The letter was so beautifully crafted, it was clear that it was not dashed out in the late afternoon.

Yes indeed. That is one of Bob's best in a long time.

I am not a Steve Jobs fan. He seems like an overgrown baby; a mean and insensitive SOB that I would not like to work for. However, you can't help but praise him for his passion and vision. And I truly feel that most geeks that do work for him need the kind of motivation that he provides - a heavy dose of fear with undertones of "show me how good you really are! Impress me you pathetic, no-girlfriend, coding worm!"

Did he milk the "early adopters"? Of course! Duh! Who doesn't? XBOX 360, PS3 etc. Anything new and cool and in-demand will command a premium price if you want to be the first on the block to have one. And do you know what? Most early adopters know this and don't care. Especially when it comes to the kool-aid that is Apple.

If I were sitting at the boardroom discussing the product launch and life cycle of the iPhone I would have agreed with every single thing they've done to-date:

Milk the early adopters? Check. Undersell the sales estimate to the analysts? Check. Lower the price 3 months later? Check. Offer a $100 Apple credit to appease the whiners? Check. Blow the sales estimates away because of the new lower price? Check.

Make no mistake; the iPhone is the most significant device since the personal computer itself.

I firmly believe we will look back 10 years from now and realize that this product began the true transition from a computer on the desk, to one in your shirt pocket. Yes it has shortcomings, but this is version 1 folks! It is so far ahead of any other device in terms of design, power, and functionality that the game has truly changed now and forever.

So bravo Steve Jobs! Keep wowing the consumers! Keep humiliating and motivating your employees at the same time. And most importantly, keep never settling for "good enough".

My apologies. My comment was not quite so crafted. To restate:

The Apple CEO's letter was so beautifully crafted, it was clear that it was not dashed out in a rush this afternoon.

Stu Gazzo comments: "this product began the true transition from a computer on the desk, to one in your shirt pocket." Yes, and notice who's software is NOT leading the transition. Let's revisit that "doesn't he realize he can't win" comment of Gates in a few years.

You know, Steve has a far greater opportunity available to him - that of his legacy. Imagine if Steve was a tremendously nice guy to people? He'd be a legendary role model, both a superb manager and someone to admire.

And honestly, I think Steve could go down in history with a far more admirable legacy than that of Gates, if Jobs was a nice guy and loved talking to people. He could retire as a bestselling author, a role model to thousands of people, admired by millions, and worshipped all the more.

Umm, when did people start thinking that Bill Gates was such a wonderfully nice guy? Even if you think Steve is devious (another word for clever?) nothing that he has done can be considered one-one thousandth as predatory as Gates and Co.

It is great that Gates is redistributing his ill-gotten gains to the less fortunate, but they shouldn't have been his to begin with.

Let's be honest, that is no different (morally) than the subterfuge that Cringely is accusing Jobs of doing here vis a vis the iPhone--except that instead of $100 million, we're talking about over $50 BILLION.

microsoft aimed for a microsoft product in every home, apple is aiming for an ipod in every pocket (or purse for that matter

within a decade, we will have, perhaps, a TERABYTE in our pockets if GOO-PLE-TUBE succeeds

I think there's an additional element of this:

Everyone, especially Americans, love apologies. It's ok to make a mistake, but the "big" people among us are never afraid to apologize.

It's rather Machiavellian to know you're going to sin but then have your apology ready to roll in advance. Turns that whole "better to beg forgiveness than ask for permission" thing on its head. Imagine having a typed apology ready to go when confronted with your transgression.

What I don't understand is why the market pounded AAPL shares so badly on Thursday. I know this leaves some money on the table from Apple for its customers, but it removes all doubt that Apple is going to crush the competition now. The goal is to get out ahead before the other guys can come up with any features to make consumers even consider alternatives. Kind of how it went down with the iPod: You could get another gizmo from Creative or another vendor for half the price and twice the features, but everyone wanted an iPod.

Brilliant.

Now, if they could just ditch AT&T. When can I hook this thing up to my t-mobile account?

"Umm, when did people start thinking that Bill Gates was such a wonderfully nice guy? Even if you think Steve is devious (another word for clever?) nothing that he has done can be considered one-one thousandth as predatory as Gates and Co."

I suspect that has a lot more to Jobs never having the market dominance required to pull a microsoft than it has with Jobs being unwilling to do so.

Bob, while you would have been remiss to not comment this week on the Apple mischief, I was hoping for some commentary on the gPhone and all the ferver around it.

D

>>
I suspect that has a lot more to Jobs never having the market dominance required to pull a microsoft than it has with Jobs being unwilling to do so.
>>

Yes, but last time I checked we prosecute people for crimes committed in practice--not in theory. So by that standard, your perception of Jobs's "willingness" to be as predatory as Gates is irrelevant.

Ah, but this is not about Steve or Bill or any particular person. It's about products and services.

Apart from the Xbox 360, Microsoft doesn't have any interesting or promising products or services at the moment. Look at Vista - what a complete disaster - technically and market-wise. It's the biggest flop since Windows ME. MSN is not going anywhere, and Office is a boring, mediocre office product. The hardware division's mice and keyboards are OK, but there are many great competitors such as Logitech.

Meanwhile, Apple keeps pumping out hot new products and services that make you feel: I WANT THAT!

It will probably go on like this for a long time.

Stop the presses!
I find myself in total agreement with Bob.
My first exposure to the Ipod was at Internext, sitting in the moniker domain auction with the editor of News.com, who also happened to be the keynote speaker at our convention. (I spoke on the future technology panel)
Anyhow, he was a "mac" guy. And an uber geek Mac guy, so of course he had the Iphone. As I played with it, I realized Steve got the display right. The thing that always has sucked on the Windows PDAs, all the way back to the Casio 105.
Frankly it annoyed me. My windows Pocket PCs can do all these functions, but the Iphone's screen just worked better.
Now, why can't Gates and the Windows people figure this crap out?

So loyal Apple cuomsters basically have battered-wife syndrome? haha. It does make a sick sort of sense though.

"Yes, but last time I checked we prosecute people for crimes committed in practice--not in theory. So by that standard, your perception of Jobs's "willingness" to be as predatory as Gates is irrelevant."

Don't be ignorant, willfully or otherwise. Apple has been just as predatory over the years as Microsoft, but on the much smaller scale that they play in. (And for that alone I have more respect for them.) They have sued, threatened, bought out, and locked out competition many times over the years, not to mention they're just as iron-fisted with the press. It was probably worst in the 90's, when they were taking closed-platform to an extreme, it's not as harsh with BSD and Webkit.

As they gain marketshare, more people are waking up to the fact that Apple is a more stylish and even more ruthless Microsoft/Oracle/Symantec/IBM/etc. Even as someone who uses and likes Apple products, as well as Microsoft products, I'm still going to be wary.

Did anyyone notice or complain when Microsoft announced a Zune price drop from $249 to $199 on September 4th? The very next day Steve Jobs announced the new iPods. Microsoft then announces a limited edition pink case Zune a day or two later. Are any Zune owners clamoring (whining) for $25 from Bill Gates? Unlikely. Bill may be eating a lot of HumbLe Pie at the moment.

Bob, I know I read your story about Vanity Fair before...

It's a pity Apple is going to go straight down the tubes when Steve Jobs is gone. Is any kind of dynamic heir apparent being groomed? No, which is very frightening, if you are an Apple stockholder.

The biggest reason that I didn't buy an iPhone when they first came out... the price (and the contract).
The second, the assumption that nothing Apple releases as "Mark-I" is bug-free and painless.

I'm still holding out... but it's getting harder to resist. But, if I were an early adopter; I'd still be pissed. And Steve still isn't my hero. (Nor BG either, but that is a different rant).

Kudos, Bob...

-edmund

“He has to know that he can never win."

What a fascinating quote. At the time, Gates seemed completely correct but look at Apple now...

They are a clear leader in digital music and no-one else is even close to snapping on their heels yet - not even Microsoft, whose effort is widely seen as embarrassing. Ouch.

The iPhone - not that I've seen one - is obviously a revolutionary product. However the lack of an open development API (Surely Jobs remembers the lesson of the Windows open platform and the Mac's relatively closed one in the 80s?) and alleged contractual demands that demand that Apple are making on potential partners - which seems like arrogance and potential hubris - are two big question marks on it's future.

The Mac is never going to beat the Windows marketshare - but Jobs doesn't seem bothered. They're gaining share in the profitable high-end of that market and Apple now appears to have the mind-share of much of the tech elite and increasingly is making in-roads to the typical members of the business elite. Go on any public transport - planes or long-distant train journeys (I'm writing from Europe) and year on year, you see more and more Macs being used by sober suited people.

Bob, I remember you writing an article on this topic back a few years ago, where - I believe - you said that Steve Jobs was quite happy with Apple's position because he was playing by his own terms - not by an agenda set by the press, analysts etc. - and by that count, winning.

Well, like him or loathe him, Jobs popularized the template for desktop computer that we have today whether it be Windows or a Mac and in the last few years has changed the Media industry whilst marking what are widely perceived to be the best (and very profitable) personal computers.

So two landmark achievements in the computing industry - and arguably, the second achievement marks the beginning of computers breaking out of the desktop and becoming devices that we don't really think of being computers. And the second time around, Apple under Jobs just seems to be getting stronger and stronger.

