updated 12:25 pm EDT, Fri September 7, 2007
Cringely on iPhone credit
Apple CEO Steve Jobs dropped the iPhone's price by $200 to make a buck and bolster his ego, according to PBS.org columnist Robert Cringely. The price cut -- which Jobs announced on Wednesday at the end of Apple's special event in San Francisco less than three months after the iPhone's initial launch -- was "a carefully and tightly scripted exercise in marketing and ego gratification," the columnist said. "It wasn't an accident. It wasn't a thoughtless mistake. [...] In the mind of Steve Jobs the entire incident had no downside, none at all, which is yet another reason why he is not like you or me," said Cringely, who worked in Jobs' garage during some of Apple's earliest days. "Steve does things like this because he can. It reaffirms his iron grip over both Apple and Apple's customers. It's a lot about ego and a little about business, though with Steve Jobs they are hard to differentiate."
"Apple introduced the iPhone at $599 to milk the early adopters and somewhat limit demand then dropped the price to $399 (the REAL price) to stimulate demand now that the product is a critical success and relatively bug-free. At least 500,000 iPhones went out at the old price, which means Apple made $100 million in extra profit."
The columnist insists that Apple would have left it at that if no customers had complained, but that Jobs expected complaints and had an answer waiting in the form of a $100 Apple store credit.
"This was no knee-jerk reaction, either. It was already there just waiting if needed."
Jobs knows that some customers will never use their store credit, according to Cringely, and that many iPhone owners who purchased the device from an AT&T store who do use it will have to make their first-ever trip to an Apple Store. Further, most purchases making use of the $100 credit will add up to much more than the credit itself, netting Apple more profits in the end.
"So Apple still comes out $75 million ahead, which is important to Steve Jobs."
Cringely also says Apple's chief makes most of his business decisions as reactions to the company board firing him back in 1985, when company shareholders settled instead for marketing professional John Sculley. Sculley tried his hand at marketing strategies as Apple's leader, but Jobs ultimately regained his position as CEO in 1997.
"In the 22 years since that humiliation, Jobs has devoted himself to proving: 1) that he can deliver the numbers (and does he -- Apple is the best-managed computer company on Earth), and; 2) that he is a better marketer than Sculley, the supposed marketing genius," Cringely explained. [corrected]