Apple's New $399 8GB iPhone Price a Low Blow to Early Adopters? Give Us a Break!

[9/6] [Updated twice]Apple's New $399 8GB iPhone Price a Low Blow to Early Adopters? Give Us a Break!

Along with the new iPods, new iTunes functionality and new iPhone functionality announced yesterday at Apple's Special Event, Apple drastically lowered the price of the 8GB iPhone from $599 to $399. Many early adopters of the iPhone are not too happy about the $200 price reduction just over 2 months after the iPhone hit the market. Those with the 4GB iPhone are even less enthralled that their $499 investment has been obsolesced. Is this a low blow to early adopters? We don't think so, at least not one delivered purposefully, but bear us out.

Technology gets cheaper and better as time marches on and everyone expected that this would also happen to the iPhone, right? Well, most would agree perhaps early next year but not in just two months on the market. Still, for $2.99-$18.18 per day we have had the use of an insanely great and still unmatched communication device at our beck and call for 11 to 67 days longer than anyone else in the world (Apple provides price protection for up to 10 days).

We thought the iPhones were worth $499 and $599 when we bought them, right? So what's the beef? The beef is really that Apple deviated from its customary practice with regard to pricing. Apple's general custom is that over time one gets more for the same price or a slightly lower one but not the same for a much lower price, especially not in a very short period of time. Apple's customary pricing has supported a pleasantly lucrative resale market for early adopters to continue to upgrade to the latest technology for relatively little cash beyond the initial investment. It also has allowed Apple to keep margins relatively high.

So why did Apple do this? Certainly not to deliver purposefully a low blow to early adopters, the very people that Apple needs to sustain its leading-edge technology introductions. We can only think that Apple did it out of desperation, i.e. iPhones have not been selling near as well as Apple believes it needs.

Is there any evidence of flagging iPhone sales? After all, didn't iSuppi just report that the iPhone had out-sold all other smartphones in July, a report that was ballyhooed virtually everywhere? That report followed Apple's third quarter financial report that 270,000 iPhones were sold in a day and a half at the end of June? And didn't Apple CEO Steve Jobs announce during the Special Event that Apple was on track to sell 1 million iPhones by the end of September? The answer is yes to all of these, of course. But iSuppli also reported that Apple sold only 220,000 iPhones in all of July indicating strongly slowing iPhone sales. If iSuppli's report is accurate, without some dramatic change, Apple would fall well short of its 1 million sales goal by the end of September and, worse for those of us who bought one, badly petering out sales might doom the iPhone altogether.

We think that the necessary dramatic change was the $200 price drop which Steve Jobs used to claim that Apple is on track to meet its 1 million goal. Apple had no other choice. It had miscalculated the market and was not yet ready to provide enough more in technology to keep the same price and to meet its goal.

So if you are feeling screwed by Apple and recently bought an iPhone, at least an 8GB model, within the last 10 days, go get your $200 refund in accordance with Apple's policy. If it was bought within the last 14 days you can return it with payment of a restocking fee under most circumstances. We are not sure what Apple might do for those who bought an obsolesced 4GB model in the same time frames but at least a $100 refund would be our guess.

If you bought your iPhone with a credit card that has a price protection benefit, you can get a refund from your credit card company.

For the rest of us (frequent readers know that we bought an 8GB model on June 30), buck up! Enjoy the fact that you thought your iPhone was worth the price when you bought it and that you have been using the communication device of the decade, if not the century, longer than anyone else for a relatively small amount of cash. Most of all, sigh with relief that Apple has taken decisive action to ensure that the fabulous iPhone technology not only does not wither but will flourish. At $399, we think Apple can't miss its iPhone sales goals. [Update: Revised our description of Apple's general return and price protection policy for clarity. Update 2: Apple today announced a $100 store credit for every iPhone customer who bought an iPhone before the price reduction.] [Bill Fox & Dana Baggett]