2007/06/04

The iPhone Is Doomed - Here's Why

So now we have the release date. On June 29th, Apple will release the gadget that should be the coolest thing since the original iPod...but isn't. And ironically it's not the iPhone's fault. Nope! Apple has entered into a deal with AT&T that will make the iPhone the greatest "also-ran" of Internet-enabled gadgets ever brought to market.

"But why Kvatch? Why are you so down on the iPhone?"

Well my friends, let me tell you...it breaks my heart. You see, the iPhone is the device I've waited for all my short life. It's the perfect synthesis of the two gadgets that this frog really wants in one perfectly designed "lust until you bust" package: My digital assistant and my digital music player. The fact that the iPhone can also make calls is a bonus...I guess. But I wouldn't really use it for that because what I really want is that beautiful, high-resolution screen; that "now it's vertical...whoops...now it's horizontal" switching. I want that video/music player that also happens to be my calendar, my email, my stock watcher, and my Internet browser. I want WiFi and Bluetooth. I want all of those really cool Apple widgets that make PalmOS look like cuneiform on a stone tablet.

But alas, it is not to be. Because what I don't want is a mandatory f*cking 2-year service agreement with AT&T. I don't give a sh*t about making calls, and I don't want to switch from my current provider (T-Mobile). So sorry Apple. The iPhone may be the coolest thing since sliced bread, but I don't think that you're gonna sell as many as you hope, and the sad thing is that it could have been so sweet.

23 Comments:

You may not want to make a deal with the Devil, but there's a lot of people willing to sell their soul for the latest gadget, I think it'll do just fine (unfortunately).
You hit the nail on the head; being tied to AT&T is a dealbreaker for me too. I just got away from them because their coverage was so spotty.
I agree. Apple is shooting themself in the foot with the AT&T deal. Hopefully, they will add more providers. I have T-Mobile, too, and I'd love to have an iPhone.
Hey I am on ATT already...

Now if I just had $600 for the phone....

CRAP!

No it's sad really.
Lew... I don't know the only model with a decent amount of memory is $600.00--pretty pricey when you add phone contract on top.

JM... I don't even want the phone capabilities. I just want the WiFi, Skype, and a mic.
Lizzy... Moreover, the deal with AT&T is exclusive for 5 years. In other words, no other provider, no unlocked iPhones...at all.

Crackpot... I'm not a huge T-Mobile fan, but since I'm not interested in this thing as a phone, I wouldn't switch just to get it.
ipod made a phone? yawn.
ipod and at&t joining forces to conquer the world? why don't they install a toilet into the gadget? i'll be truly tempted then.
Being the only human on earth to not own an Ipod, I have to laugh at the desire of everyone who wants the little gadget to the tune of six hundred dollars. Do you know how many pairs of shoes or purses that much money could buy? :)
PT... For me it's , "Apple made Palm...yeah! Oh wait...it's a phone? UGGGH" :-)

why don't they install a toilet into the gadget?

Raffi... Would you call that the "iPotty"?
I'd call it an iCrap.

Bummer about AT&T. Oh well, life goes on.
PoP... I love my iPod, but $600.00 *IS* really pricey. I'd prefer just an evolutionary step...maybe the WiFi and the widgets as the next revision, but alas...

Praguetwin... Makes sense that they chose a GSM provider--easier to distribute worldwide, but why limit to just AT&T?
Did cell phone coverage somehow get worse when Cingular became AT&T?
I was very happy with my cell phone that I had from AT&T until they became Cingular and the fucks tried to force me into changing my plan. Now I use Verizon and am much happier and pay a lot less.
Nvisiblewmn... The Cingular/AT&T dance is a complex one, my dear. First (at least on the West Coast) Cingular and T-Mobile share the same network--actually Cingular leases their network to T-Mobile. But AT&T Wireless has a brand-spanking new GSM network with call quality and services that people can only dream of. Cingular covets said network and buys AT&T Wireless to get it. T-Mobile is stuck with the old creaky network. Then...AT&T thinks that perhaps they made a mistake in selling the wireless unit to Cingular, and buys the whole shebang back, Cingular and all.

So...depending on when you joined...it's the same network. Nothing's changed.

Now Captain Corky has avoided the whole thing by switching to a CDMA network. of course, he'll never see an iPhone in his lifetime.
At some point, Apple will realize they are not selling enough iphones and break it contract with ATT for what would seem like large sums of money, but is really chump change for the 900 Lb Gorilla that is Apple...they are not sitting on billions of dollars of cash reserve for no reason, after all.

Even so, it's not going to be the same splash as the ipod for that very reason - it's not open source....which has been the biggest downfall of apple products for a very long time...their stuff only runs on apple stuff.

One day, they will license their gear the way MS does and they will knock M$ off their high horse doing it...no?
Too many things to comment about. One, I don't like multi-taskers. I have a cell phone, a couple of computers and a "home entertainment center," I know I broke my own rule, but it has seperate components.

I tried a PDA, but it's more trouble than it's worth. Post'ts are the way to go.

As to AT&T, broken into Baby Bells, two of which, SBC (formerly Southwestern Bell?) and Bellsouth (formerly Southern Bell) spinning their cellphone operations into Cingular and SBC, the latter buying what was left over of AT&T's former monopoly and renaming it's self as AT&T and then merging with Bellsouth? That might be a sentence and I think it is an accurate history. My take, Cingular has it's good and bad moments, I've experienced them for years. I'm sure I'll get more of the same with "The New AT&T."
Even so, it's not going to be the same splash as the ipod for that very reason - it's not open source....which has been the biggest downfall of apple products for a very long time...their stuff only runs on apple stuff.

