No more Apple Tax: The curious state of Apple’s product pricing

“As Apple pushes deeper into luxury brand territory, the company is making its products more accessible through lower pricing,” Neil Cybart writes for Above Avalon. “At $159, Apple is underpricing AirPods. The same can be said for Apple Watch, priced at $269. In just ten years, we have moved from the ‘Apple Tax’ days, when Apple was accused of pricing products artificially high, to Apple products being priced below the competition. Apple is using its balance sheet and scale to grab new users, and in the process, redefine luxury.”

“After using AirPods for the past three months, one takeaway relates to pricing. It is clear that Apple is underpricing AirPods,” Cybart writes. “AirPods are not just any pair of headphones. The combination of accelerometers, optical sensors, Apple’s new W1 chip, and a well-designed charging case, position AirPods as Apple’s second wearables product. AirPods are computers for your ears.”

“It is very difficult to find a pair of wireless headphones priced lower than AirPods… Many wireless headphone companies have been forced to cut pricing in an attempt to better compete with AirPods. Even after price cuts, competitors are still unable to come close to AirPods pricing,” Cybart writes. “A similar pricing dynamic is found with Apple Watch… At $269, Apple Watch Series 1 is one of lowest-priced smartwatches worth buying in the marketplace.”

Cybart writes, “There are three theories to explain Apple’s AirPods and Apple Watch pricing strategy…”

Much more in the full article – highly recommendedhere.

MacDailyNews Take: It’s very exciting to see Apple, in some cases, shoot for the entire market! Pity Apple’s would-be competitors in these markets. They don’t stand a chance.

SEE ALSO:
Apple Inc., the new leader in wearables – March 6, 2017
Apple Watch sales hit all-time high while Fitbit stumbles – March 2, 2017
The Apple Watch is winning – March 2, 2017
Apple Watch had massive holiday quarter; took nearly 80% share of total smartwatch revenue – February 10, 2017
The Apple Watch ‘WOW’ moment – February 3, 2017
Apple Watch dominates with 63% of worldwide smartwatch market – February 2, 2017
Apple smashes Street; iPhone, Services, Mac and Apple Watch set all-time records – January 31, 2017
Apple Watch has blood on its hands: Pebble is dead – December 7, 2016

28 Comments

    1. Shut up. Even if you’re counting from the announcement date its been 6 months. If you cared so much you would have pre-ordered in December and had them in Jan. So again, shut up.

  1. Actually, for the newest MacBook Pro, I’d say the “Apple Tax” is back big time.

    This is in part driven by the fact that the MacBook Pro can’t be upgraded after the fact. I did buy a new 15″ Pro, but was severely tempted by the RAZER BLADE STEALTH that was very comparable and, in some aspects, better than the 15″ Pro. I would have saved over $1000 (Canadian) and had a computer that I could upgrade (memory, SSD) later on.

    1. Same goes for the Alienware 15. Though, I’ll have to compare it to the Razer Blade Stealth. But it looks like a nice laptop. Upgradeable RAM, Solid State Drive, hard drive (optional), and possibly wireless. The base model has a 2.5 GHz quad-core i7-7300HQ and a GTX 1050 Ti 2GB, 1TB hard drive, and 8 GB of RAM. It starts at $1,200. It also has all the ports you want: Ethernet, dedicated power, Thunderbolt 3, USB Type-A, HDMI, Mini Displayport and also a port for Dell’s Alienware Graphics Accelerator. If you add a 512GB Solid State Drive, bump up the RAM to 16GB, bump up the wireless card, bump up the battery, change the 60 Hz screen to a 120 Hz screen, and change the GPU to the 1060, then it’s around $2,000. But if you just add in a Solid State Drive, and double the RAM from the stock 8GB up to 16GB, it’s $1,600. The high-end configuration starts out at $2,050. It has a GTX 1070, a i7-7820HK, upgraded battery (from low-end), and comes with a 16GB of RAM, a 256 Solid State Drive and a 1TB hard drive. If you bump up the Solid State Drive to 512 GB, that raises the price to 2,350. If you bump up the RAM to 32GB, that brings it up to $2,550. Even at those prices, I think it’s still cheaper than Apple, and I’ve heard Alienware is pretty overpriced. But I’ll have to check out the Razer Stealth.

