iPhone in the UK: Pricing

Shawn,

You asked about thoughts to the O2 pricing, and the article on "Why the iPhone will fail in the UK".

First, the crock part. The list is:
"UK consumers (in general) do not normally pay for the phone on a contract."
They do often pay something for the very newest phones, but sure it's not £269. However, what about the iPod they're [i]not[/i] buying?
"iPhone's competitors have more advanced features and cost less (Nokia N95)."
Done to death. This is just another salvo in the Mac/PC wars, and the PC weenies always reach for specs. I was genuinely alarmed at the thought of the iPhone running on GPRS, which is what we have here in the UK as we skipped the "incremental upgrade" of EDGE. But they've addressed that, certainly for Londoners. (Sorry the rest of you...).
"Mobile web usage has not been widely adopted in the UK (yet)."
Baseless assertion. Was it in the US? Who are all these people with BlackBerries and what are they doing with them? Whatever. Even if that were true, that's because the experience till now has been crap.
"o2's contracts are overpriced (in comparison to competitors)"
They mean, 3 and T-Mobile. The reality is £35 is not unreasonable. Given tax differentials that compares reasonably with the US rates of $60 (which are ex-tax, of course while that £35 includes VAT), and bearing in mind we don't pay for incoming calls. Could it be better? Well of course but it doesn't look like anyone is being gouged.
"o2 has little experience in providing data plans to customers."
OK, again, whatever. I was with Vodafone and they could not distinguish between data and buckets of SMS, and they are the self-styled global leader. They're better now, but this is another baseless assertion.

However, Mr. Pogue is (IMHO) right to pick you up on the jargon of "price point", but to use it properly, I am surprised at £269. The £249 price point is simply more palatable. Ex-VAT that would be £211 - $425 or so right now, which should be more than enough to cover the negligible cost of currency hedging while pricing what the market will bear. I think that £20 is nothing more than opportunism and the nature of price points is it makes the phone look a disproportionately more expensive than it would at £249. While I am sure they've had their marketing MBA's pour all over the details, though the fact is Apple's market share in the UK is lower than in the US which should be surprising: we're quite a media- and design-savvy lot as may be apparent for the quality of our commercials over those back in the US for example, and I really think price is a factor here. This is true both of the Mac and the iPod. Apple in the US comes across as "premium". It does here too, but there is still a perception - which isn't inaccurate - of gouging, and their PR here really sucks so while I assume they have those MBA's, maybe they don't, or they're the flunkers of their class as I wouldn't hire them! iTunes is a blatant example, but the MacBook I'm typing this on came from Hong Kong as I just won't pay the mark-up (especially if I am also forced to put up with the grotesque "International" keyboard, which is another rant!). So, £269 is high, and I do wonder if the sum of those extra £20's will offset the unit sales foregone. In addition, we are being forced to take an 18 month contract. The industry has been trying to foist these upon us for a while, but you have usually been able to insist on 12 (perhaps by paying £50 for the phone). That's annoying, especially for an unsubsidised phone.

Clearly it's a great product - I've enjoyed playing with them - and clearly it will sell well, but I suspect as a premium product rather than as a mainstream alternative to your regular phone. In other words, I personally don't think as many consumers will do the "but it's like the iPod is free!" maths as Apple might hope. I also don't think there's anything like the degree of antipathy towards carriers here as there is in the US (so people are less concerned about "breaking free", as ironic as that comment is given the current bricking fiasco), and yes you are asking people to pay for something which till now has been very cheap and which will do some of the core functions of a phone, such as SMS, in a more elegant way perhaps, but in a way which is less convenient as you are standing in the check-out queue of the supermarket. The quaity of our phone service is also higher, the cost lower (generally), and the handsets themselves better. Steve may say "sometimes, you get what you pay for" but I'm looking at my (free) BlackBerry Pearl right now and no, I don't hate it. In fact I rather like it: it does what it is supposed to do very well indeed. Free does not have to equate with crap. Will I buy an Phone? Of course - I am pretty much a Macmac like all your other listeners - and as an EyeTV user too I am quite excited about being able to watch TV programmes on my way to work and I'm frankly bored with my 1G nano (!) but I don't think it will be as compelling ex-US as it was in the US.

I asked you about plans last year for Apple Expo - I hope you and Lesa are able to make it. (I actually ended up travelling last year). I refresh my offer to join you for a drink in Notting Hill (which is the next neighbourhood "up" from Kensington), beagle in tow, if you find yourselves here.

All the best - and please don't be too harsh on those who unlocked their phones on Wednesday!

Alex Johnson