The iPhone has been around for over a decade and experienced some dramatic changes.
From an almost doubling in screen size, to a major reduction in thickness.
But perhaps the most undesirable change has been its increase in price.
The original iPhone, released in 2007, retailed for $500.
But that number has fluctuated quite a bit since then.
Reaching its lowest point in 2008 with the $200 iPhone 3G, and reaching a record high
of $1,100 in 2018 with the iPhone XS Max.
So in this video we’re going to explore the history of the iPhone’s price and find
out why it’s fluctuated so dramatically.
This is Greg with Apple Explained, and I want to thank Anker for sponsoring this video.
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So as I mentioned earlier, the original iPhone’s retail price was $500.
But this is actually misleading, since that amount only accounts for the device’s upfront
cost.
There was actually an additional fee smartphone users had to pay after the initial purchase.
And it was due to something called carrier subsides, which is an important concept to
understand when calculating the full cost of an iPhone.
And it worked like this: A carrier like AT&T would offer smartphones for hundreds of dollars
less than what they actually cost in order to attract new customers.
Then, they’d recoup their loss by tying those customers to a contract and charging
an additional fee to their monthly bill that went toward paying back the full price of
the phone.
For example, you’d buy an iPhone at an Apple Store for $500, then pay AT&T a $20 fee each
month which would go toward paying off the phone, on top of your monthly plan.
And because the iPhone came with a two year contract, you’d end up paying a total of
$480 in monthly fees in addition to the $500 you paid upfront.
Bringing the total cost of your iPhone to $980.
Now let’s say once your two year contract was over, you upgraded to the newest model.
Well, you’d pay another upfront price for the phone, and a new two year contract would
begin.
But let’s say you didn’t upgrade to the newest model, and continued using your iPhone
which was no longer under contract.
You might expect to stop paying that $20 monthly fee to AT&T, but that wasn’t the case.
Customers were obligated to continue paying that fee even though their contracts had expired
and AT&T had recouped the full price of the phone.
That meant the total cost of your iPhone would be $1,220 after three years, and $1,460 after
four years.
Now that may sound like a crazy concept today, but two year contracts and carrier subsidies
were standard business practice at the time.
And that’s exactly why it isn’t fair to compare the full $700 price of an iPhone 11
to the $200 retail price of the iPhone 3G.
But there’s more to the iPhone’s price than carrier subsidies.
Because although Apple stopped selling subsidized iPhones in 2015 with the the 6S and 6S Plus,
there has still been a substantial increase in the iPhone’s price since then.
In fact, the iPhone 7 was the last flagship model to have a $650 price tag.
In 2017, the iPhone 8 started at $700, while the iPhone X, the true flagship model of that
year, started at $1,000.
So what happened to cause the price of an iPhone to jump from $650 in 2016, to $1,000
in 2017?
Well, it was due to a couple factors.
First, Apple needed to make more money from each iPhone they sold.
Because in 2015 the company began experiencing slowing hardware sales across almost every
product category.
And while you could say, well slowing sales isn’t a big deal since they’re still making
a ton of money.
You’d be forgetting the primary goal of any private company: To achieve revenue growth
each and every year.
Because if Apple isn’t making more money than they did last year, then shareholders,
people who invest in the company, won’t see any returns on their investment.
That means people stop buying Apple stock, their share price drops, and they become less
valuable.
So in the face of slowing hardware sales, Apple was forced to charge more for their
products so that they could still achieve revenue growth, even if they weren’t achieving
growth in units sold.
But they couldn’t simply increase the iPhone’s price by $350 dollars in a year.
So instead, Apple introduced several new iPhone models that ranged in price.
First, was the iPhone 8 at $700, then the 8 Plus as $800, and finally the X at $1,000.
But every single model was more expensive than $650, and the iPhone 8 was suspiciously
similar to the 7.
Which was similar to the 6s, which was similar to the 6.
Apple had used virtually the same iPhone design for four generations, and ended up charging
a premium for it with the 8 in order to generate more revenue.
This also gave customers an incentive to spend the extra $300 for the more dramatically improved
iPhone X.
So considering how expensive iPhones have become, it’s caused many people to find
other ways to save money.
Like for example, lowering the cost of their monthly phone bill with Ting.
They charge you based on how much data you use instead of one flat rate.
You can calculate how much you’d save by entering the amount of texts, call minutes,
and data you typically use per month into Ting’s bill estimator.
Most people end up saving almost 20% which really adds up over the lifetime of your device.