      1. Just checked it out. Nice specs. Prices aren’t that different from Alienware. I’d probably go with Alienware. The specs seem more flexible (Configure-to-Order), and the lighting is pretty cool. Believe it or not, you can actually control those lights in Linux, with a Python program called PyAlienFx.

      2. One thing to note is that the upgraded GPUs are *desktop* class cards, not mobile ones. Meaning it’s got better graphics than an upgraded 27″ iMac, never mind a MBP.

        Even the second-lowest Alienware 15 comes with a 6GB GTX 1060 (released July 2016), which will blow out of the water the iMac’s 4GB AMD Radeon R9 M395X, a GPU released almost 2 years ago.

        1. That’s awesome! Just goes to show how far behind Apple’s gotten. This is the kind of thing which lures people to the dark side (Windows) or whatever color you’d say the Linux side is. Linux isn’t nearly as nice as OS X, but it lets you use pretty much whatever hardware you want, which is very important to me.

          1. The option exists to make it a Hackintosh too, although the lack macOS support for these desktop-class GPUs may be one of the stumbling blocks to running on these machines.

  2. the author of the article gives a few reasons why he thinks the pricing of Airpods and Watch is so low,

    me, I think the BIGGER reason is that both products are the ONLY hardware PRODUCTS made under Tim Cook’s reign.

    He will do ANYTHING to push sales numbers up of these items to shore up his ‘innovation’ creds and reduce the ‘fire T.C’ chorus’. Tim Cook will never let Watch or Airpods fail — no matter how slim the profits or how much money he has to throw at it, look at the number of advertisements he runs for them, dozens for Watch and I’ve seen the dancing guy Airpods ads on numerous TV shows versus the NEAR ZERO Mac ads (only one Mac ad — the bulb ad — in the last few years) in spite of the fact Macs make near twice the revenues of Watch, accessories, Apple TV, Beats etc (the other products category in the financials) COMBINED.

    (think about it: he is spending WAY WAY WAY! LESS marketing money on the BIGGER by FAR money maker Macs vs the others because Airpods etc are his babies).

    TC is also spending TONS on another of his pet projects Apple Music. (Planet of the Apps have big stars as hosts and a $10 million dollar prize. Shoot a fraction of that and you can design a TOWER MAC PRO — people are building faster than Cylinders machines in their basements.)

    NOTE: 95% or more of Apple’s current revenues must be coming from products MADE UNDER STEVE JOBS like iPhone,Mac, iPad.

    As an investor I’m all for Watch, Airpods , new products success but we have to look at this dispassionately.
    For the good of the company T.C has get off his ’emotional’ running of the company , he seems so afraid because of attacks on his ‘innovation cred’ as argued that he’s focused so much on Watch, Airpods etc he’s neglecting CORE FUNDAMENTALS OF APPLE.

    fix the Mac (WTF with 4 year no updates, no drop in price, NO NEWS — so that pros can PLAN — on several Mac models?) , Cloud, Siri, the horrible ITunes as iOS hub, the incredible sagging Education Market, the useless TV remote etc
    —-

    aapl investor, I have for personal use: Mac Pros, 12.9 iPad Pro, iPhone 7 plus, MBP (so I’m not an apple hater!).

    1. correction:

      “me, I think the BIGGER reason is that both products are the ONLY hardware PRODUCTS made under Tim Cook’s reign.”

      more accurately would be .. “ONLY hardware PRODUCTS completely designed under Tim Cook’s reign”

      the others are like MacBooks are incremental increases from products created under Jobs.

      ——-
      btw NOTE: if Airpods are Cheap, Tim Cook tough has not dropped the price of the Mac Pro since 2013 !! The base model still has a puny 256 GB drive ! The GPU is several generations behind… yet the price is the same !

      (see how he neglects certain segments of the market? this reinforces my argument that he selectively helps Airpods, Watch by low pricing etc because they are his babies. )

        1. You at least spell Kool-Aid correctly. Refreshing, in an arena that plays so dizzingly fast and loose with facts. Thank god for trademarks, our final arbiter of accuracy.

        2. just calling something Kool-Aid with ZERO rebuttal arguments is better than my facts laden post?

          it’s interesting when flamers run out of arguments from pulpy brains they regress into often used vacuous sound bites ‘Kool-Aid’ incapable of even thinking of original insults and without even understanding their copied insult.

