“Verizon Communication’s decision to nix subsidies for smartphones may benefit Apple Inc. more than rival Android smartphone manufacturers,” Jennifer Booton reports for MarketWatch.
Apple’s iPhones “tend to attract users in higher income brackets, and recent survey data from Morgan Stanley suggests those wealthier customers are more willing to upgrade at the phone’s full, non-subsidized price,” Booton reports. “Morgan Stanley, using data from AlphaWise, estimates that Apple holds a 53% share of the market for consumers with income higher than $100,000.”
“Last year, NPD Group published data that was even more lopsided. It had Apple accounting for 65% of U.S. smartphone sales among consumers who earned more than $100,000. Samsung’s largest income demographic was below $30,000,” Booton reports. “In total, 74% of current Apple users across all income classes surveyed by Morgan Stanley in November and December 2014, shortly after the iPhone 6 launch, said they planned to upgrade within the next two years, compared with just 50% of non-Apple users. This, said Morgan Stanley analyst Katy Huberty, makes Apple far less impacted than the rest of the market should installment plans start to weigh more broadly on upgrade rates…”
MacDailyNews Take: The chickens are coming home to roost.
Apple’s flagship iPhone 6 PlusAndroid is pushed to users who are, in general:
a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar offers.
Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskates just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle-building powders or grease monkey overalls.
Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong.
Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.
iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the “Hee Haw” demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth. – MacDailyNews, November 26, 2012
—
“All men are created equal.”
Well, not when it comes to users of smartphones and tablets…
The bottom line: Those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.
The quality of the customer matters. A lot.
Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.
And now many more people won’t hesitate to upgrade yearly not having a two year subsidized plan. Which is good for Apple. I’m sure we ain’t seen nothin’ yet but Wall Street will simply call it the end of then line as usual, until it isn’t, again.
The ecosystem around iPhone has developed, among other reasons, because the accessory industry was able to make products that can work for two generations of iPhones. This has been going on since 2008 (iPhone 3G), and it worked very well.
The only disadvantage of keeping the body (and model numbers) and updating the internal hardware (and adding S) was for the negligible number of users who buy latest iPhones because of what others think, and having the newest model look exactly like the last year’s model would throw them into a tizzy, forcing some of them to even go (temporarily) to Samsung, just to that everyone around them would know they have the latest possible model phone…
On Verizon’s web site, seems like Verizon is still “subsidizing” the cost, as a user choice. You can choose to pay for the phone monthly, for 24 months, with NO initial cost (like $199 for iPhone 6 16GB). Or pay the full price upfront. 24 times the monthly payment amount is equal to the full price (to within a few cents).
The main difference is that Verizon collects back the “subsidy” (or maybe call it an “interest-free two-year loan”) with monthly payments that are clearly separate from the monthly wireless plan cost. When 24 months is done, only the wireless plan cost continues. This is much better for customers, who may want to keep using the phone longer than two years, it it’s still working fine for them. If they break the phone before 24 months (or decide to upgrade sooner), they still need to “pay off the loan.”
There are two ways in which this is better for customer.
First, after the phone is paid off, the monthly bill goes down.
Second, perhaps more important, is that the “subsidy” part (which is, in this case, interest-free loan) is NOT taxed as wireless service.
When carriers bundled everything together, including subsidy for the phone, that monthly bill was taxed as ‘wireless service’, which in some states comes close (if not even above) 20%. The subsidy part of that bill, over two years, is about $450-500, on top of which one pays $100 in “wireless service” tax. When the “subsidy” is backed out of the bill and charged separately, it isn’t taxed as wireless service. Instead, you pay regular retail tax for the full price of the phone when you first get it (between $30 – 50, depending on state), and the monthly installments aren’t taxed.
In other words, if you are on a “subsidised” plan, you are needlessly donating at least $50 for each phone you get to the American government. While the government might appreciate the free gift, I’m pretty sure you aren’t exactly thrilled about it…
That’s a great point. And the THIRD benefit is that Verizon is footing the bill (the “loan” amount) for the ENTIRE cost of the iPhone. With the “old” way, the customer paid $199 (or more) for the latest iPhone up front. So the initial expense (per iPhone) for Verizon is significantly higher with the “new” way, and MUCH lower for the customer.
Signed up with AT&T for the next plan about 18 months ago. Key thing to watch out for is to make sure you understand the plan terms. Next 24 actually requires 26 or 28 payments.
If you decide to upgrade earlier, AT&T will buy back your old phone. Note that will not be as good as you get from Gazelle. You can also pay off the remainder and keep the old phone.
I definitely like the new approach. If phones are held for 3 years instead of 2 then the savings is significant (~1/3).
This time around I will probably get the 6S but could also hold hold for another 6 months to get the 7.
It is called purchasing on an installment plan. This is what it should have been called all along. It is Very Good for consumers that the device purchase is totally separate from the service purchase.
