Friday, July 7, 2017

John Gruber speculates on pricing for this year’s new iPhone models. →

Excellent, well-thought out piece by Gruber on pricing and storage capacity for the three reportedly new iPhone models due out this year.

The whole thing is definitely worth the read, but here’s a few highlights and thoughts.

Assuming that’s true and that Kuo means the phones will only come in 64 and 256 GB configurations, I can see two ways this plays out for the 7S and 7S Plus:

Scenario 1:
-32 GB 7, no-S: $549 – 64 GB 7S: $649 – 256 GB 7S: $749 – 32 GB 7 Plus, no-S: $669 – 64 GB 7S Plus: $769 – 256 GB 7S Plus: $869

Scenario 2:
32 GB 7, no-S: $649
64 GB 7S: $749
256 GB 7S: $849
32 GB 7 Plus, no-S: $769
64 GB 7S Plus: $869
256 GB 7S Plus: $969

If it wasn’t for the fact that I’m basing this analysis on Ming-Chi Kuo’s reporting, I would expect 32/128/256 configurations of the 7S models, at the same prices as today’s 7 models. Apple was very slow to move beyond 16 GB base configurations; it seems odd to me that they’d be so quick to move beyond 32 GB base configurations. It also seems odd that Apple would move away from the successful good-better-best strategy of having three storage tiers. But that’s what Kuo is reporting.

It’s hard for me to think Apple will move beyond the good-better-best strategy either. If they did though, it would then make sense for them only to have 64GB and 256GB tiers for the 7S and 7S Plus models. Right in the middle.

Either way, Apple is doing so much to combat the local storage problem, it could make sense for them to break with the good-better-best tradition.

Here’s a few things Apple is doing/has done to illustrate my point:

  • App Thinning and Delta Updates have been in place for a while. This allows for smaller app downloads (in theory).
  • iOS will temporarily delete and restore your apps if you don’t have enough space to update the OS to a new version.
  • Auto deletetion of on-device downloads from Apple Music if you haven’t played them in a while.
  • Optimize iPhone Storage for iCloud Photo Library so you aren’t storing full size pictures on-device.
  • Decreased monthly pricing for iCloud storage tiers ($.99 for 50GB, $2.99 for 200GB, $9.99 for 2TB).
  • In iOS 11, you can have the OS Offload Apps (but not their data) if you haven’t used them in a while.
  • The new App Store in iOS 11 doesn’t display download sizes for app updates inline with update notes anymore. Also, when downloading a new app, the download size is no longer at the top of the page (you have to scroll down a bit).

These actions indicate to me an end-game for Apple. Eventually, they don’t want customers to worry about local storage. At the same time, they are well aware of this setup when it comes to model pricing. The iPhone 7S/8 may be the onset of this change.

Apple’s work in this area definitely benefitted the 16GB generation, but larger capacities can reap the benefits as well.

So in my Scenario 2, where the 256 GB 7S and 7S Plus cost $849 and $969 respectively, the base model 64 GB OLED iPhone would have to cost at least $999, and I think more likely $1099, and the 256 GB model would cost at least $1099 or $1199.

But if Apple expects severe supply constraints on these iPhones, I think prices of $1199 (64 GB) and $1299 (256 GB) are more likely. I honestly don’t think something like $1249/1399 is out of the question.

Sounds about right. There definitely is a market amongst the Apple diehards (including yours truly) and professionals that wouldn’t bat an eye at a $200-$300 premium for the best phone on earth with tangible benefits. I mean, it’s not like Apple’s taking an Android phone and just slapping gaudy crap on it. Plus, if you get it with Apple’s iPhone Upgrade Program, it means you’re only forking out around $20-30 more a month.

The prices for these iPhones need to be high enough so that tens of millions of people still want to buy the iPhone 7S and 7S Plus. If the “iPhone Pro” or “iPhone Edition” or whatever it is that Apple is going to call this phone starts at $800 or even $900, who is going to buy an iPhone 7S or 7S Plus? Not enough people, that’s who. Apple needs tens of millions of people to buy the 7S and 7S Plus because they aren’t going to be able to produce the “Pro/Edition” model in sufficient quantity.

Makes a whole lot of sense. 90% of normal users will continue with the good old fashioned iPhone line (7 and 7S) and be perfectly happy with the second best phone on earth.