Katie Marsal
While Apple has strong-armed wireless heavyweight AT&T for much of their iPhone deal, the subject of pricing in the carrier's go-to-market strategy may still be up in the air, recent discoveries show.
Even though Apple's partner AT&T (recently known as Cingular) has been adamant in the past that it had "bent" the Cupertino firm to its will by signing a multi-year exclusive deal, the Journal's Amol Sharma revealed that the latter had squeezed an immense number of concessions from AT&T, which normally holds all the cards in its negotiations. Some of these are by now legendary, such as the near-total absence of carrier branding and the insistence that the iPhone only sell in the controlled environments of Apple and AT&T retail stores.
Standing out among the claims in the report, however, was the apparent confirmation of a revenue-sharing plan. Apple would snatch a part of the monthly subscription fees for every iPhone sold, Sharma said. This contrasts sharply with the profit-taking deals for other cellphone makers, which often end as soon as their devices reach a customer's hands. Verizon was known to have turned down a similar offer before the AT&T deal had been struck.
The agreement undoubtedly skewed the pricing arrangement in favor of Apple, guaranteeing a steady cash flow from every iPhone buyer that passes through AT&T's doors. What's less than certain is Apple's influence over the final sticker price, according to a PineCone Research survey leaked online.
ATT/Cingular iPhone pricing survey | Source: PineCone Research.
Discovered (and later pulled) by Apple iPhone Review, the now authenticated study showed a sample ad that deliberately lowered prices to gauge customer reactions to different price levels. Surprisingly, the two-year contract prices in the mockup fell to $299 and $399 for the 4GB and 8GB models respectively — a precipitous $200 drop from the figures given by Apple at the Macworld keynote in January. Calling and data rates were unchanged.
Although far from a confirmation of a new strategy, the leak has uncovered AT&T's willingness to toy with the pricing of what will almost certainly be a cash cow for the provider. It also calls into question the pricing scheme floated by PiperJaffray analyst Mike Wakley, who suggested last month that the carrier wouldn't subsidize the initial cost to protect the iPhone designer's premium reputation.
It remains to be seen what part, if any, Apple has played in the test pricing.
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149 Comments
$299 would be a lot more tempting. Except it's still friggin' AT&T. I hate them so much I don't think I'd buy it if it was less than $100.
Does apple want to force people to get $40 + data planes with the Iphone?
LOL@anyone thinking that Cingular won't get their money...one way or another. Apple maybe getting a bigger cut, but rest assured that those cuts will be made up for by us, the loyal Apple fans. As the poster above said, the data plan will be high, or they'll find a way to nickle and dime us one way or another.\
iPhone sales are far more critical for Apple than for AT&T.
AT&Tis doing just fine without it, though the intention is to try to gain more customers with it.
If it doesn't sell well, Apple will be screwed. That's the problem when you make something like this the certerpiece of your company, as Apple has done right noe, to the exclusion of almost everything else.
It MUST succeed.
Whatever AT&T does, should be fine, as long as it sells phones for Apple.
Some people decry AT&T's service. That's fine,
But, remember that even the worst cell service has only a few percent of its customers who are not happy.
Does apple want to force people to get $40 + data planes with the Iphone?
Without a data plan, few phones these days can be used to their potential.
How do you expect to get onto the internet, or get email, without a data plan?