So, not too shabby...

P.S. I disagree with you re. the iPhone price cut. I think that Jobs thought that the typical Valley elite who would originally purchase the iPhone just wouldn't care about the drop - which is probably true - so the cut just didn't matter. What's $200 to them? But I'll bet quite a few people who bought an iPhone were not your average wealthy high-achiever or Apple fanatic and were understandably upset.

I mean, Steve Jobs just doesn't ever say sorry unless he has to, does he? Yet he apologized and ate humble pie in front of the World - and that had to hurt!

Good read. I don't accept your assertion about undeserved profit.

1) iPhone is a luxury products. They are supposed to come with a higher price tag. It is part of the deal. You get a bit of "experience"/styling/coolness /exclusivity in exchange for paying more.

2) We know that techn-products gets cheaper (of course not that fast). So being the first to get it, you know you are going to pay extra.

I'm sure if you look at luxury product pricing, you would find this common.

Jobs is just right on the mark. Apple is in the fashion business, not the computer business.

Personally I don't care one bit about the price. I do mind though that I still can't buy an iPhone because I live in Europe, and that I will have to buy it on a contract. Luckily the company expected to sell them is a pretty decent one.

Finally! Back to hard-boiled, gossipy, trashy conspiracy-theories. But with a chewy people centre.

Critical faculties blissfully suspended, I soooo want this to be true.

More please!

Good point Kevin. Steve is such a big personality who probably inspires many people in the company, it will be pretty much impossible to replace him. I can't see him grooming anyone for his eventual replacement as it would damage his ego!

'The iPhone is obviously a revolutionary product'
Ahem, I don't think so. The multi-touch screen is a new step, but the rest of it is not revolutionary.
Apple were not the first MP3 player manufacturer, were not the first mobile manufacturer, were not the first to combine the two. Even Bill G said that he thought the iPod's days were numbered as the mobile can do what an iPod can.
But the product's style and marketing are both outstanding. And the way Apple are catching up the likes of Nokia & Sony Erricsson is remarkble too.

Jon K – 'The iPhone IS obviously a revolutionary product'

It's not so much WHAT it does, it's all about HOW it does it. No, I'm not specifically referring to multi-touch. I am referring to the overall user experience. It's simply fabulous. The iPhone doesn't do everything that everyone wants, but it does a lot of it and does it well.

Nothing frustrates me more than technology that is harder to use than it should be, and this is where Steve and Apple just "get it".

I don't recall Apple claiming that they created the first MP3 player. I do recall them claiming that it was the best though and history has proven them right. Nor did Apple claim to create the first mobile phone. They were not the first company to combine an MP3 player and a phone or the first out of the gates with a half decent smart phone.

Apple did the MP3 player right. It wasn't perfect, but it was and still is, in a class by itself. Apple has done the smart phone right as well. It's not perfect, but again, it's in a class by itself. I doubt that Apple will have the dominance with phones that it enjoys with MP3 players, because, as you mentioned there are other very capable phones out there. These other phones are only going to get better, because they HAVE to. Apple has raised the bar. Who wins? Everyone.

"Even Bill G said that he thought the iPod's days were numbered as the mobile can do what an iPod can."

That may prove to be true to a certain degree... but WHO CARES! The iPod has made Apple a ton of cash, generated new customers and help sell other Apple products. It's all good my friend!

It's not so much WHAT Apple does, but HOW they do it that separates them from the pack.

This is just my opinion. I've been wrong before, just ask my ex-wife! LOL.

"Apple is in the fashion business, not the computer business."

False dichotomy. The difference between Apple products and Dell/Microsoft is a lot more than just fashion.

Love Steve Jobs or hate him, just don't ignore him.
...
At least 500,000 iPhones went out at the old price, which means Apple made $100 million in extra profit.

I don't love him or hate him, but I'll be cursed if I ever stand in line to buy his products. Good on him for a making a buck from the "gotta have it" crowd, they deserve what they get. One plus - taking advantage of the lowly consumer with "fashion" and staying profitable requires continuous, high-quality innovation. That's one area where everybody wins: witness iPhone. Every competitor is now going to make some attempt to mimic its popularity. The challenge for Apple is to keep ahead of the fashion curve just enough to stay "fashionable," but not so far out front that people look at its stuff and say, huh? Such was the demise of The Cube.

>> "Apple is in the fashion business, not the computer business."

> False dichotomy. The difference between Apple products and Dell/Microsoft is a lot more than just fashion.

Apple is in the User Experience business. Dell is in the commodity hardware business, Microsoft is in the Monopoly Protection business.

Gee, which one is going to make product that users actually enjoy using?

Mew

I used to believe Steve until Newton, NeXT, and some of the other failures. At NeXT he had an early lead that was wasted through sheer ego. He cannot have believed that the most compelling feature of the Macintosh Classic was the small, B&W screen; it was the OS and GUI interface. OSX is a Unix hack from open source. While beautiful visually, it is still closed, proprietary, and as far from the mark as every other Unix distribution in that computers should be working for us but we are still mostly working for them simply trying to get them to work for us. If it wasn't for blind luck at Pixar he would still be a simple multi-millionaire. He still has great Vision but he's never had great Listening.

er.... you appear to be having a dig at a company and its CEO , purely because A) The company has actually lowered the price of one of its products and B) because its CEO is actually making money for his company!!!! Get real , this is called capitalism.

I for one am not complaining about the fact that my Ford car is now available for $4000 less than I paid for it 6 months ago , thems the breaks !!!!

I personally think that the real reason Apple dropped the price is that they want to launch the iPhone in Europe and compared to European phines the iPhone is rubbish.

I like Apple products and I love the OS but the iPhone is, was and always will be a joke. Top of the line phones in Europe have everything this phone has and dont look half as gimmicky.

Apple have to beat the top of the line phones here and give something special. iTunes on a phone isnt special, it's a crap way to buy music. 8GB compares to an iPod nano, hardly top of the line. If apple want to do something special it has to have a camera, video calls wi-fi internet and more than 10 GB of storage. Only when they can do that do I think Europe will even care about this toy.

I love my mac but this phone was a disaster from the start.

Even with the rebate, the early adopters are going to be much slower to adopt future Apple products. I think "listening to your once loyal consumers when they light the castle on fire" is not a brand building exercise of any kind...

Interesting article but it still comes down to another spin on SOUR GRAPES. I cannot believe the amount of whining that is occurring in the press and blogosphere. It is pretty obvious who flunked market economics (if they even understand free markets and economics, it is a REALLY big step for most people).

Cheers,
bb

Sigh. With all due respect, what part of "caveat emptor" is not getting through? You thought it was worth $600 when you stood in line two months ago, all of a sudden it's not worth that much anymore? You didn't get on the web and research the device, so you did not see all the geeks across the blogosphere saying "wait, the price will come down and the features will improve, that's the Apple M.O."

This is no different from customers who buy a new Apple laptop or desktop two months before Macworld, only to find out from the keynote that prices are slashed and features are improved. Except that nobody forms a pitchfork and torch mob or demands financial concessions when that happens, because that's the risk you take. You buy a new car two months before the new model year and find out on TV that the price has come down, the incentive package is insane and the new model year has new gizmos. You don't go back to the dealer and demand that he refinance your X model car at the Y model price, do you? Remember all those folks who bought the Honda Insight?

In terms of actually watching the keynote, this latest Steve "event" was a turning point for me; the Reality Distortion Field evaporated. Up until now I've put up with his constant muttering ("amazing", "revolutionary". "it's really beautiful" and so on) as his condescending way of framing viewers' thoughts and precluding critical thinking. It's irritating but tolerable, in the realm of accepted salesman behavior.

Everyone has their own breaking point, and many reached theirs long ago, but this was the speach that did it for me. The arrogance of charging for using software to create a ring tone (what's next, 5 cents per email? $1 per Pages doc?), and then the shameless $200 iPhone price drop followed by the $100 store credit (which, as Bob points out, given their margins and customer buying patterns really costs nothing), all delivered with a that smirk and "how cool is that" patter, well, it just turned me. It seemed he was treating his audience as a bunch of enraptured fools.

I like Apple for their innovative products, but I don't enjoy being taken for a ride.

But, but. Does Bill realize he lost? Look at the Stock, Microsoft is a flat-liner.
The times of excessive ME TOO come to an end and Microsoft is just fall out. Everybody can copy now and does.

"the top-selling smartphone in the world"

Whaaaa? There were 18.7 million Symbian smartphones alone shipped by licensees in Q2 2007. Global smartphone shipments in 2006 totalled 72.9 million units. Being the best-selling smartphone in the world is a little less impressive if you can do it with less than 3% of the market.

Come on folks, this is the *free marketplace*. Buy what you need when you need it at the best available price. If your wants demand more, be prepared to pay higher than commodity prices.

I don't have an iPhone. Nice, but it's way more than I need (now). I don't text message or have much need for wireless internet connectivity *at the current price vendors are charging*. When the equation changes, I'll reconsider.

Lest everyone think me a Luddite, I ordered my first Mac in January 1984. That Jobs guy does have vision. He sees technologies becoming available to fulfill parts of the vision and he goes for it, incorporating them in his products. And he really seems to care about the users' experience using those products. Because of that, the technological world is a better place.

