This is Going to be Big
Tomorrow is going to be a big day for Apple — I can feel it. I ordered my first generation iPhone the day they were released, and it is battle scarred now, with numerous scratches, surfaces worn smooth, and even a cracked screen from our casting session for this video when one of the actors fell on it. As many people may be discovering now, the new OS that came out today runs rather sluggishly on the original hardware. Needless to say, I’m itching for my new, 32GB 3GS upgrade.
Not wanting to wait any more than necessary, I called AT&T this evening to find out the status of the order I placed with them last week. Turns out, they are out of stock. Yup — anyone trying to order from AT&T since earlier this week is going to have to wait.
Photo courtesy of Apple
This morning, Philip Elmer-DeWitt compiled some of the analyst opinions for this weekend’s iPhone sales in his Apple 2.0 blog. While I wouldn’t venture to speculate on what will happen over the next couple of days other than to say that selling a quarter billion dollars worth of phones in one weekend seems like a given, I think the real story is not about the 3GS or the immediate sales impact, but about the $99 price point of the current 3G.
Price is a big deal. While there are always people who will buy at the high end of the price curve (zealots like myself who shelled out six bills for an iPhone just under two years ago), I don’t think any phone is mass market until it breaks the 3 digit price barrier. I have no data to back up that assertion, but I think most people would agree. $199 sounds like a lot to pay for a cell phone. $99 seems pretty reasonable.
But the real story here is that people will be lining up to pay $99 for these devices because they are so much more than phones. While Apple doesn’t break out results for them, everything I have seen indicates that the entry-level iPod touch sells quite well. Some of this has to be the fact that some people do not want to switch to AT&T. But my guess is that $229 without a contract also seems like a relative bargain to get into the iPhone game. With the price of an actual phone — one that brings that great Internet experience just about wherever you need to go — dropping below $100, I predict that sales of the iPhone itself will take off.
These things don’t change linearly. That is, a reducing price by half doesn’t double the number of people who buy a phone. Instead, the potential increase is much greater, as huge swaths of the population who never before considered buying an iPhone will now be taking a second look. We saw it with the iPod when prices started dropping below $200 for the nano, and I see no reason why the iPhone won’t follow the same pattern. By rights, Apple should end up selling 100 million iPhones over time.
The skeptics will point out that actual cost of ownership for an iPhone is much more than $99. Pshaw. Most people don’t really weigh monthly payments when making a purchase. Realtors have known this for years. How else did we get into the 0% down, debt up to your eyeballs mess that we have now? Besides, this will be a replacement for other cell phone contracts. Sure, the iPhone data plans are relatively more expensive (compared to 2G network plans), but not by all that much. No, I think what we will see is a significant increase in iPhone sales, and I predict that it will be steady over time as people wait for their existing contracts to expire so that they can upgrade their phones or switch carriers.
Technology nuts will turn out in droves this weekend for the 3GS, just like they did two weeks ago for the Palm Pre. But the drumbeat of new iPhone customers coming to the 3G will sound slow and steady for the rest of the year.
Thank You, Thank You, Thank You
These last two weeks have been a little crazy. We have been flooded with calls — inquiries, suggestions, everything. It’s great. A little overwhelming, but great.
It’s always a little scary when you take something that you have worked on for a long time — particularly when your livelihood depends on its success — and you put it out there for the world to see and to critique. Wanting to pull back and wait is a perfectly natural — and perhaps the only sane — reaction. Every time I see another review go up, my heart starts beating faster. What was the experience? Did things work out okay? (After all, we are in beta…) Did the reviewer understand how we have laid things out?
I have the same pangs in my gut when we receive an email or a phone call from a beta tester. After all, these are people who laid down $119 of their hard-earned money to get a RedEye, and so we want them to have a great experience. But usually a call means that they are having a problem, and that is the last thing we wish on them.
To be honest, it hasn’t always been smooth. We’ve had our issues, and we’ve tried to work through them as quickly as we can. But in the end, the thing that amazes me the most is the reaction of those customers who have encountered the problems.
We have a fantastic group of beta customers. I am floored by the level of patience that they have had with us, not to mention the problem solving skills and the creativity that they have shared. To be honest, going into this I didn’t expect our customers to be figuring out solutions to problems we have, but today two people — one of them Frank Nicholas from Indiana (thanks, Frank!) — found solutions to two different issues. How amazing is that?
Earlier I was overwhelmed because I was worried that people might not take well to what we are doing. But today I am overwhelmed by the willingness of these early customers to put their own time and energy into helping us make the RedEye better. We could not have asked for more, and I am truly grateful.
Thank you, thank you, thank you.
UPDATE (17 June 2009): Michael Watson is another of our fabulous beta testers. We are always tickled to see people write about us in their blogs as Michael did. Now we just need to make sure we live up to the high expectations.