I think that market pressure finally got into Apple’s head and they lowered the price because they felt like they had to.
Number 2 – I think they lowered the price On this phone because Apple is in a different phase right now.
They are no longer as dependent on their iPhone revenue to stay profitable. They don’t need to make a lot of money off of their phones. Because their services revenue is just growing so rapidly, it’s actually quite surprising. We’ve got Apple Music, Apple Games, Apple News, Apple TV etc.
There are a ton of services that Apple is selling to people and what is the best way to snowball the revenue from those services? Cheaper iPhones. So, sure you lose a billion dollars in iPhone revenue, but as you capture a bigger audience with this cheaper phone, you just make that money back. Maybe double or triple that with services.
And now, when a consumer is looking at that mid-range market, I guess mid-range is relative, but if you look at that $700 price point. You now have a very compelling product from Apple with the iPhone 11.
Now, if that price tag is still uncomfortable, if that $700 price tag feels a little steep. The iPhone 10R from the previous year is $600. I think that’s actually a pretty good value for what it is.
I was actually one of the very few people last year that didn’t dip on the 10r. But I actually think it’s a pretty solid experience for the money. It’s just even better of a value.
I’m very excited to see how Apple takes this. What’s their next step. They have these cheaper phones, obviously their whole product line isn’t super cheap. But the fact that they lowered this one by this much, it means something.