I am a newcomer to the whole apple/jobs reality distortion so apparently the koolaid hasn't taken full affect...however, Constance is right, caveat emptor. Personally, I love the show that Steve puts on...It's amazing! So much charisma and natural showmanship...

It must have been worth the $200.00 to be the first guy in your gang with an iPhone.

And now you get a $100 voucher too. How good is that?

Any sign of the ZunePhone?

You know Apple's in a good position where they have to worry about lowering prices too quickly.

This is spot on though. Apple's pricing is nothing if not meticulously intentional. Nobody complaining about the drop is actually going to stop buying Apple products, and a huge host of new customers will pick it up at the new point, just in time for the holiday season.

Wonderful piece. But believe it or not, Jobs missed a huge opportunity.

S.O.S. Steve Jobs! eBooks Will Save You!

Given your understanding of him, I am now hated by God Himself.

Expect many execs stepping down "to spend more time with family" at Nokia, Motorola, LG, Verizon, Sprint, NBC/Universal....
They are all toast. The iPhone was already a hot product; now it's more affordable. And you can get the goodness without the phone part (the iPod "Touch"), which you don't really NEED anyway, if you have the wifi.

And if Bill reads this he must be thinking that his statement about Jobs not winning was just a scrass and stupid as Michael Dell saying Steve Jobs should hand the money back to shareholders..

Apple products makes everything Microsoft does look twenty years old.

Thank you Steve Jobs. Goodbye Bill Gates.

Bob, in your book Accidental Empires, you give name to this behaviour: The Battle Cry of Youth.

It's that, "Oh yes I can! You'll See!!" heard from every kid who is told that they can't do something.

So Mr. Gates says Jobs can't win.

...Oh yes he can, we'll see.

perhaps.

Regardless of whether or not the iPhone price drop was a strategic miscalculation of customer reaction, or whether it was a deliberate attempt on Steve Jobs ' part to punish his customers (seems highly unlikely), I do believe that it will have little impact on future Apple sales. Here's why:
- The internet echo chamber means that the number of vocal critics of the price drop are probably far, far, far less than those that are perfectly happy with what they paid for their iPhones.

- The folks who buy Apple products will continue to do so as usual, because
a) they love the Apple experience, not Steve
b) Steve's reality distortion field is incredibly powerful at getting people to buy Apple products.
c) We Americans have a short attention span. We'll forget this whole brouhaha within weeks.

So don't cry for Apple. Next quarter, they'll still be laughing all the way to the bank (assuming the coming recession doesn't affect them much).

This is all a big pile of whining. People saw the product, saw the price, had reason to believe the profit margins were dramatically high, but were not only willing to buy the phone under those terms, but were willing to make great sacrifices (camping out in front of stores, etc.).

In other words, people are willing to pay big to be early adopters. No one was hoodwinked.

That Steve decided to placate customers' indignation by offering $100 gift certificates to anyone who payed the original price doesn't speak well to you general theory / character assasination.

Am I the only one who thought the iPhone was not originally overpriced nor is angry about the price cut? I'm delighted. We're supposed to be delighted when products become more affordable (re-sale value drop aside). It is a smart phone and iPod in one, so why not charge the price of both. None of those people who paid $599 were forced to do so. The have the right to complain of course, but we should all ignore them. Me, I'm happy I waited until yesterday to buy one, but I'm sure a new, probably faster model will come out next year with more memory and I'll be envious again. But then I'll just buy a new one, just like a buy a new computer every year. I won't complain about it. I'll be happy I can get a new, better one.

"Shameless price drop" - that's a new one. Steve Jobs has the gall to ask consumers for less in return for his goods! The unfeeling bastard.

This really is new territory. Historically, people have damned merchants for price increases. Now the price cut is an affront. How long before people start whining about prices that stay the same?

Bogus commercial ethics really does depend upon ignorance of economics.

More likely the price drop was not aimed at the people who had just purchased the iPhone, but aimed instead at those who wanted one, but were waiting for this expected event.
The only whiners were those who got trapped in the hype.
I doubt anyone really thought the price of a piece of electronic gadget would not go down. Every phone sold by every company has dropped in price just as dramatically as the iPhone, such as the Razar, which is at least $300 less than the day it was first offered.

I laughed at my friend who got one at $599. I told him that I would wait until next month to get mine cheaper. We both knew I was right. He wanted one first, he has one, he loves it, and will gladly spend more money in the Apple Store.

Yes Steve gets on your nerves sometimes, but evil Puppet Master? Not a true characterization. Remember to be a puppet master to make the puppet move you have to jerk the strings, not pull our leg.

Wow; that's some SOUR grapes. (And some pot-stirring, click-generation of your own.)

So did you have a rant about the Motorola Razor$ It's gone from $499 to $49 w/service agreement, and still $249.99 purchased alone.

Bob, it seems like you've got a bit of a personal ax to grind when it comes to Mr. Jobs, given your relationship at Apple, and subsequent professional encounters.

As for the iPhone "fiasco" where Apple "punished" its users ... First off, it's amazing how we're forgetting the risk that Apple was taking. In a field where they had no prior experience, the iPhone could have suffered the fate of the Mac Cube, either with lower-than-anticipated receptivity or a major technical issue (remember the Cube's notorious "cracks"?). Buffering the risk with larger margins is a common practice. But now the iPhone is a legitimate hit, Jobs is comfortable making a full market-share assault with a price that pits the iPhone against most other premium smart phones. Plus, he planned for a number of different possible customer reactions, and Apple responded accordingly.

That's just good strategic planning. It has nothing at all to do with Gates, Sculley, or any other deep-seeded Jobsian machinations. He dropped the price. Everybody wins. Yay capitalism...

So tell me, when will Bill Gates give back some of that over priced Vista OS he is selling in 7 different flavours? And what of the extra cost to buy a version that will run in Virtualization. And you somehow conveniently miss out how such a great deal OS X is to run on 5 machines at home (the family pack), compared to that of Vista on 5 machines. How do these things stroke Job's ego? We'd like to know old wise one.

Excellent column. Someone with an inside track to the inner workings of Jobs tries to lay out the thinking/personality traits involved in this 'pricing fiasco'. (And IMHO does a pretty darn good job of it too.)

Still, people who have NO dog in this fight (ie, those who have not purchased an iPhone and/or do not work for the Apple accounting department) continue to beat up on the iPhone owners who felt jilted by the price cut. Who's whining now?

I mean, seriously, does it hurt you in any way we early adopters, arguably among Apple's best and most vocal customers, felt a little betrayed? Does it hurt you at all, that Apple decided to give us a break on future purchases for our trouble? Didn't you enjoy the 24 hours that you got to feel smug about NOT having a beautiful iPhone to use/work/play with?

Come on. Enough is enough. Give it up. Your jealousy is showing, and its really ugly.

Milking the early adopters is classic marketing strategy. I remember doing some spreadsheet modeling way back in the 1980s for Jack Ryan who invented the Barbie Doll. He had just invented a coffee cup that would keep a cup of coffee hot for an hour. He planned to sell the first wave at $35 (which seemed like a lot in 1985 dollars). And then he projected the price down to $5 at KMART by the "end" of the product cycle.

I just wonder if a) Steve wasn't a little too greedy in going for an "extra" $200, and b) if he shouldn't have waited a couple days to lower the price to let the iPods have their own news cycle apart from the price drop.

I will say that the price drop motivates me. I'm on a family plan with my wife, and I wasn't about to spend 2 x $599 plus a verizon cancel fee (read $1375 total) to get into an iPhone. But if I go to the Apple Store and purchase two refurbs I can keep the investment down to about $875. And help Steve make his numbers.

I have no doubt the iPhone price cut was planned in order to capitalize on Christmas buying - long ago, in fact. Look at what's come together this winter for Apple: New iMacs, hot iPhone, very attractive new iPod lineup, refreshed Mac Mini, better Laptop growth than any other computer maker in the market, and a shiny new operating system release (an OS which is apparently used by every single device in the arsenal). This convergence was no accident: this Christmas was specifically targeted to grow the Apple platform - to put devices in the hands of users. Next year, even if there is little or no new hardware, Apple will be able to use OSX to expand the capabilities of every device they sell at practically the same time for the same investment. My guess is that iPhone price cut was always planned in order to promote this Christmas push, but the iPhone launch may well have been a month or two later than originally scheduled - a schedule tentatively outlined several years ago.

I want to echo the posts of Scott and Christopher--those who bought first, who wanted to be on the bleeding edge--didn't get burned, they got what they wanted which was to be one of the first iPhone owners.

And let's remind folks that one of the biggest criticisms of tech and other journalists wasn't about the phone, it was about the price: $599--even though Nokia, Samsung and others sell phones for more, and have much less functionality. So if there's a touch of whining going on, it seems to be the hypocrisy of those who are now complaining that Steve cut the price.

From purely a biz perspective, why is this bad move? I bought the original iPod, a 5gb for $399! Was I bugged that a 15gb version came out 6mos. later for$349? Or that you can get a $160gb version for $349? I was a early adopter of the Mac and probably hold the distinction of buying a Mac SE AFTER the price WENT UP $200!

Regardless of all the whining going on now, the $399 price cut will do nothing but put iPhone sales on fire (as if they aren't already).

Oh, and did anyone point out that w/the 4gb version discountinued, and the iPod Touch at 16gb, that there will probably be a 16gb iPhone very soon at... $599!

