Hey guys, it’s Greg with Apple Explained.
And in this video we’re going to explore some reasons why Apple products are getting
so expensive.
Now you might remember a similar video I made called “Why iPhones Are Getting So Expensive,”
but I felt the need to make a video covering the overall trend of price hikes that Apple
has been implementing in almost every product category, especially after the recent Apple
Event in New York City.
So this video topic was the first place winner of last week’s voting poll, and if you didn’t
get to vote, make sure you’re subscribed.
That way the voting polls will show up right in your mobile activity feed and you can let
me know which video you’d like to see next.
Now Apple has almost always had a reputation of pricing their products quite a bit higher
than their competition, and this premium cost is commonly referred to as the Apple Tax.
And it can be traced as far back as the original iPod in 2001, which had a starting price of
$399, or about $570 adjusted for inflation.
And when compared to other hard drive-based music players that sold for around $200, the
iPod’s price was staggering.
And when the iPhone was released in 2007, one of its biggest criticisms was its price,
coming in at $499, or about $600 today, and that was with a two-year contract.
And don’t forget the MacBook Air, which debuted with a $1,800 price tag.
And that got you just 64GB of solid state storage.
So the Apple tax is nothing new to longtime Apple users, but there has been an unusual
trend upward in almost all Apple’s product categories over the past few years.
And I think there’s more to that story than the Apple tax can account for.
So let’s start from the beginning.
When did Apple’s products first begin creeping up in price for no apparent reason?
Well, the answer is debatable, but I think it all started with Apple’s keyboard, mouse,
and trackpad accessories in 2015.
All increasing in price for the first time without a clear reason.
Apple’s Magic Mouse 2 cost 15% more than its predecessor, the Magic Keyboard cost 44%
more, and the Magic Trackpad 2 cost almost 90% more, jumping from $69 to $129.
And keep in mind that the prices of Apple’s mouse and keyboard had remained steady for
many generations.
So those big price bumps caused quite a bit of backlash from Apple users who felt the
company was aggressively nickel and dime-ing them without much added value to their products.
And if that wasn’t bad enough, Apple raised the prices of their Mac accessories once again,
for no reason other than their new space gray color.
So at that point, Apple set a precedent that they wouldn’t hesitate to substantially
increase the prices of their products just because they thought customers would still
pay for them.
And that’s where it seemed Apple began testing the price boundaries of different products,
getting a feel for just how much their customers were willing to pay.
And 2015 was also the year Apple released the $10,000 gold Apple Watch.
Which only contained about 300-dollars-worth of gold by weight.
But what’s more bothersome are the recent price hikes of base model products.
Because sure, you could buy an aluminum Apple Watch for $349, so the $10,000 gold model
didn’t really matter to everyday consumers.
But the base model Apple Watch price being raised $70 from $329 to $399 is what really
begins to price out a significant amount of customers.
And that’s exactly what happened with the series 4 Apple Watch.
And it’s the direction most of Apple’s products are going.
At their Special Event in New York City, Apple announced some impressive updates to the Mac
Mini, MacBook Air, iPad Pro, and Apple Pencil.
But every single update was accompanied by a price hike.
The entry level Mac mini used to cost $499, but now it starts at $799, which is kind’ve
incredible considering it doesn’t include a display, keyboard, or mouse.
And the MacBook Air’s base price jumped from $999 to $1,199.
Which may be more of a justified increase because of all it’s new features like the
retina display, but it’s a significant price hike nonetheless.
But I think the iPad Pro had the most shocking cost increase, raising 23% from $649 to $799.
And that isn’t even considering the extra $50 expense tacked onto higher capacity models.
So that means the highest capacity 12.9” Cellular iPad Pro model now costs $1,899.
Easily breaking the $2,000 mark with taxes and the optional AppleCare warranty.
And you aren’t just spending more for the iPad Pro itself, but you’re spending more
for its accessories too.
A similar situation to the one in 2015 with Mac accessories.
Because the Apple Pencil now costs $129, up from $99.
And the iPad’s Smart Keyboard Folio Case has increased from $159 to $179.
But perhaps one of the most surprising decisions by Apple was to continue selling the now outdated
10.5” iPad Pro for the same $649 price.
Instead of dropping the price like they’ve done in the past.
And leads me to my next point.
How does this pricing behavior by Apple compare to how they’ve priced new devices in the
past?
Because if you think back to the iPods and even early iPhones and iPads, you’ll remember
Apple very rarely increased the price of new generation models.
If anything, they tried to decrease the price.
As I mentioned earlier in the video, the original iPod debuted at $399, and when the last iPod
classic model was discontinued in 2014, it cost just $249.
That’s a $150 drop over a thirteen year period.
And the MacBook Air’s price has been declining since its release in 2008, but this year’s
model marked the first price hike to the Air in its 10 year history.
