Price Is Not The Issue -- Steve Jobs Had That Figured Out Decades Ago -- August 1, 2018

Wow, isn't this interesting? Watching television commercials and reading social media discussions it was my impression that Samsung was giving an Apple a run for its money with regard to smart phones. Everything I read and have read recently suggested that Samsung users were very, very happy with their phones. Now this, from The WSJ -- I never expected this: diverging fortunes: high prices propel Apple, sink Samsung.

Wow. From the linked article:

iPhone has navigated slowing smartphone market with new features and exclusive operating system while Galaxy S9 has largely failed to impress consumers.

Apple Inc. and Samsung Electronics Co. entered the second decade of the smartphone era by betting on super-high prices for their flagship products.

One year in, that strategy has energized Apple but sapped Samsung’s sales.

The Silicon Valley company on Tuesday announced a third consecutive quarter of record iPhone revenue as strong demand for its $999 iPhone X helped lift the average iPhone selling price 20% to $724 for the three months ended in June.

Just a day earlier, Samsung announced its smartphone profits cratered, as fewer buyers were willing to shell out the nearly $1,000 that the South Korean company wanted for its flagship Galaxy S9 handset. On average its smartphones sold for about $220 in the most recent quarter.

Apple has navigated the slowing market by leaning on its premium brand, new features and exclusive operating system to command record prices—even with little unit growth.

But Samsung’s higher prices didn’t deliver, as flagship Galaxy S9 sales slipped and unimpressed consumers turned to less expensive devices from Android rivals.

Adding insult to injury, Apple appeared to gain market share from Samsung. During the second quarter, the iPhone’s share rose to 12.1% from 11.8% a year earlier and Samsung slipped to 20.9% from 22.9%.

Meanwhile, China’s Huawei Technologies Co. for the first time surpassed Apple as the world’s second-largest smartphone maker, with 15.8% of the second-quarter market.

Much, much more at the link.

Comment: the price "thing."

First, the telephone companies are subsidizing the phones.

Second, folks amortize these expensive phones over two years, paying monthly rates.

Third, the monthly payments are "hidden" in the overall monthly statements -- remember how the Baby Boom generation paid for "renting" that ATT desk / wall phone. Ridiculously expensive and then it was simply being rented.

Fourth, Apple phones last a lot longer than two years. Parents hand them down to their older children, and eventually their older children hand them down to younger sibs. It turns out these high-price phones are amortized over several years.

And, fifth, people routinely spend $3 - $5 for Starbucks on a daily basis, x 20 days = $60 to $100/month. They're willing to spend that kind of money for their phones. Especially if the cost is hidden in their monthly statements.  [My total Sprint bill for two lines went from $85/month to $109/month when we replaced our 10-year-old Samsung flip phones for two brand new iPhone SEs. The difference was like going from the stone ages to the 21st century overnight; another $25 a month was not even noticed. People upgrading from the iPhone 8 to the iPhone X absorb the difference, hardly noticing it. Sort of like the proverbial frog sitting in water in a pot warming on the stove.