What I'd really like to know is, did Cringely buy an early-iPhone and is he going to take Steve up on his offer?

"...and the iPhone, which was already the top-selling smartphone in the world,..."

If you said, "which was already the top-selling smartphone in the US, in the last 3 months" you would have avoided walking around with D on your hat.

Nokia sold how many 10's of millions of smartphones this year?... ordinary mobile phones was an order of magnitiude more.

RIM still had more smartphones sold than Apple... what a bizzare statement you make.

Bob, I am surprised you didn't interpret the price drop on the iPhone as clearing the decks for the introduction of the gen 2 HSDPA iPhone you predicted in your 7/5 and 7/12 columns.



As for the ethics or business sense of the price cut, I think it would have been nice if Apple had stated up front an intent to drop the price substantially after a couple months, but I can see why they wouldn't want to commit to a schedule or a dollar value when they didn't even know for sure how sales were going to go. And I don't know if sales would have been affected much if they had given warning. But in these situations where demand exceeds supply, I'd rather see the manufacturer charge more up front to modulate demand than to see the money go to speculators selling on eBay.

Ok, so I bought the iPhone 10 days ago. If not for the price-change rebate, I would be mightily upset right about now. I wouldn't have been upset if the drop came 3 months from now, as that is an insult that I am used to from the computer industry.

But anyway, now that my iPhone costs (costed?) $400, I find myself much more tolerant of its shortcomings. Slow EDGE network? So what, it's just a normal $400 phone. Short battery life? I'll by another one next christmas when they fix it-- my last $300 phone only lasted one year anyway. (Goddamn razr piece of crap, may it rest in hell.)

As to whether the iPhone is revolutionary, well, it is. The Mac was revolutionary not because it was the first GUI (Xerox Star was) but because it was "The first personal computer worth of cricism." (Alan Kay) The iPod was the first MP3 player worthy of criticism. The iPhone is the first multifunction phone worthy of criticism.

Sure, you could criticize the expensive phones from Nokia that had crappy UIs, or the TREO and Windows phones that were slow and hard to use, or the Blackberry that's still better at email than being a phone, but those were easy. Nobody expected much from them, and that's what they delivered. People expect the world from Apple, and in the iPhone, they're starting to deliver it.

Hi Bob -- I really enjoyed the Jobs column -- you are always at your most erudite and hillarious when analyzing Stevo.

Bob I also Have a suggestion - How about another article about Hurd at HP and how they are kicking Dell's ass.....

Maybe even about how HP now has the public's "Mindshare" on the best pc's -- and their strategy of buying VOODOO PC AND THE NEW BLACKBIRD 002???

THANKS BOB!!
BRIAN KOESTER

EDMONTON ALBERTA CANADA

The ipod would perhaps become absolete if it stayed a MP3 player. But...the future of ipod is a PDA, or a mobile computer. With OS 10, no mobile phone is similar to ipod. It would take a really a mobile company to change into a software company to have any chance to compete in the future. Even the world second best software company has no clue how to do mobile. I would not bet againt the ipod becoming the personal mobile computer similar to devices in Minority Report.

I can't agree that Apple "punished" iPhone owners. Precisely nothing happened to them when the price was reduced; they didn't become poorer; their iPhones didn't stop working. It is totally unlikely that a small (to Apple) one time milking of their best customers was the motivation. It's much more likely that the higher launch price (which was set in January, 8 months ago) was (a) to limit demand somewhat in a high risk large scale entry into a completely new market, and (b) to make competitors commit to their product plans and suppliers for the coming 3 months on the basis of a higher iPhone selling price and lower iPhone volumes. Suddenly, Nokia's N95 is not the competing phone, something much simpler is. And Apple has got huge amounts of free publicity for the price drop among the 99% of Americans who don't have an iPhone yet.

You may be right about SJ's personality, but by now he knows himself well, and it is only one, minor factor.

I feel sorry for the early adopters ... but not too much. Nobody forced them to buy the iPhones at that price. And most peple do not spend money on products they feel are unworthy of their cash. The buyers made the choice to purchase the phones at the original price.

What should Apple have done? NOT cut the price by $200-- just to make these guys happy?

Wow. It's almost as if the author bought and iPhone on eBay and found out they aren't eligible for the $100 credit. IT'S BUSINESS IN THE TECHNOLOGY FIELD!!!! What about that plasma I bought 2 months ago that is now $300 less?

Look at all the posts.
If not thing more, the Apple crowd is certainly persuasive, prolific and proud (a bit like Jobs himself no?).

I'm having a great deal of trouble understanding how that $50million was "undeserved" or how in fact lowering the price does ANYTHING to ANYONE. If you buy something at a certain price, and the price comes down, YOU STILL HAVE THE ITEM, and have to pay NOTHING more. When the xbox and the ps2 came out, they all had early adopter premium pricing as well. When you pour a billion dollars into developing a new product, you have to recoup is a much as you can as fast as you can.
The fact is, the price of ANYTHING is whatever the market will bear. Everyone on earth knows if you have to be first to buy a tech product it WILL be much cheaper soon after.

I stood in line for 10 hours to get my iPhone after salivating for 6 months. It is every bit worth the $600. To think that Apple punished me and other early adopters by lowering the price is ridiculous. The strategy was a shrewd move to limit demand until production could ramp and to screw with the plans and expectations of competitors. The price drop and new products prior to the holiday shopping season is brilliant. The $100 rebate is an unexpected windfall that will go towards more Apple purchases. Shareholders and consumers should all be pleased... and Steve has good reason for a healthy ego.

Honestly it was a great move on Job's part. Why?


The problem for the iPhone all along had been its price, but there was also a good number of people willing to pay the price to get it just because they could get it. So, Apple charged them that price for it. Don't get me wrong - the price is great if you're buying it for a PDA or even to be some kind of Mac-mini equivalent; it's just too high for a cell phone, even a smart phone.



Now, as the iPhone saturates that part of the market, customers are starting to be more wary of the price and unless Apple changed the price to be more reasonable for a cell phone, then it would have flunked just like the Apple Newton. (And we all remember how bad that was. It cost Apple the entire PDA market, not something Jobs wants to repeat with the cell phone market - or any other market he choses to enter Apple into.)


So, 3 months after introduction? Yep, that's probably about right for saturating the number of people that were willing to pay; and btw, it also enables them to do a little testing. But what testing would have been needed? (Another brilliant side to this.)



Well, it's kind of hard to test in those kinds of numbers internally. It's also kind of hard to test the activation and other features to that level. So, by managing a limited deployment by charging more as you only get people that are really willing to buy technology that will likely break - e.g. the early adopters, it enables them to test and scale the deployment so that they can properly handle the masses when they do lower the price. So, it seems that they've finished their testing after 3 months. They will still be bugs, but those remaining bugs will be pretty minor, and not likely noticed by most.



And I would certainly have to agree that the price cut and rebate were all pre-planned. It's always good to have some kind of backup to please the people your pissing off so that if it does happen, and there is some kind of backlash, you have something to immediately toss out and please them. Then you can mitigate the rest if you need to; so there is likely a second plan in case this one failed.



So yes, another brilliant move by Jobs & co.

Jobs mentioned, rightly, that there would have been chaos at the lower price. AND us early adopter types would have been paying the $200 (or more) more via eBay and the like. As with other such releases (PS2 etc). Why is paying an eBayer better? Would the eBayer ever write me a personal blog and give me a $100 credit? Or have earned the premium by developing a way cool device? We were not forced to buy iPhones at $599, nor are we at $399. Me, I am thrilled at the $100 credit. For whatever its purpose. Any other company done the same? None that I know of.

The people who chose to purchase an iPhone knew full well what they were buying. They weren't all 'used,' either. Apple isn't the only shrewd marketeer. My girlfriend's boss paid her to stand in line for him, then purchased two phones and resold one of them on ebay for a 50% mark-up which more than covered what he paid her. We can't blame anyone for using the capitalist system. It exists for the best and strongest to use to grow stronger and better; just like evolution...

In one respect the marketing message was a disaster -- because nobody is talking about the new iPods at all, it's all about the price cut. That $200 didn't just obscure the iTouch message, it completely obliterated it.

That alone makes me think this badly handled, and not some Jobsian scheme to manipulate the masses.

This is sort of off topic, but you mentioned a fire-proof safe. I wouldn't count on that for saving a tape. Fire-proof safes are rated only to keep the temperature lower than the ignition point for paper - well above the melting point for plastic. If you want to safeguard electronic media, you need to get a heat-proof safe. These are generally larger and MUCH more expensive.

Okay, so what is the REAL lesson in this finely crafted Cringley column? Writers are like elephants. But unlike elephants they have pens. Skipping out of an interview will cost you, because they always get the last word.

Okay, so what is the REAL lesson in this finely crafted Cringley column? Writers are like elephants. But unlike elephants they have pens. Skipping out of an interview will cost you, because they always get the last word.

People talk about the Steve Jobs Reality Distortion Field but they do not mention the Cringely reality distortion field. I wonder why?

A writer takes his past anger at someone not following up with an interview and somehow that person is forever a questionable person. Hmmmmm.