In most industries, this sort of naked bundling to bamboozle purchasers into paying more for the bundle (ie, device + service) than they would otherwise be willing to pay, is technically illegal.
Disagree. No contract means no financial incentive to upgrade after two years. I wouldn’t be at all surprised if many iPhone sixes last 3 or 4 years rather than 2.
We’ve seen what happened to upgrade sales for iPads when there are no two-year contracts: people wait to upgrade. Sometimes a long time.
And now many more people won’t hesitate to upgrade yearly not having a two year subsidized plan. Which is good for Apple. I’m sure we ain’t seen nothin’ yet but Wall Street will simply call it the end of then line as usual, until it isn’t, again.
Let’s get rid of S releases, then. Whole new iPhones every year.
That would be a major mistake.
The ecosystem around iPhone has developed, among other reasons, because the accessory industry was able to make products that can work for two generations of iPhones. This has been going on since 2008 (iPhone 3G), and it worked very well.
The only disadvantage of keeping the body (and model numbers) and updating the internal hardware (and adding S) was for the negligible number of users who buy latest iPhones because of what others think, and having the newest model look exactly like the last year’s model would throw them into a tizzy, forcing some of them to even go (temporarily) to Samsung, just to that everyone around them would know they have the latest possible model phone…
I am still trying to figure out how this will work. My boss just got his new iPhone, off contract and got to keep his unlimited plan.
Does Next overlay on top of what you have?
Really my inclination is to keep unlimited, until I die.
On Verizon’s web site, seems like Verizon is still “subsidizing” the cost, as a user choice. You can choose to pay for the phone monthly, for 24 months, with NO initial cost (like $199 for iPhone 6 16GB). Or pay the full price upfront. 24 times the monthly payment amount is equal to the full price (to within a few cents).
The main difference is that Verizon collects back the “subsidy” (or maybe call it an “interest-free two-year loan”) with monthly payments that are clearly separate from the monthly wireless plan cost. When 24 months is done, only the wireless plan cost continues. This is much better for customers, who may want to keep using the phone longer than two years, it it’s still working fine for them. If they break the phone before 24 months (or decide to upgrade sooner), they still need to “pay off the loan.”
There are two ways in which this is better for customer.
First, after the phone is paid off, the monthly bill goes down.
Second, perhaps more important, is that the “subsidy” part (which is, in this case, interest-free loan) is NOT taxed as wireless service.
When carriers bundled everything together, including subsidy for the phone, that monthly bill was taxed as ‘wireless service’, which in some states comes close (if not even above) 20%. The subsidy part of that bill, over two years, is about $450-500, on top of which one pays $100 in “wireless service” tax. When the “subsidy” is backed out of the bill and charged separately, it isn’t taxed as wireless service. Instead, you pay regular retail tax for the full price of the phone when you first get it (between $30 – 50, depending on state), and the monthly installments aren’t taxed.
In other words, if you are on a “subsidised” plan, you are needlessly donating at least $50 for each phone you get to the American government. While the government might appreciate the free gift, I’m pretty sure you aren’t exactly thrilled about it…
That’s a great point. And the THIRD benefit is that Verizon is footing the bill (the “loan” amount) for the ENTIRE cost of the iPhone. With the “old” way, the customer paid $199 (or more) for the latest iPhone up front. So the initial expense (per iPhone) for Verizon is significantly higher with the “new” way, and MUCH lower for the customer.
And, by the way, T-Mobile has been doing this for over two years now.
Signed up with AT&T for the next plan about 18 months ago. Key thing to watch out for is to make sure you understand the plan terms. Next 24 actually requires 26 or 28 payments.
If you decide to upgrade earlier, AT&T will buy back your old phone. Note that will not be as good as you get from Gazelle. You can also pay off the remainder and keep the old phone.
I definitely like the new approach. If phones are held for 3 years instead of 2 then the savings is significant (~1/3).
This time around I will probably get the 6S but could also hold hold for another 6 months to get the 7.
It is called purchasing on an installment plan. This is what it should have been called all along. It is Very Good for consumers that the device purchase is totally separate from the service purchase.
In most industries, this sort of naked bundling to bamboozle purchasers into paying more for the bundle (ie, device + service) than they would otherwise be willing to pay, is technically illegal.
Disagree. No contract means no financial incentive to upgrade after two years. I wouldn’t be at all surprised if many iPhone sixes last 3 or 4 years rather than 2.
We’ve seen what happened to upgrade sales for iPads when there are no two-year contracts: people wait to upgrade. Sometimes a long time.
This is so freaking obvious, I almost sh3t my pants laughing at the quality of this post.
But, that’s MDN!
I read this sight for the quality of the articles, just like rading “Playboy” is for the articles.
This sight gets me laughing somhasrdmi could jusmfscskin’ sh3t myself