          You n using ‘conspiracy’ probably hearing it from movies or something when even if I’m wrong I never conjectured a ‘conspiracy’, T.C is doing stuff out in the open, he’s exercising his CEO prerogatives openly , he doesn’t have to ‘conspire’ (definition : “make secret plans jointly to commit an unlawful or harmful act.” ) with anybody…

        3. also Kingmei,

          if all my criticisms of Apple leadership in the last several months are wrong as you are saying (note : I’ve also praised them for things like the good iPhone, good hardware quality of the iPad Pro etc) then why are we getting:

          problems with the things I’ve mentioned : Macs not updated (some form 2013) , Siri, Cloud, home appliance integration, iTunes as iOS hub, collapse of education market with basically no response, Apple TV content and remote, months to fix simple issues like Wifi, lack of supply for practically every product launch … ?

          (there are also issues with stock and finances which I won’t go into)
          ETC.

          so if stuff I’m saying is wrong why are things like the above happening? It can’t be ‘lack of resources’ right as SVPs are making Christmas trees (” specially milled ‘Apple Paper’, edged with silver ” ) , furniture for charities, Coffee Table books, Planet of the Apps, ‘sex filled romp of Dr. Dre’s Life mini series’, sponsoring fashion shows like the Met Gala , worrying about ridiculous tolerances of the ‘iPhone standard’ Campus ( so much so that the architects complain that with the tolerances Apple designers want doors would stick when they expand… ) ? etc etc.

          So with all the problems and seemingly plenty of time and resources (100,000 staff, billions in the bank from Jobs created products mostly and SVPs dong all kinds of hobby projects ) they are either suffering issues due to reasons I’ve postulated (lack of focus and leadership) OR they are ‘just plain incompetent and stupid’.

          (I don’t think there is any other reason available).

          now , it is hard for me to believe the latter (incompetence and stupidity) as Jobs hired most of them and they have shown brilliance in the past and still do now when they are focused (the Watch is a good product and I’ve praised the hardware of the iPhone, iPad etc above ) so I think I’m pretty accurate in my criticisms of Apple leadership being too often not focused correctly (e.g Macs, Apple TV etc ) .

  3. Ha!
    I didn’t realize MDN was into comedy routines now.No Apple Tax? I suppose if you don’t look at any of the Macs and limit yourself to looking only at accessories, maybe. I don’t know of any better example of the “Apple Tax” than the current (if you can even call it that now!) Mac Pro or MacBook Pro.

  4. Since both the AirPods and Apple Watch are more or less peripheral devices to primarily the iPhone, experiencing no Apple Tax on them is ignoring the Apple Tax on the iPhone to make them work as they should.

  5. The Apple Tax is blindingly obvious when you have to buy an iPhone or MacBook charger, as I did a few months ago. The prices are absurd.

    And, on the issue of “luxury”, there is nothing “luxury” about an IT product. Apple tried, and failed dismally, with the ridiculous gold Apple Watch. Haha. It was just as thick and ugly as the normal watch, but gold.

    Luxury is found in Europe. A Zegna suit; anything from a Milanese fashion house; something in glass from the ’30’s by Rene Lalique; a night at the Paris Opera; a 4-door Maserati; a gelato in Firenze; a weekend in a posh London hotel; anything in cashmere.

    Plastic earphones? Definitely not luxury. Good tech perhaps but not luxury by any reasonable definition.

    With the gold Apple Watch Apple were seemingly trying to win over footballers and rap artists: people with more money than taste. It didn’t work and they gave up. The invisible retail face of Apple is so invisible I’ve forgotten her name. And the stores look the same to me. Smart, even elegant, but not luxury. Thank goodness.

    1. Exactly! The competition builds in things like USB-A, Ethernet, HDMI, and SD card slots for free, so you don’t need adapters. Sure, the competition usually ships with Windows, but that’s not much of an issue since you can always install a Linux distribution, or if you really want to, you can install OS X and all the hacks you’ll need to make it work. Ubuntu Gnome is pretty neat, especially with all of the extensions.

  6. The Apple tax is visible every time one compares a comparable or better desktop or laptop to an Apple desktop or laptop. (For hardware that is.)

    I tend to look at it like I pay more for the privilege of not having to run Windows.

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