I agree that Steve Jobs is a very smart man and I am sure that the price drop and store credit were planned at some level. (re options, choices, street reactions, etc. )

But too many writers like to assume that Steve Jobs and Apple work in a vaccum. They assume that the market place does not exist and that stocks go up on good news, etc. Hmmm, it looks like they are wrong a lot of the time.

Apple has been working on these systems for YEARS. You make plans, choices, take chances and sometimes the events come together well and sometimes they do not. But if you make a good product with good features it sells much better than cobbling up some zune thing with DRM stuck in every corner cause people don't matter, only money and big business matters. Right?

Well, to Bill Gates and his "doesn't Steve Jobs understand that he can never win" comment, I say that maybe the tides are turning. And a tide is a slow but powerful thing.

Now people are saying, "Now, why can't Gates and the Windows people figure this crap out?" more and more. Maybe its Bill Gates that needs to know that "Maybe its him, that can lose" afterall.

And to Mr. Cringely, I say, "The world moves on. You must look at Apple in todays world view, not from years ago. Like Jobs said, You have to skate to where the puck will be!!"

PS, I really think its OK to like Apple products if they really are good. :-)

Later,
en

In response to "He has to know that he can never win:" He's already won.

Jobs is not in a competition with Gates over marketshare. He doesn't care how many people use Macs vs. use Windows. Or for that matter Zune vs. iPod (though I'm sure it's gratifying seeing the marketshare that high, but even were it not, nothing would change.)
Gates has changed the world of computing once. And not the one people think. Gates implemented the idea that instead of contracting to provide a company with a program that then became theirs, contract with a company to provide a program that remains yours and is licensed for use. That was a huge change in the 70's.

Jobs arguably brought personal computers to the masses in 1977. Then made it no longer just a geek phenomenon in 1984. Then finally made it a household appliance in 1997. Then made unix user-friendly in 2001. Then went to work on music. Built the iPod. Not the first, but the first of its kind, and it changed that industry.

Gates is out to make money. And he's won.

Jobs is out to change the world. And he's won.

Who is feeling sorry for those who ran out to buy an iPhone for $600? I don't, and I doubt many 'early adopters' do either.

It is about being the first. They knew what they were doing and are not surprised, or at least they have no right to be surprised, that the price was dropped.

Things that made me laugh:

1. People cheering because they get to pay $1 to make a ringtone out of a song they already own.
2. Almost every feature basically boils down to "and now you can buy stuff from iTunes somewhere else"
3. The thought of Steve Jobs cringing backstage as his Starbucks announcement was totally gutted by the 3 to 4 years its going to take to roll that feature out accross Starbucks outlets. Can't apple just make some kindof black box that you turn on in store to enable this? Years of development and they can only roll it out to 100 outlets a month worldwide?

I'm curious, you quote Gates as saying of Jobs that, “He has to know that he can never win." Is Gates saying that Jobs still wants to overtake Microsoft?

Robert, this is an interesting perspective and I think you're probably right on with your very last statement: "....'He has to know he can't win'..... I don't think he knows that at all." Direct hit. Now, regarding the motivations and intentions of Steve Jobs, I don't see that we will understand that - even by asking Steve. The person that can truly & accurately explain their motivation is rare indeed. That's not to say you can't get a lot of perspective from what a public figure like Steve or Bill decides to share.

For whatever it's worth, I don't think the iPhone pricing was an exercise in ego, I think it was more of a missed bid that needed an over correction. I do think you're right that pretty quickly Steve / Apple knew what they might have to do and planned accordingly.

The statement "And Steve, having deliberately alienated his best customers, now gets a chance to woo them back. He has finally placed millions of people in the role of every key Apple employee — being alternately seduced and tormented."

The nearly twenty years I spent at Apple lets me say that you have hit the nail directly on the head.

Practically every Apple employee that I have known will agree with your statement.

Many will take it a step further and say that the only reason they stay at Apple is because they love the technology and enjoy working with some of the world's most loyal customers.

Just wait another month or so, and you will see another scripted Jobs revenue enhancement.

It is not a coincidence that new hardware is most often released at a different time than the operating system.

It isn't about marketing either, it is about money.

Introducing the new iMac a few months before the new OS lets Steve get another $129 tax out of them when they figure out that their latest and great computer doesn't have the latest operating system.

Just remember it is about the money, and Steve doing it just because he can.

I don't think the $100 rebate was necessary at all. It's a nice gesture, but early adopters of ANY technology know very well that constant developments, especially in electronics, mean that even before you buy the latest product there's already a successor planned for production. I bought the Playstation 2 that first week it came out in the UK and paid a hefty price tag for it - if I had waited just 2 months I would have paid significantly less, but as a gaming fan I wanted it straight away and was prepared to pay extra to do so. I paid a ton of money for my Nikon camera, and not 3 months later they have a better one on sale. That's the way it goes - we should appreciate constant improvements and technological breakthroughs instead of greedily demanding them all cheap and fast.

I will buy the iPhone the minute it hits the UK - yeah in 6 months there'll very likely be an updated version, just like any other mobile phone, computer, DVD player, microwave, washing machine, camera - and in any case, whatever the US and Europe come out with, the Japanese are already 5 years ahead of us!

I think Cringely is right on here, and mirrors my theory the day of the price break (my burning rage must have triggered some inert brain cells).

$599 was *never* the intended price. Apple likely intended to cut the price to $399 just before launch, to set off a buying A-bomb. But hype was already at a fever pitch and people were already lining up to buy at $599. So why not keep the price at $599 and build a perception of high value with the customers?

Then two months later you cut the price to what you had originally planned. A new buying frenzy erupts. After all, the iPhone is obviously *worth* $599 (per the mob scene on launch day), so at $399 it's an irresistible bargain!

Let the early adopters (like me) fume and scream for a day. Tell the media "Sorry, that's technology." You know, play it cool. Then issue a benevolent missive to the masses the following day and give them a $100 gift certificate to buy *more* Apple stuff. Apple's "good will" is a huge PR coup, loyal customers are even *more* loyal now, and iPhone sales start to accelerate.

A brilliant plan, no question.

You think the customers who flashed their iPhone around for 2 months and then suddenly started crying over the price cut are Apple's "best customers"? Is that a joke? The whining of these self-indulgent dipshits alone is proof that most of them had never bought an Apple product in their lives until the iPhone. If they had, they'd understand that Apple's product pipeline is fast and that early adoption has a price and a risk associated with it.

More generally Cringely, your theories are always full of giant holes. I mean, the "REAL" price? "Extra" profit? You should stop talking shit long enough to take a course in economics. Companies set prices to maximize profit and Apple is no different. Setting a high entry price for a new product and cutting it significantly after a few months is business as usual for all companies, and perhaps especially consumer electronics companies where products have short life cycles. The only thing remarkable about this price cut is that it was for the iPhone.

You think the customers who flashed their iPhone around for 2 months and then suddenly started crying over the price cut are Apple's "best customers"? Is that a joke? The whining of these self-indulgent dipshits alone is proof that most of them had never bought an Apple product in their lives until the iPhone. If they had, they'd understand that Apple's product pipeline is fast and that early adoption has a price and a risk associated with it.

More generally Cringely, your theories are always full of giant holes. I mean, the "REAL" price? "Extra" profit? You should stop talking shit long enough to take a course in economics. Companies set prices to maximize profit and Apple is no different. Setting a high entry price for a new product and cutting it significantly after a few months is business as usual for all companies, and perhaps especially consumer electronics companies where products have short life cycles. The only thing remarkable about this price cut is that it was for the iPhone.

Apple wanting to make money. Whatever next.

Technology going down in price. Who'da thought? How quaint is that. Guess we'll have to wait for the article on Sony, Microsoft and Nintendo with their consoles that constantly reduce in price.

Maybe Nokia will drop the price of the N95....

Oops. I got excited and broke the personal attack rules. Sorry. In anticipation that my comment will be deleted, here's a second try.

First, Apple's best customers know that it doesn't matter if a product is new, better and cheaper products are still often just around the corner. The people who are making the most noise about this are certainly not Apple's best customers.

Second, your price analysis makes no sense. All companies set prices to maximize profit. There is no "REAL" price and no "extra" profit. Apple is no different. Setting a high entry price and cutting it after a few months is nothing remarkable. The only thing remarkable about this price cut is that the product was the iPhone.

I've had my iPhone since day one and have been extremely happy with my $600 purchase. The recent $200 price cut stung a bit, but it really didn't bother me as that's part of the risk of early adoption of any new technology. The $100 rebate wasn't necessary, but it was a very smart move by Apple.

minxlj nails it...

$599 was *never* the intended price. Apple likely intended to cut the price to $399 just before launch, to set off a buying A-bomb. But hype was already at a fever pitch and people were already lining up to buy at $599. So why not keep the price at $599 and build a perception of high value with the customers?

Then two months later you cut the price to what you had originally planned. A new buying frenzy erupts. After all, the iPhone is obviously *worth* $599 (per the mob scene on launch day), so at $399 it's an irresistible bargain!

Let the early adopters (like me) fume and scream for a day. Tell the media "Sorry, that's technology." You know, play it cool. Then issue a benevolent missive to the masses the following day and give them a $100 gift certificate to buy *more* Apple stuff. Apple's "good will" is a huge PR coup, loyal customers are even *more* loyal now, and iPhone sales start to accelerate.

A brilliant plan, no question.

AGREED.

You don't think he cut prices in anticipation of the rumored gPhone coming in at $100?

