Is the iPhone just too darn expensive?
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Every year Apple changes a lot of things about the iPhone. Over the years we've seen it get thinner, lighter, faster, and better. But there's one aspect of the iPhone that Apple seems to be unwilling to reinvent, and that's the price.
A brand new, unlocked, hot-off-the-production-line 16GB iPhone 6s costs $649. Back in 2011, a brand new, unlocked, hot-off-the-production-line 16GB iPhone 4s would have set you back $649. In that time Apple has tried to shake up pricing by offering a cheaper iPhone - the iPhone 5c - and introduced a higher-priced "Plus" range for those who have really deep pockets.
Interestingly, the "c" configuration of iPhone only hung around for one upgrade cycle, which suggests that users don't want to buy what is perceived as a budget iPhone.
But data suggests that consumers are beginning to see the iPhone has too expensive. In fact, UBS analyst Steven Milunovich is predicting that while Apple may well have sold a record 75 million iPhones over the holiday period, a third of those sales will be of last year's iPhone 6/6 Plus models, which consumers can pick up for $100 less than the current models.
This time last year only about 25 percent of buyers were choosing the to buy the previous year's model.
If this is true then the message for Apple is clear - people want the iPhone, but an increasing number are willing to put up with last year's model in exchange for $100 off the price.
And $649 for the base model is a lot of money. Take the average lifespan of the device to be two years, then that works out at around $0.90 a day. Push the boat out and buy the 128GB "Plus" model and that daily cost jumps up to $1.30 a day.
It's a lot of money.
And it seems that Apple is aware of this. Not only does it now run an "iPhone upgrade program" where owners can pay monthly and get a yearly upgrade, but it now runs a trade-in program where you can get up to $350 for your old handset.
One big plus side of owning an iPhone - an advantage that extends to most Apple products - is that they hold their price well, and second-hand resale value is usually excellent. In fact, if you're savvy and know what you're doing on eBay, you can get a very good price for your old iPhone.
There are rumors circulating that Apple is planning to reintroduce the 4-inch iPhone to cater for those who want a smaller display. Problem with this thinking is that it goes contrary to what we saw with iPhone sales when Apple moved to iPhones with bigger displays. People seemed to love the larger display. Also, if the 4-inch handset is perceived to be the cheap option then that may give it the same kiss of death that saw off the iPhone 5c.
Apple's in a precarious position. It's heavily reliant of iPhone sales. While they're selling well, a high price is great, but if it seems that the wheels are falling off sales then it needs to act quickly. And while jigging around with new models might buy the company some time, a day may come - sooner rather than later - where it has to make to a lower profit margin in order to bolster sales.
When Apple publishes the data for the last quarter later this month we will know more. Keep an eye not only on the units sold but also the average selling price and overall profit margin. A record sales quarter might still not be as rosy as it first seems.
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