The Second Coming of the iPhone
To commemorate the launch of the second version of Apple's iPhone, I'd like to revisit my original iPhone article from one year ago. In that article I theorized why the iPhone would not succeed, at least not in its first incarnation, and why it would not be until its third version that it would be a runaway success.
So, one year on I still believe that it will be the third version that will cement the iPhone's position in the same way that the third version of the iPod led to the iPod becoming pervasive. The iPhone definitely has the potential to become as pervasive as the iPod, but it is still not ready.
When I look back at the specs I predicted would lead to ultimate success, Apple has only moved part of the way there with its second iPhone. If Apple is truly honest with people, this new iPhone really only serves to take the iPhone global (through the addition of 3G) and to enable more accurate location-enabled applications.
Those are really the only two new features of note on the phone. This new iPhone is really only a minor tweak, a repackaging of the existing iPhone so they can drop the price and have it better accepted globally, not the revolution that is truly necessary to finish the job of making the iPhone the number one mobile phone in the same that the iPod became the number one digital music player.
And what about the price drop?
Here is my theory on that. The price drop serves two purposes. The first is to hopefully increase sales outside of the USA where people looked at the original iPhone as an over-priced, under-powered toy (no 5MP video camera, no 3G, etc.). This offering fixes the 3G and price problems, but does not address the camera issue. This leads to the second purpose of the price drop. This "new" iPhone is to be the entry-level phone in a new expanded lineup that will come at Macworld in January, if not before. My leading thought is that the new iPhone Pro is likely to launch in October - just in time for the holiday shopping season.
The iPhone Pro will likely come with the specifications I listed in last year's article. Apple's strategy is brilliant really. By "launching" the low end phone before the high end phone, it is an easier sell, and in that October-January timeframe the carriers will be able to drop the price of the low end phone even more (to either $99 or even to FREE) and spread it even farther. The other reason to launch the low-end phone first is to give developers an incentive sooner to develop applications for the iPhone/iPod Touch platform sooner, which will serve to enhance the value of the iPhone Pro when it launches.
At the launch event for the iPhone Pro in October or January, Apple will be able to make a lot of noise about all of the applications that the new iPhone Pro will be able to take advantage of and they will be able to highlight a few new ones that take advantage of the capabilities unique to the iPhone Pro. The main new features of course will be a 5MP swivel video camera (or a front/rear facing camera combo) and a video iChat application for the iPhone Pro. This capability will then be introduced into a new low-end phone this time next year at the WWDC.
As a recap, here are the features that I predicted one year ago for the third version of the iPhone (noting those achieved), which I now believe will be the iPhone Pro that will launch in the October-January timeframe:
- 5-megapixel swivel camera (or paired with a 2-megapixel screen-side video-enabled lens)
- Video iChat capability (iChat AV)
- Next generation Bluetooth
- DONE - I think - Bluetooth 2.0 + EDR
- A slightly bigger screen (every millimeter counts) - if the bevel can be reduced
- UPDATE - Phone might get smaller instead
- 16gb or 32gb of flash memory
- Hopefully a faster 3G or WiMax network connection
- DONE with 2nd version
- 802.11n WiFi
- Faster processor with lower power needs
- Improved battery life
- Lower price - $299 or less
- 2nd version hit $199-299 - iPhone Pro will also be priced at $199-299 and v2 will drop in price to FREE-$99
So, who thinks I'm right?
Note: These are purely my opinions based on my understanding of technology and of strategy and are not based on any inside knowledge.
posted by Braden Kelley at 7:55 AM
7 Comments:
You say apple will drop the iphone Pro this fall, a mere Quarter after the into of the Iphone 2? Seems implausable given their previous timings between product releases. Also, how does your guess that the iphone 2 will become Free-99$ account for the fact that apple and ATT are taking large hits now, to be slowly recouped over the term of a 2 year contract? This "investment" by apple/ATT has been covered all over the net since the price announcement...
Interesting theory about what will make the iPhone a phenomenal success. You listed features that the iPhone should include that it currently doesn’t include. Apple has made some extremely strategic moves over the last year with the iPhone. While I agree that the features not yet addressed in iPhone 3G will make an extremely powerful phone, I believe Apple’s move to make the iPhone compatible with MS Exchange is one of the best moves the company has made. Businesses run on PCs. It is impressive to me that the iPhone already is the number 2 player in the Smart phone market after less than a year. Personally, the price drop is making me consider seriously the purchase of a iPhone sooner than I had planned. I think you may be on to something with the notion that the iPhone pro will come out in Oct – Jan. I don’t think it will come out until this time next year. I think the price drop alone and the compatibility with MS Exchange will create enough momentum and buzz that Apple probably should delay the 3rd generation until this time next year. If you are right and the iPhone Pro comes out in Oct-Jan, Apple may risk alienating people that are buying the iPhone 3G over the next few months. I think Apple should wait until this time next year to release the iPhone Pro.