I think Apple is just about to release a 16GB iPhone and therefore cut the price on their now flagship 8GB iPhone. They are just waiting for the Europe iPhone announcement the 25 of Sep to release this new 16GB iPhone, they might even throw in some 3G.
It doesn't make sense to me to have a 16GB iTouch iPod and not have a 16GB iPhone in the same format. It'll come soon.

Me again. Cringely, your psychoanalysis of Jobs is whacky. The only part that will bother him? As if he's going to read your article. LOL. And if you want to understand something about the reason for the price cut, read this:
http://bits.blogs.nytimes.com/2007/09/07/steve-jobs-speaks-the-truth-about-the-iphone-price-drop/index.html?ex=1346817600&en=dabd8bc62f0a6da0&ei=5088&partner=rssnyt&emc=rss

Interesting commentary to which I have only one observation. The open letter announcing the $100 rebate contains some awkward phrases ("iPhone is so far ahead of the competition [that what?], and now it will be affordable by [for]even more customers.") and (arguable) typographical errors that it feels thrown together in a rather hurried fashion - as if they were trying to get ahead of the issue and difuse it before it spins out of control. I suppose that could just be part of the consipiracy, but I guess I'm just not willing to be that paranoid. Of course, just because you're not paranoid doesn't mean they're not out to get you.

Apple got free publicity worth tens of millions and the iPhone, which was already the top-selling smartphone in the world, will now sell two million units by the end of the year, up from an estimated one million.

Actually, Apple's stated goal is 1 million iPhones by the end of September and 10 million by the end of 2008.

Hi Bob, thanks for this excellent article. I enjoyed it immensely and have posted to it from my blog. I just love the insight into this whole matter. Ahh I wish I could listen to Bill's interview :-)

Ross Dunn
CEO, StepForth Web Marketing Inc.

It is amazing the vitriol that is reserved for the pioneer who changes society for the better. People should be grateful that Steve Jobs single-handedly made the personal computer a reality for the world (Apple I & II), made the personal computer easy to use through adoption of graphical interface (Mac, and Windows that followed), and is now changing the state of the communication device (Ipod, IPhone). While we are all debating his quirks -- and he has several -- the history books will have long forgotten the overwhelming majority of us who did little like he to push the envelope.

I find the phrase "Apple keeps an undeserved $50 million..." (emphasis mine) an odd one. If they had just kept the price where it was and the perceived value of the product were unchanged, would you still have described this money as undeserved?

While I think Apple is entitled to all the money 500,000 people willingly handed over for their iPhones, I think that the timing of this price drop was imprudent. I've been burned by price drops and new product announcements in the past and cursed my luck (or lack of research), but doing this so soon after a release will likely cause potential buyers to hesitate in the future, waiting for a price drop that may never come.

I will comment on the only statement in this article that I can comment on and let the speculation upon speculation babble on.

The statement: ... Apple punished its most loyal users by dropping the price of an 8-gig iPhone from $599 to $399 less than three months after the product’s introduction, is classic Steve Jobs.

is simply hogwash and not true in any way. My wife and I bought two 8GB iPhones on day one because they were part of a strategic plan to reduce our telecom costs over the next year. By dropping some redundant lines and services which the iPhones replace we have saved about $400 already. More importantly, why should the opportunity of others to buy this phone cheaper "punish" me in any way? We've been recommending iPhones to everyone, I'm actually happy new buyers can get a nice deal. I'm already set. I'm happy to take these $100 rebates because that will drop my cost on OS X Leopard to practically zero for our older Macs, but I don't need it to feel I got my money's worth. And why is the press so frantic at dissing Apple? Does anyone expect an auto maker to refund the $3 grand extra a customer paid for a car just a day before the "year end blow out, cash back sale?" NO, of course not. Is the press on the case of the phone companies for offering sign-up rates to new customers that are much cheaper than existing customers pay? NO, and that is clearly a case of punishing existing customers.

To the whiners, and the pot stirring, headline jockeys, I say, Get a life!

What a fascinating (from a safe distance) man, though I wish he didn't have such a tight grip on a vital part of my ... errr ... infrastructure. I refuse to buy the iPhone because it doesn't meet my minimal needs, and I don't trust Jobs to ever pay attention to what I think I need (vs. what he thinks I need).

The optimistic/delusional spin on the price drop is that they're going to roll out iPhone 2 after Jan 2008 at the original price point -- and this way iPhone 1 buyers will be a bit less outraged ...

In regards to Bill's quote, it's clear that he and Jobs have very different definitions of "win." It's being the richest man in the world/being the dominant operating system v. driving/transforming our culture/being the best operating system. Neither is more valid than the other and each will have its own adherents.

You obviously need to take a basic business course, maybe then you'll understand the logic of the price drop.

Even without one though it's very obvious (Steve said it himself) that he wants to sell as many phones as possible this holiday season.

Everyone knows that the price on any electronic device will drop over time. No one is being punished. When you buy a product it's because you think that it is worth the price at that moment. It's clear that the iphone was.

Is it that you're still sore at Steve Jobs for blowing you off? Is it simply that you're an incredibly lame journalist (maybe that's why he didn't want you to interview him)? In any case this is one of the most ludicrous articles i've ever read, though you do reveal a lot about yourself. Not pretty...

I'm surprised more don't reference Steve's buddhist faith as an explanation for his behaviors. To me it explains his ability to walk to his own drummer and also what he considers a 'win'.

I consider his marketing strategy a Zen Koan. In this sense the price drop isn't a disappointment, but part of a story in which I have a role. I can't wait to see how it'll turn out!

I certainly didn't expect (but am pleased) that my wife's response to the rebate was, "So mine will cost less now?"

And isn't that a win-win-win for me, Steve, and my wife?

Sometimes vendettas can be powerful motivation that drives people to demonstrate their real or perceived prowess over other challengers. Jobs may be the most brilliant marketer or he may have been a bit surprised at the launch results, and decided he would flex a bit of creative influence. If the impetus for the purchase was to improve efficiency, and save on current technologies, the savings is irrelevant, the goal has been met. The salient point is not whether Jobs mesmerized naive consumers but whether they saw value in what they purchased.

Are you kidding? Those folks are going to use that $100 store credit next month to buy copies of Apple's newest OS, Leopard. In so doing Steve will increase his installed user base of Leopard faster than he would have without the credit. Think of it this way, be the first to buy and iPhone and get the next OS for $29. Now that's a deal!

I see Microsoft announced a price drop on the Zune. Is Bill giving Zune buyers a rebate? I don't think so. This is all good for Apple in so many ways.

Are you kidding? Those folks are going to use that $100 store credit next month to buy copies of Apple's newest OS, Leopard. In so doing Steve will increase his installed user base of Leopard faster than he would have without the credit. Think of it this way, be the first to buy and iPhone and get the next OS for $29. Now that's a deal!

I see Microsoft announced a price drop on the Zune. Is Bill giving Zune buyers a rebate? I don't think so. This is all good for Apple in so many ways.

The price cut is about kneecaping competitors ... they figured they were competing with a $599 phone, now Nokia, Palm, MS and RIM are looking at the iPhone being a $100 upsell from an 8 GB iPod Touch. A totally different game.

"most of his business moves are still in reaction to having been fired by Apple back in 1985."

And this entire article is still a reaction to you getting snubbed by Jobs in 1999....so whats the problem?

PEOPLE ARE COMPLAINING BECAUSE THE PRICE WAS REDUCED???

Duh, get ahold of your wits.

Does that mean that they would be happy if Apple increased the price by $200 instead? Let's all complain because price of gas has been declining. This is just plain crazy!

Do people really need to be told that the risk of early adoption is paying a premium? It's like telling someone that smoking may be hazardous to health- if they don't already know that then they're beyond all help.

Nothing has changed. People have always been paying a premium for new tech like DVD's, digital cameras, HiDef TVs, BluRay, HD DVD, etc.

The early adopters should be happy for the price reduction. It's a hedge against obsolescence. The wider the audience the less likely it will become a paperweight before its time. It means their purchase won't go the way of the betamax and those LP sized video disks of long ago. It means the manufacturer is committed to the long term viability of the product.

Those who are complaining over the price decrease should just get over it, get a life and accept responsibility for being an early adopter.

There are way too many whiners in this culture!

I imagine google could give Apple a run for the title of best managed technology

I suppose one question that emerges from this is what would Steve Jobs do if everyone simply sat around and waited for a few months until the price dropped and all the early adopters simply refused to adopt? Would we then have a situation of an irresistable force meeting an immovable object or would Steve Jobs have to give way to market demands and drop the price in order to attract the early adopters and then drop it some more to attract the rest of us?

An interesting conundrum...

Do any of you read newspapers or pay attention to the world outside of gadgets and toys? The U.S. economy is heading into recession, and retail sales of high-end "stuff" will likely tank next quarter. Apple's price cut is preemptive, because they see the sh_tstorm that's coming in a few months.

@Somebody:

Having visited Google recently, I can assure you that they pose no threat to Apple whatsoever for the "best managed" title. That's not to say that they won't continue to be successful, but it will be in spite of - not because of - the management.

It's really pathetic how people try making lemonade from lemons when it comes to just about anything Apple or Steve Jobs does.

Early adopters do what they do strictly because they want to be first. That is why we call them early adopters (not early adopters at a specific price point).

