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Thinking About iPhone Pricing

Ben Thompson, Stratechery

The fact the 5C needs to be sold in both subsidized and unsubsidized markets makes the pricing tricky; in subsidized markets, Apple is currently receiving a subsidy of around $450 on the iPhone 5. It wouldn’t make sense to unilaterally lower that – after all, it’s not like the carriers are going to lower iPhone service bills. This sets a floor of $450 for the unsubsidized 5C ($0 with contract). This also lets Apple dump the 4S, with its 3.5″ screen, 30-pin connector, and lack of LTE.

A nice analysis of Apple’s iPhone strategy thus far, and logical predictions for pricing of their forthcoming “low cost” iPhone 5C. I agree with Thompson that the 5C will ring in higher than predicted by most media outlets – somewhere around $450 unsubsidized. Anything lower would take too big a chunk out of Apple’s margins. Even at $450 off contract, the 5C will be cheaper than most unsubsidized smartphones, plus it allows Apple to sell a cheaper subsidized device at $99 or $0 on contract – an attractive option for Western consumers accustomed to the carrier subsidy model.

Tomorrow will be interesting.