iPhone – Will it blend?

A day late and a dollar short, I’m weighing in on Apple’s announcement of the iPhone, the smart phone/iPod combo. My overall opinion is fairly negative, but it was negative about the iPod too. Marketing can cover a myriad of sins. Some thoughts:

  • Cingular Exclusivity – word is that the exclusivity period is far from brief. Forcing customers to choose another company in order to choose your product makes earning their business that much harder. Tell me they couldn’t have had every U.S. wireless provider begging to carry this product to drive 2 year contracts and broader adoption of unlimited data plans.
  • Price Point – $500-600 with a 2 year contract? Insanity. If it’s a market-skimming price that will drop steadily, no worries. The rationale is that you combine a smart phone price ($300) with an iPod price ($200-300), and that’s what they’re charging for the combined device. Once again, they’re asking customers to think of this as making 2 concurrent purchasing decisions. Except that many of the folks I’d expect to want an iPhone already have an iPod with more capacity than this. I’ll be stunned if they can hit 1% market share without quintupling storage capacity or halving the price.
  • “Keyboard” – the keyboard is the touchscreen, no physical keys. Early reviews indicate this is indeed as sub-optimal as it sounds. Anyone who wants to use a smart phone for heavy email usage is going to prefer the tactile feedback and certainty of actual keys. If they get the price down, it IS a huge leap forward for the consumer market, which is used to the hideous process of typing words on a 9 digit keypad.
  • Chest-thumping – Margaret Thatcher once said, “Being powerful is like being a lady. If you have to tell people you are, you aren’t.” I’d add “revolutionary” to that list, and man, was Jobs busy telling us (repeatedly) how revolutionary the iPhone is. Quit telling and just show it. This phone does very few things, feature wise, that my new Treo can’t do. But the same was true of the iPod – countless competitors had feature-complete mp3 players at lower prices. Apple succeeded in making the iPod a lifestyle brand, and the price difference didn’t matter. It’s tougher to do the same thing with a $500 phone that ties you to a 2-year contract with Cingular.

I have every reason to be an Apple fanboy – I used my first Mac almost 20 years ago, used Apple II computers in elementary school, but the gearhead in me tends to find that I don’t WANT the hand-holding that makes Apple products so appealing to so many. Even in the Mac SE/30 days, I resented that MacOS gave me its system errors are number codes (“Error 99”, and little extra info). That’s fine for a casual user who will only be confused by the extra info. For me, I like getting the full error message that lets me understand and fix the problem too. I like that my MP3 player has a slot that lets me upgrade the capacity whenever I want. At equal prices, I might buy Apple, but for a premium, usually not.

The iPhone doesn’t give me anything I want that I don’t already get from a Treo, Blackberry, or other smart phone. I foresee a product launch similar to the PS3, though more peaceful. Massive fanboy demand at launch, followed by widespread oversupply when the general public refuses buy into the uber-premium price. I think Apple could have launched a phone I would praise, but this isn’t it. Being Apple, perhaps their marketing will bail them out again.


3 thoughts on “iPhone – Will it blend?

  1. “Anyone who wants to use a smart phone for heavy email usage is going to prefer the tactile feedback and certainty of actual keys.”

    In which case they would certainly switch to using a notebook or laptop computer, rather than a tiny phone.

  2. They couldn’t launch on every carrier in the US – the market is way too fragmented, even now it has settled down to CDMA vs GSM. They struggled enough just to do a GSM phone (it’s an already out of date only 2.5G device, after all). GSM was the only sensible choice of technology if they want a global product (even if it cuts out South Korea and Japan until the UMTS 3G rev). Given that, a Cingular tie-in makes more sense because they will have bought that with bigger handset subsidies than they would have offered for a non-exclusive deal, and the device is already price-sensitive as you pointed out.

    It’s a more complicated market than music players, and only time will tell whether they’ll last more than a year or go the way of Siemens Mobile et al.

  3. anonymous: I see a ton of value in being able to send large amounts of email from a device that fits in my pocket. I’m not the only one. Most Blackberry/Treo/Sidekick users aren’t going to buy that argument.

    raddedas: Hard for me to believe that a cross-carrier launch (Cingular/ATT plus T-Mobile and Alltel) couldn’t drive enough volume (including revenue share from data plans) to cover the exclusivity premium Cingular’s paying. On the CDMA vs. GSM angle, there’s no comparison. As a recent CDMA convert, I can certainly say that mating a smart phone to EDGE (GSM) vs. EVDO (CDMA) is crippling. A long term exclusivity deal tied to EDGE opens the door in the US for another device to beat them on usability of data services. It all depends on how long the exclusivity is.

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