Let's focus on the product shall we. A WiFi iPod is genius. I can't wait to get one.

Steve and Apple are doing everything right by their current and future customers.

Keep it up.

Sorry that should have been "lemons from lemonade".

My bad.

Look, you bozos, you're just proving Carver's First Law of Retail: CUSTOMERS ARE STUPID!

EVERYTHING ELECTRONIC GOES DOWN IN PRICE EVENTUALLY! It's just how things work in the real world!

Yeah, there may be some who think they should have waited, but they'd have lost the two months of utility they got out of the iPhone.

These are probably the same people who think they're getting free money from the government when they get a tax refund.

Apple is the world's whipping post. It's either all Jobs' problem or Apple's problem or the brainwashed Mac faithful's problem. I guess it helps distract people's attention from the REAL problems in life. Even if you wanted to restrict yourself to technology, there are bigger problems in the field, like the fact that 100% of spam is promulgated by Windows systems and it's chocking our productivity.

Anyway, if I were Steve Jobs, I wouldn't give Cringely an interview either. Based on the self-important, wishful and speculative garbage Cringely produces, it would only help to line Cringely's pockets with money and it wouldn't enlighten anyone.

The only surprise here is that Apple/Jobs is even offering the ($100) coupons. He probably saved the company millions in legal fees from a class-action suit that would have ended up with the same scam, I mean solution: vouchers good at the company store.

Sky-hi prices and almost immediate price cuts are de rigeur for the cell phone business. Not a month goes by without Nextel sending me an ad with new "special" pricing on phones that were premium the month before. Apple has done nothing other than what every other phone maker/dealer has been doing for the last 15 years.

Amazingly, my five year-old Motorola keeps chugging along without having to sign a new service contract.

so?
You paid full price for that '07 car in January and now the exact same model is several thousand less? Why aren't you demanding a rebate from Ford or Mercedes?

When a department store cuts the price of that designer suit by 70% just two months after you bought one, do you go ballistic and cry foul?

You do know that in January there'll likely be a new model iphone that will be faster, shiner and even more capable at the same or lower price. Are you gonna lose it again?

The "true" price of an iPhone is whatever price which the buyer and seller mutually and voluntarily agree on. Nobody was marched into the Apple retail stores at the point of a machine gun and made to hand over their money. They willingly camped outside overnight in their thousands and then cried with happiness when they got the stupid thing out of its packaging.

So Apple got an "undeserved $50 million"? Haven't they been pouring investment into this phone over several years? Didn't they in fact delay Leopard as a result, delaying upgrade sales by half a year at huge cost? Unpicking the cosmic morality of where this money came from and went to is rather more difficult than it at first appears. If we actually look at the actions carried out by the individual people involved, nobody got "slapped around a bit" at all. On a cosmic scale of justice, perhaps there shouldn't be iPhones at all, but more kidney dialysis machines. This could take a while to get to the bottom of, so wake me up when you've straightened everyone else's entire lives out for them.

The early iPhone customers are presumably some of the richer people in America - why not write a polemic on behalf of starving Africans next time? Meanwhile, iPhones just became marginally more accessible to America's poor. What an immense moral tragedy, eh, Bob?

I really love ginjg's comment comparing buying a $600 electronics device to an avg. $25K new vehicle - Honda or Lexus used car at that. The logic goes like this...if I was a car buyer and bought a brand new car and 2 months later I am expected to be "happy" my car lost 33% of its value???....I don't think so. Maybe 2 years later especially if I bought a quality brand like Honda! ?

This argument still holds true if that buyer has a perception that buying Apple is like buying a Honda = higher quality that won't be sold 33% less in 2 months, then maybe that buyer's perception was wrong in the first place and they should not have bought an Apple! Choose a different analogy like say a discontinued piece of electronics and your argument might have more weight.

TROLLING EXERCISE for a little-read author.

You know NOTHING about business, and your purported knowledge of the "real" Steve Jobs is hyperbole at best and mythology at worst. Since when is selling a product for a price consumers are willing to pay regarded as "undeserved ... millions"? Undeserved millions pretty much applies to a PBS pledge drive, though

Since when is a price drop when sales have slowed a dastardly attack on the pocketbooks of early adopters who knew the price would be less and the features greater at any time after their purchase?

I liked on the video of Steve Jobs from your site, and I felt I was watching a TV Evangelist or a Tent Evangelist that my grandmother use to drag me to when I was little? If I remember I didn't care much for it then, and I don't care too much for it now, but you do have to give him credit he does know how to work a crowd.....

Bob
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I liked on the video of Steve Jobs from your site, and I felt I was watching a TV Evangelist or a Tent Evangelist that my grandmother use to drag me to when I was little? If I remember I didn't care much for it then, and I don't care too much for it now, but you do have to give him credit he does know how to work a crowd.....

I liked on the video of Steve Jobs from your site, and I felt I was watching a TV Evangelist or a Tent Evangelist that my grandmother use to drag me to when I was little? If I remember I didn't care much for it then, and I don't care too much for it now, but you do have to give him credit he does know how to work a crowd

Check out what early iPhone adopter (and web comic author) R Stevens posted today:

to the early adopting iphone whiners

I bought an iPhone this summer at full retail and you know what? I ain't mad at the price drop. Traveling and working is HARD, but my little phone made doing both a lot less stressful.

If you're among those of us getting $100 credits, please consider sending Steve/Apple a nice email- they acted pretty classy and I'm sure 99% of his inbox is "I HAET YUO APPEL IS TEH GAY DIE DIE". We internet people need every positive email we can get.

*****

From: dieselsweeties@mac.com

Subject: the iphone credit

Date: September 6, 2007 4:13 PM :: 9/6

To: sjobs@apple.com

Just saw your open letter on the Apple site- very classy!

I ordered my iPhone back in July and got 20+ days and 8,000+ miles of road trip and work convention usage out of it and it was worth every PENNY of the extra $200. (not that I'm going to turn down the $100 credit to get some accessories.)

Thanks! And rock on.

Whiners. They had an iPhone all summer for $200. You can't get a decent hotel room for that.

If you didn't think it was worth $600 then why did you buy it?

I am glad that Apple is going for marketshare--for ONCE.

If they had a cut rate Mac it would KILL all the lousy HP/Acer/Toshiba/Sony/Dell crap out there. But it would also cut into their own better hardware. So they don't. Lucky for the likes of HP, Dell etc... who do nothing but put together components no software no hardware no nothing (they design the cardboard box and logo mostly...

I liked on the video of Steve Jobs from your site, and I felt I was watching a TV Evangelist or a Tent Evangelist that my grandmother use to drag me to when I was little? If I remember I didn't care much for it then, and I don't care too much for it now, but you do have to give him credit he does know how to work a crowd

I have been an Apple user since 1985, and will continue to use their products, but...

It seems as if the strongest defenders of this Jobs/Apple pricing move appear to come from those who camped outside an Apple store waiting for a chance to buy an iPhone (and maybe resell it on eBay?) .

It is also very interesting to me that the new (?) iPod is the old iPhone without the phone; and that the (old?) iPhone is really a handheld computer running OS X that happens to also be a phone. Perhaps, too, it was just coincidence that Cingular was acquired by AT&T just in time to be the SP for iPhone customers (HA!).

Don't forget that Apple almost went into the toilet until Steve reinvented the company with all the "i" products that have us looking at technology as furniture/lifestyle appendages ...don't forget, too, that I/i is a pronoun -- "i" is Steve is Apple is "i". We all get to carry a piece of Steve around with us wherever we go.

As for Biil and Steve, after a certain point it might no longer be about money; Steve's won because he gets to define "cool."

It never ceases to amaze me how desperate people are to bash Apple- even cringly. Apple doesn't "deserve" profit?

Is cringly so ignorant of economics and high tech that he doesn't understand that when you sell more of something the cost per unit to manufacture goes down?

Jesus, it would have been better if apple had waited to drop prices? So they could get more "unearned" profits?

There is no way any rational person can fault apple for what they have done-- they didn't owe their customers a rebate but they gave one anyway. They didn't have to cut the price of the phone-- its selling like crazy, but they did anyway. And they didn't ahve to cut hte price of the phone that much-- but they did anyway.

And yet still people- mostly self appointed pundits like cringley are whining to high heaven .

Shame on you.

Its hard to have much sympathy for you when you dvorak jobs like that-- no wonder he cancelled the interview.

I mean ,if I were him, I wouldn't volunteer to be interviewed for a hit piece-- and it seems that the only article you coudl have about the relationship between jobs and gates (in mainstream media, anyway) is a hit piece on jobs. Hell, jobs does good things and you write hit pieces.

So, in the end this article is all you being petulant because jobs cancelled an interview-- you failed to put one over on him, and in a fit of petulance you ascribe to him the very reaction you have having--- still 8 years later.

Shameful.

"I liked on the video of Steve Jobs from your site, and I felt I was watching a TV Evangelist or a Tent Evangelist that my grandmother use to drag me to when I was little? If I remember I didn't care much for it then, and I don't care too much for it now, but you do have to give him credit he does know how to work a crowd"

Hey Pyke. Stop itting the Submit button.