That may be changing. Take a lookat this story on the Macworld site that says that Steve Jobs announced that Apple is now probably going to break a long standing tradition and allow 3rd party apps to run on the phone. Many software developers are chomping at the bit to work with the unit, and this should be good news to people who buy the phone.

In the meantime, the only way Apple is going to change its service provider policy is if enough people refuse to buy the phone in the first place, or complain vociferously enough to force Apples' hand in the matter.

My over two year old LG with Verizon keeps chugging away in the meantime.

And Patricia, that makes TWO of us. TUA bought one for his wife, but I'll bet he swipes it all the time!
Apple will realize they are not selling enough iphones and break it contract with ATT

WS... I hope so. Though what I'd really prefer is an "unlocked" no phone service iPhone. All I really need is a bluetooth headset and 802.11, and I'm ready to make calls (Skype).

Dave, I like multi-tasking devices when it's the right devices: The ones that I carry in my briefcase.

But for calls, I'm with Haris. I like a simple phone. My Sony/Ericson is over three years old and I love it.
iPhone doomed? Because of its contract?

Not likely. If sales are slow, changes will be made. If the contract is the barrier, it will change.

Meanwhile, as noted by others, this product is just one among many in the capitalist paradise of America. If customers are unimpressed, they will seek alternatives, of which there are many.

P.S. This is not a product of interest to me. But I do hope Apple is successful in its endeavors.
Not likely. If sales are slow, changes will be made. If the contract is the barrier, it will change.

no_slappz... Though I agree that the contract ultimately won't be a barrier, it's a shame that a device that could be such a winner as a Internet appliance, will be hobbled by a requirement that you pay for it like it's a phone. Think of that contract as $400 yearly surchage.
kvatch, you seem to have forgotten that introductory prices of electronic gadgets start high and slope downward at a steep pitch once sales pick up.

Clearly the two-year contract is a gambit to offset the subsidy given to buyers of the iPhone itself.
Kvatch, the following are thoughts on iPhones from a financial site:

Can Apple’s iPhone sell 45 million iPods in calendar year 2009 and take 7 percent of North America handset share?

That’s what Piper Jaffray analyst Gene Munster is arguing in a research note Thursday. Wall Street analysts have been floating big predictions on iPhone shipments for days. Apple has projected 10 million units in calendar 2008 and analysts expect more.

Instead of pooh-poohing the prediction, let’s here Munster tell it:

“We believe Apple can sell 45 million iPhones in CY09. While this may seem like a bold prediction, we believe a number in this area is not as far of a reach as some may think. Specifically, to reach iPhone units of 45 million, we believe the product will have 7.0% handset market share in North America and 2.8% handset market share in the rest of the world (ROW).

We assume Street pricing on iPhone will have dropped to $338 by CY09 from $542 in CY07. Additionally, it is critical to keep in mind that the iPhone will be a combo device (iPod and mobile handset), which will attract more than just a mobile phone customer. We believe we have factored cannibalization of iPod from iPhone into our model by lowering iPod growth rates from 35%+ year over year growth in FY07 (and prior years) to 10%-15% year over year in FY08 and FY09.”

That’s a mouthful, but the bottom line is that 45 million units is a stretch. Munster got input from Mike Walkley, Piper Jaffray’s wireless analyst, before making the call. According to Walkley, Munster’s prediction is a stretch, but feasible based on the Motorola RAZR. The RAZR sold 65 million units in 2006 after launching in mid-2004.

How did the RAZR do it? For starters, price points are key. Once the RAZR fell way below $300 units surged.

There are two problems with this comparison. For one, Motorola’s RAZR launch was a global launch. Apple is starting out with one carrier in the U.S. To make Munster’s numbers work anywhere from 12 percent to 15 percent of AT&T customers would have to be iPhone users.

Meanwhile, the iPhone may not hit the sub-$300 mark. Apple doesn’t cut prices with reckless abandon–unless rival carriers dent iPhone demand with other devices. Lower priced iPhones are likely to emerge, but sales depend on whether consumers see the iPhone as an iPod replacement or a smartphone. BusinessWeek reports that the debate won’t be settled until 2009.


Munster is banking that the iPhone will benefit from the iPod replacement cycle, which runs about 2 to 3 years. He assumes that 15 percent of iPod users will look to the iPhone as a replacement. Since Apple is likely to ship 100 million iPods in 2006 and 2007, 15 million iPhone units may just be iPod replacements.

Munster adds:

“If we assume 7.5 million of these are North America customers and 7.5 million are international, Apple needs only add 5.8 million iPhone buyers, on top of iPod replacement buyers, in North America and 24.3 million internationally. We believe CY09 will be the year in which we see the biggest growth in adoption, given the iPod adoption rate spiked in years 3-4 following release (growing units > 400%). We think iPhone adoption will spike between years 2-3, given greater awareness for MP3 players and music-enabled handsets. We are modeling for year over year iPhone unit growth of 223% from CY08 to CY09.”

Now Apple could hit Munster’s projections, but the iPhone seems to be setting up for a perceived failure. Apple has a hit on its hands, but with expectations being ratcheted up daily it will be nearly impossible to make Wall Street–and probably the tech press–happy. Let’s say Apple sells 30 million iPhones in 2009. That’s a big deal–unless expectations are calling for 45 million iPhones.

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