And you can see this pattern in almost all of Apple’s product lines.
The iPhone debuted at $499 and now the supposed “budget” model starts at $749, with the
true flagship model starting at $1,000, significantly more than its introductory price in 2007.
But I should mention the 2007 iPhone was subsidized so its true price was actually higher than
$499, but still not as much as today’s iPhones.
And when it comes to the iPad, it’s price has soared from $499 in 2010, to $799 in 2018.
So it’s clear Apple’s raising the price of almost all of their products in an unprecedented
way, but the big question is why?
And if you try researching this you’ll find all kinds of theories, ranging from high Chinese
tariffs, to severe US economic inflation.
But I think the real answer is much simpler.
The reality is Apple has been facing sales slowdowns across many of their product categories.
The iPhone, iPad, and Mac are reaching maximum market saturation.
Which means there isn’t much market left to expand into.
And this has result in product sales peaking in 2015, and slowing down ever since.
In fact, Apple just announced they’d no longer tell investors and analysts how many
iPhones, iPads or Macs they sell.
Instead, they’ll report how much revenue they generate from each product category.
This of course implies that even Apple isn’t confident they’ll be able to achieve the
type of sales numbers they had in previous years.
And this poses a problem.
Because Apple is a for-profit company with shareholders that expect healthy growth every
single year.
So if you’re Apple and product sales are slowing down, how do you still ensure revenue
growth?
Well, you raise the prices of your existing products.
That way you don’t need to sell as many units since you’re making more from each
sale.
And that’s exactly what Apple has been doing over the last few years.
Now this obviously could have some unintended consequences.
Because if Apple raises prices too much, they could drive users to other more affordable
platforms like Android or Windows.
But Apple has an advantage here.
Because most Apple users don’t have just one Apple product.
They have several.
And that means they’re invested in an ecosystem that is not only pricey to escape since you’d
have to replace multiple devices, but really inconvenient.
Imagine trying to switch to Android after having an iPhone, Apple Watch, and iPad.
You’d need a new smartphone, smart watch, and tablet.
And they likely won’t work together in the same way as iOS.
So most people probably wouldn’t even know where to begin when it comes to accomplishing
the same tasks they’re used to in Apple’s ecosystem.
So if you look at Apple’s product lineup as a business plan, you begin to understand
how it’s designed to attract customers and prevent them from leaving.
Now I don’t mean to suggest Apple is the only company doing this, virtually every tech
company is trying to create their own ecosystem to attract new customers.
But I think Apple is the most effective at it because they offer such user friendly products
that integrate with each other seamlessly.
But in order for this business plan to work in Apple’s favor, it has to work in the
users favor too.
Because to convince customers to pay more for their products, they need to offer even
more value in return.
If not, users will likely become frustrated by the ever increasing prices and leave the
Apple ecosystem en mass.
So what’s Apple doing to give their customers even more for their money?
Well, they’re including some cutting edge technology in their products that’s impossible
to find anywhere else.
For example, there isn’t any tablet on the market that can compete with the iPad Pro’s
multi-directional face ID, low latency & touch-enabled Apple Pencil, powerful A12X Bionic chip, and
beautiful true tone display with a 120Hz refresh rate.
And because there isn’t anything else like it on the market, Apple is able to charge
more than they ever have before.
And if you think about it, that’s pretty much what happened with the MacBook Air, original
iPod and iPhone, and the first Retina MacBook Pro that was really pricey at its release.
They were products that offered something unique that wasn’t yet available from any
other company.
And although this may not apply to all of Apple’s higher priced products, it is an
important factor that’s keeping Apple users loyal to the company.
And there are rumors that Apple’s creating their own Netflix-like streaming service,
but the exciting part is that the service will be free for all Apple users.
Which will add yet another incentive to buy into and remain in Apple’s ecosystem.
But there’s one more thing Apple has been focused on in the past few years to differentiate
themselves from their competition.
And that is privacy.
Most of us know that Apple has always taken a hardline stance on privacy ever since the
early days, but Tim Cook is promoting that stance more than ever before.
And I think it’s because Apple wants current and potential customers to know that they
aren’t profiting off their data.
Which not only builds trust with users, but helps justify the higher price of their hardware.
So it’s become painfully obvious that Apple is testing how high they can price their products
without driving customers away, mainly due to slowing sales of their existing products.
And although many users appear to be accepting today’s price hikes, who knows how far Apple
might go to continue revenue growth year after year.
All we can do is hope we don’t get priced out of the Apple ecosystem or forced to buy
outdated technology for the sake of Apple’s bottom line.
So those are some reasons why Apple products are getting so expensive, and if you want
to vote for the next video topic, don’t forget to subscribe.
Thanks for watching, and I’ll see you next time.