Joe, Cringely wasn't criticizing Apple or Jobs per se, he was just pointing out that the price-cutting move by Jobs calculated down to the finest detail. He also pointed out that Jobs' motivations are not completely 'economics' or business; they're also personal. Finally, he suggests that Jobs is a master at working the corporation-consumer relationship to his own benefit. Jobs is in control and if you don't like that, then that's fine to Jobs too because you're still going to buy anyway.

The thing that I think is missing here is Job's humanity. Mac has been into music a long time, hence the iPod. Maybe, he just thinks that the mission is for people to enjoy themselves and money not being the main criteria. iPhone sounds cool, I was going to buy one even not being able to use the phone part, now...with the price reduction, the reality is a lot closer. Skip the phone, move system ten.

The popular iPod nano form factor, that is now replace by iPod nano "fatty", is too good to completely disappear. I suspect it returns next year as a low cost ($149-$199) mobile phone with limited functionality as compared to iPod nano "fatty".

price cut of iphone is most likely due to sales not meeting expectation. If they were selling so well, why cut $200? why not cut $100? Also, AT&T can't be happy with the release of ipod touch as it will deter many would be iphone customers from purchasing iphone. In the end, my sense is that, apple and Mr Jobs has reached the end of the gravy train that is ipod. Despite Mr Cringely's suggestion, this whole price-cut fiasco does not appear well thought out.

Seems to be a smart move to me. He gives a $100 retail gift that is only costing him pennies on the dollar wholesale. Look what you can get for $100 ,a nano maybe, plus the right to buy more music from Apple.

Wow...this was a phenomenal article. I am continually amazed at how Cringley marries the technology discussion with a dead-on look at the marketing and business savvy behind it.

I have a marketing background as well as technology one, and I can tell you Cringley's analysis is correct. One only has to look at the way all the toy companies are reacting to their toxic toys recall. So they get some goodwill brownie points for "doing the right thing" thought they are barely making a dent in actually fixing the problem they solved.

They offer to replace your toy, but know that the redemption numbers will be low because most people just throw the toys away rather than deal with having to fill out forms, mail it back and get a rebate to take back to the store. All that to replace a $9 toy? Riiiiiight.
As I business owner myself, I will admit it takes some cojones to bilk your best clients, but Mac-ophiles are a rabid bunch like no other!

The iPhone was the best selling smartphone on the planet this past month. The only "expectations" Apple has failed to meet were the inflated/made up ones posted by The Street "analysts".

As an Apple stockholder, and iPhone owner, I just am happy to own the stock. And the phone is pretty good too, although AT&T needs some work....
This has got to be one of the best Cringely columns that provides insight on both Steve and Bill.
I look forward to the inevitable VOweb client on the iPod Touch...maybe jahjah; a Palm to iPhone data transfer application would be nice, too.;)

When I think of Bill - I picture a guy in a gold lattice box; and when I think of Jobs, it is a ginsu knife slicing a tomato.....

Mmmm, some interesting points, but I think you may have given Jobs too much credit. Time will tell.

A factual mistake in your column. You wrote:

>>>Apple got free publicity worth tens of millions and the iPhone, which was already the top-selling smartphone in the world, will now sell two million units by the end of the year, up from an estimated one million

Apple projected that it would sell 1 million iphones by the end of September, not by the end of the year. A very aggressive target indeed.

Loved the article. It's well thought out and simple to follow even for a rookie like myself.

Keep up the good work.

Good article. I think you missed the boat when you discussed IBM. I felt you were saying what you wanted to be true, not what is. But here, I think you are right. I remember my first reation to the Apple Store- I was repelled by the snooty elegance. But you know what- the service is good, the genii actually know something, and if they aren't busy they will help you out without an appointment. Furthermore, the sales staff don't hassle you and they have stock on hand. Its kind of like the machines. They work.

Good article. I think you missed the boat when you discussed IBM. I felt you were saying what you wanted to be true, not what is. But here, I think you got it pretty right. I remember my first reation to the Apple Store- I was repelled by the snooty elegance. But you know what- the service is good, the genii actually know something, and if they aren't busy they will help you out without an appointment. Furthermore, the sales staff don't hassle you and they have stock on hand. Its kind of like the machines. They work.

Good article. I think you missed the boat when you discussed IBM. I felt you were saying what you wanted to be true, not what is. But here, I think you got it pretty right. I remember my first reaction to the Apple Store- I was repelled by the snooty elegance. But you know what- the service is good, the genii actually know something, and if they aren't busy they will help you out without an appointment. Furthermore, the sales staff don't hassle you and they have stock on hand. Its kind of like the machines. They work.

What was fasicnating was seeing how Jobs and Gates interacted with the attendees at the D5 Conference earlier this year. During lunch, a self-serve buffet held outdoors, Gates wandered through the crowd chatting with anyone that came up to him or he came in contact with. He was alone with no entourage. Jobs, between appearances, was nowhere to be seen.

And then watching each of them on stage later in the afternoon, Gates was friendly, smiling and confident. Jobs seemed stiff and uptight, almost like a bully. Between the two I'm sure Gates is the much happier person. Gates has proven himself, but Jobs needs to keep doing it. Perhaps that's why we get much better products from Apple.

I can't resist one more comment: about how amused I am at the stock market and the press. Is the allure of good ergonomics and good industrial design so hard to get? Sure, lots of other devices do the same things- but how many of them are you going to do on them. In this country the business model is slow down evolution and sell the dummies another versio of the same old pain in the butt they got last season. I agree- the iPhone is a move in the direction of a pocket full blown computer. Carry it around, find interfaces (monitors, etc) to connect (bluetooth+). Think tricorder, not Razor.

"In one respect the marketing message was a disaster -- because nobody is talking about the new iPods at all, it's all about the price cut. That $200 didn't just obscure the iTouch message, it completely obliterated it."

Exactly opposite. In the fifth year of iPod when news stations are likely not to trumpet another iPod refresh, all the local news stations last night led with teasers about how to get your money back if you'd bought an iPhone following the iPhone price cut. Thousands of articles have now been written about the iPhone price cut and the rebate. That's priceless.

Just getting their attention is key whether to go to an Apple Store or browse online. The iPhone is still the most expensive iPod and if it's too expensive, the customer will just move on down to the cheaper model. Perfect.

"Things that made me laugh:
1. People cheering because they get to pay $1 to make a ringtone out of a song they already own."

People cheered because everywhere (legally) else one looks, it costs more to get a ringtone.

As for Ken Chin-Purcell's "The arrogance of charging for using software to create a ring tone", he should realize that it is the arrogant content owners that are the ones who insist on charging again for ringtone (as separate from the song download). Apple seems to have pushed hard to get the price down to just 99 cents.

Because the people who are crazy enough to think
they can change the world,
Are the ones who do.

an earlier commenter said:

"I used to believe Steve until Newton, NeXT, and some of the other failures."

Steve had nothing to do with the Newton. That was born entirely under John Sculley and later, Michael Spindler's regimes -- two technocrats who didn't really have the vision to push the product where it needed to be, but it was groundbreaking enough to invent the entire PDA category. Its handwriting recognition lives on in Mac OS X's Ink, arguably considerably improved. (in fact, I'm a little surprised it didn't end up on the iPhone.)

The earlier poster also said:

"At NeXT he had an early lead that was wasted through sheer ego."

How so? He built a new company, new computers and a new OS from scratch and even managed to find a niche market (apparently the NSA bought tons of NeXT machines), and managed to get Apple to buy his company for over $400M and make him CEO again. And NeXTStep is basically what became OS X. It might not have knocked Microsoft off its (increasingly rusty) throne, but it shows that yes, in some lives, there certainly are second acts!

"While beautiful visually, it is still closed, proprietary, and as far from the mark as every other Unix distribution in that computers should be working for us but we are still mostly working for them simply trying to get them to work for us."

I have yet to see ANY Unix or Linux GUI that doesn't look like it was designed by a bunch of Babylon 5 fans with Geocities homepages (ooh, ironic diss)... Nautilus came close -- but only because it was designed by a bunch of ex-Apple people -- and the nerd market decided against it.

However, it seems that more people these days are trying OS X and liking it -- and trying Vista and wondering when their software will be compatible.

Granted, for a completely new-to-computers user, OS X and Windows are EQUALLY hard/easy to learn, but in practice, OS X gets out of your way and just lets you DO things. And I say so as a 20+ year user of multiple operating systems.

"If it wasn't for blind luck at Pixar he would still be a simple multi-millionaire. He still has great Vision but he's never had great Listening."

Blind luck? More like, he saw the potential at Pixar and decided to let the artists and storytellers run the place. Under George Lucas' tenure the place was not run very well. If there's one thing Jobs respects, it's artists and musicians, and he does listen to them and help create tools that 'get out of the way' and let people create. In releasing iWork, he's listening to people who want the functionality of Office, but are put off by its complexity and yes, the ugliness of the output. You get the idea.

I say this not as a blind Apple fanboy -- I'm more than a little cheesed off at my current 1st MacBook Pro which experienced the battery-swelling issue as well as a defective keyboard -- and yeah, Jobs certainly doesn't show his warm and fuzzy side in public -- but they didn't get to where they are now by blind luck and uncalculation.

Hey Bob...just curious a curious fan wondering what Bill Gates and Steve Jobs would say if they could say what they felt about Bob Cringley :) We pretty much KNOW what they think of each other. What they think of you. Now THAT would be interesting!