Ting’s service is powered by Sprint, T-Mobile, and Verizon’s 4G LTE networks, so you’ll
always have a fast, reliable connection.
What’s also great is how easy it is to switch.
80% of phones are already compatible with Ting so all you’d need to do is switch out
your SIM card, and you can start enjoying a lower monthly phone bill!
So whether you’re buying the new iPhone SE, or you’re not planning on upgrading
anytime soon, you can bring your phone to Ting and get a $25 service credit by going
to ae.ting.com.
You can find that link in the description.
Now, Tim Cook was confronted with a question about the iPhone X’s premium price in an
interview with ABC.
When asked, “Don’t you find the price tag for the iPhone X out of reach for the
average American?”
Cook replied, “Well, it’s a value price actually, for the technology that you’re
getting.”
Which, in layman terms, means he thinks customers are going to want the iPhone X’s new features
so badly that they’ll pay a lot more for them.
Cook went on to say, “Most people are now paying for phones over long periods of time,
and so very few people will pay the price tag of the phone initially.”
Which still doesn’t answer the question of why Apple needed to increase the flagship
iPhone’s price by more than 50% in one year.
He was simply explaining why he thinks customers will still buy it despite the $1,000 price.
And he was right.
The iPhone X went on to become the world’s bestselling smartphone in 2018, and helped
Apple achieve their most profitable quarter in history, generating $88.3 billion in the
first quarter of 2018.
Their risky pricing strategy paid off, and competitors took note.
With the following iPhone release in fall 2018, Apple pushed the envelope even further.
They were successful in raising the average iPhone selling price from $618 in 2017 to
$793 in 2018, but wouldn’t it be great to break that $800 threshold?
Well, Apple gave it their best shot with the release of the iPhone XR, XS, and XS Max.
The entry level XR started at $750, which was a $50 increase over the iPhone 8 a year
earlier.
The XS had the same $1,000 price as the X, but Apple decided to introduce a new model
called the XS Max which had a larger display and sold for $1,100.
Breaking the record set by the X of being the most expensive iPhone ever, and helping
to raise the average selling price of the iPhone to well over $800 in 2019.
So up to this point in the iPhone’s history, we’ve only seen its price tag increase.
But in 2019, Apple took a dramatically different approach to their iPhone pricing strategy.
For the first time ever, they decreased the iPhone’s price from $750 to $700 with the
iPhone 11.
While the premium 11 Pro and 11 Pro Max retained the same price tags as the XS and XS Max.
But the $50 discount wasn’t the only thing that made the iPhone 11 so appealing.
It was also its impressive feature set.
You see, when Apple released the iPhone 8 and X in 2017, there were dramatic differences
between the two models.
The iPhone 8 didn’t have an edge-to-edge OLED display, it didn’t have Face ID, it
didn’t have the dual camera system, and it didn’t even have the same amount of RAM
as the X.
So for the $300 savings, iPhone 8 customers were giving up a lot of features.
Now, this dramatic disparity between models was narrowed with the iPhone XR’s release
since it did feature an edge-to-edge display with Face ID, but it’s price was $50 more
than the 8.
And it still didn’t have a dual camera system or the same amount of RAM as the XS.
But consider the iPhone 11, it not only received a $50 decrease which put its price on par
with the iPhone 8 from two years earlier, but it also received almost all of the features
of the premium 11 Pro models.
It has a dual camera system with an ultra-wide angle lens, it has spacial audio, it has the
same 4GB of RAM as the 11 Pro models with the same durable ion-strengthened glass.
The only compromises you’re making with the 11 is the LCD display rather than OLED,
an aluminum frame rather than stainless steel, and no telephoto camera lens which means no
2x optical zoom.
But most customers are happy to make these minor tradeoffs considering the $300 savings
over the 11 Pro.
And despite analysts predicting a decline in iPhone sales due to customers waiting for
a 5G model.
Sales actually jumped 8% compared to the first quarter of 2019 and helped Apple grow their
overall revenue 9% to $91.8 billion.
Outperforming even the most optimistic analyst expectations.
And that growth was largely fueled by the sales success of the iPhone 11, proving that
Apple had struck a perfect balance between price and premium features.
Now as we look forward to a new iPhone models this fall, it’s likely that Apple will stick
with their current pricing strategy and continue to offer as many features as possible in their
entry level model since it’s proven to be such a success.
Alright guys don’t forget to like and subscribe, and I’ll see you in the next video.