Interesting theory about what will make the iPhone a phenomenal success. You listed features that the iPhone should include that it currently doesn’t include. Apple has made some extremely strategic moves over the last year with the iPhone. While I agree that the features not yet addressed in iPhone 3G will make an extremely powerful phone, I believe Apple’s move to make the iPhone compatible with MS Exchange is one of the best moves the company has made. Businesses run on PCs. It is impressive to me that the iPhone already is the number 2 player in the Smart phone market after less than a year. Personally, the price drop is making me consider seriously the purchase of a iPhone sooner than I had planned. I think you may be on to something with the notion that the iPhone pro will come out in Oct – Jan. I don’t think it will come out until this time next year. I think the price drop alone and the compatibility with MS Exchange will create enough momentum and buzz that Apple probably should delay the 3rd generation until this time next year. If you are right and the iPhone Pro comes out in Oct-Jan, Apple may risk alienating people that are buying the iPhone 3G over the next few months. I think Apple should wait until this time next year to release the iPhone Pro.
The new iPhone is already heavily subsidized - that's why we're seeing a price drop. AT&T is expected to take a hit of millions of dollars that should even out by about 2010. The odds of a carrier reducing the price to $99 or nothing is absurd and wouldn't make sense to anyone involved. They've already taken a huge marketshare in such a short time, and if you want to follow the path of the iPod, how long was it before they released the sub-100 dollar Shuffle? It took quite a while. There's no reason for Apple to flood the market with cheap iPhones while they're still a hot commodity.
I think the Bluetooth is exactly the same.
Also, I really don't think you have anything right at all, just a bit of semi-educated guessing, that's all. iPhone Pro? would be nice, but probably not until Macworld itself or maybe next year's WWDC. Why would Apple subject itself to massive worldwide angst - again - for dropping the price or introducing a NEW one so soon, a mere 3 months out? Doesn't make sense, although Jobs' original price drop after 3 months didn't make much sense either.
But it's easier to drop the price on an existing product than it is to bring out a whole NEW product in 3 months...
So... I think you're wrong and that we won't see a new iPhone until at least Macworld 2009, or more likely, WWDC 2009.
Rgds
SJ
I would like to disagree with three points you made.
Number one, the price drop is linked with the App store. Similiarly how the ipod is to attract users to the itunes music store, Apple is projecting that by selling more iphones, they will dramatically increase sales in the app store. The price drop comes with the trade off revenue sharing from monthly plan and Apple will use the app store to replace the lost future revenue.
Secondly, I do not agree with the features that you believe will be part of the "iPhone Pro." I do not think that apple will make a "slightly larger" screen for the phone. The cost trade off of separating the bulk buy potential of the display panels into two comparable sizes is not apple-like.
Lastly, an N wifi chip is not desirable feature in a cell phone. G wifi at 54 mbpsis already much faster than most internet connections (a full T1 is only 1.5 mbps). The advantage of N wifi is for file transfers and streaming video (think Apple TV and Time Capsule). At its top speed, N wireless is roughly half that of USB 2, and not desirable for syncing music of videos to an iphone or ipod. With the MobileMe (or enterprise) for users interested in wireless syncing of contacts/calendar/mail, I strongly disagree with N wireless being included in the next iphone.
In regards to the doubts about Apple doing this potentially a mere quarter after launching a phone, first I must reiterate that this is not a "new" phone, this more like a v1.1 phone released to take the iPhone global than a true v2.0 phone.
Second, there are definitely image risks and financial benefits for Apple to weigh. An October launch would allow the harvesting of holiday revenue. A January launch would be less likely to present the same image risks.
Next, the iPhone Pro when launched will come in at a higher price point than the iPhone 3G and will serve a different market segment. The iPhone 3G will be the iPhone for the rest of us (like the iBook and the iPod Nano) and the iPhone Pro will be for those people who want maximum capabilities, coolness, and status.
And in response to doubts that the price can and will go lower...
Apple will have the ability to drop their price to the carrier, and already in the UK the carrier O2 is willing to subsidize the phone all the way down to FREE.
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