Last week Apple co-founder and general all-round-nice-guy Steve Wozniak made headlines via a Reddit AMA in which he was quoted as criticizing the Apple Watch for taking the company into “the jewelry market”.
Typed Woz:
I worry a little bit about – I mean I love my Apple
Watch, but – it’s taken us into a jewelry market where you’re going to
buy a watch between $500 or $1100 based on how important you think you
are as a person. The only difference is the band in all those watches.
Twenty watches from $500 to $1100. The band’s the only difference? Well
this isn’t the company that Apple was originally, or the company that
really changed the world a lot. So it might be moving, but you’ve got to
follow, you know. You’ve got to follow the paths of where the markets
are.
This week
Apple made a few headlines of its own, including its announcement of a
$50 price cut of said smartwatch. The new entry level price for picking up Apple’s wearable is $299, for the smaller sized Sports model.
Does that price drop mean Apple has realized it has an expensive dud
on its hands and is desperately trying to entice buyers to think
otherwise? In a word, no.
The
Apple Watch remains the category leader in the smartwatch space.
And while the long-term sustainability of ‘lifestyle wearables’ (if I
can call them that) remains a matter for debate at this still-nascent
stage, it’s fair to say an early price-cut for an Apple device is not
unexpected, given the company’s past pricing strategies.
It’s also smart business if you make money off selling an
interconnected ecosystem of devices and accessories, as indeed Apple
does.
On the price-cut front, the original iPod, for example, cost some
$400 at launch in fall 2001. In the following years the price of
individual iPod models pretty steadily declined, even as new models
launched, enabling Apple to reinstate higher price points for the latest
top-of-the-line device. Today you can pick up an iPod nano for ~$150
(or a screenless shuffle for ~$49) — a far cry from the $400 original.
And yet these (relatively) cheap and cheerful iPods are still apparently
worth Apple’s while to make and sell.
The original iPhone also had a price haircut of $200 mere months
after launch back in 2007 — yet that device went on to be a rip-roaring
sales success, and continues to be the core engine of Apple’s business
even today. So a price-cut, in and of itself, doesn’t tell us very much.
Interestingly, though, in the case of the Apple Watch, Apple has not
reduced the prices of the additional Watch bands it sells. So while
Apple’s core wearable is now a little cheaper, the Apple-made Watch
accessories are holding steady.
CEO Tim Cook yesterday made a point of noting that about a third of
Apple Watch users “regularly” change their bands. Which means that
around a third of its wearable owners have shelled out for (or been
gifted) a second (or additional) band — expanding the profit margin
Apple can make from the wearables.
