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.
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