Old iPhones Are Collapsing The iPhone’s Average Selling Price, And Maybe iPhone Profit Too

Old iPhones Are Collapsing The iPhone’s Average Selling Price, And Maybe iPhone Profit Too

Sales of the iPhone 4S and iPhone 4 are eating into the iPhone 5.

Apple’s iPhone penetration strategy is to not release a lot of conflicting models, but to drop the price on previous iPhone models every time the new one comes out.

Right now, for example, Apple sells the iPhone 5 starting at $199 on contract, the iPhone 4S starting at $99 on contract, and the iPhone 4 with a two-year contract. In this way, Apple can sell an iPhone to anyone, regardless of their income level.

This strategy might be leading to negative repercussions for Apple, though, at least according to a new report, which suggests that Apple is proportionally selling considerably fewer iPhone 5 units during launch than they sold iPhone 4S and iPhone 4 units during their launch window.

The report comes from the Consumer Intelligence Research Partners, who note that the iPhone 5 accounted for only 68 percent of total iPhone sales during its first month at market, compared to 90 percent for the iPhone 4S.

That suggests Apple is proportionally selling fewer units of their premium device by keeping their older devices in the market. And the devices that were sold had lower storage capacities as well.

“This is all about how the pie is sliced,” CIRP co-founder Josh Lowitz told AllThingsD. “In the current launch, the 4 and 4S slices are bigger, relative to the 5 slice than the 3GS and 4 slices were relative to the 4S slice during the prior launch. Similarly, the 64 gigabyte slice is smaller, relative to the 16GB and 32GB slices of the 5 than the 64GB slice was relative to the 16GB and 32GB slices of the 4S when it was launched.”

The problem here is that Apple may be selling more iPhones than ever before, but they are selling them at a lower average price. Since most of Apple’s money comes from selling iPhones at extremely high profit margins, Apple could see the growth of its profits and revenue slow down over time, too.

  • techwarrior

    The iPhone5 is incompatible with many old accessories. Previous iPhone releases retained at least most of their back compatibility with accessories. Surely, if Apple had done a better job of preparing the accessory partner community, the numbers would look quite different. Perhaps it was an oversight (can you say goodbye Mr. Forstall), or perhaps it was a calculated risk putting secrecy on a higher pedestal than profits…

    While the analysis is partially correct, it ignores the obvious. Further, the economy continues to drag. It is rarely as simple as a single factor as this study suggests.

    No doubt, once the accessory market rises to the occasion, and economic factors improve, we will see a return to the mad rush for the 5s and 6.

    The emerging market for N-1 and N-2 models helps them to reach the less affluent market segments without having to compromise the brand. This further boosts the value of the brand as early adopters know their suddenly obsolete iDevice is still worth a lot to others. How many other brands have such a strong resale market?

  • FriarNurgle

    I’m debating on upgrading my daughter from a Virgin Mobile no name Android pos to an iPhone for xmas. Question is to save 100 bucks and go with a 4S instead of a 5? Can’t imaging getting her a 4 given the lack of Siri.

  • technochick

    How was this information derived. Did they account for all factors like the dropping of ‘new every two’, the change in calendar etc

    Do they really think Apple is or has reason to be concerned

  • TheMadTurtle

    I think the new phone, honestly, just isn’t as desirable. I know people that jumped onto the iPhone5 and don’t like the new, longer shape and have had problems with the wifi connection. I know too many people that aren’t happy with their 5, which translates to me keeping my 4S until a newer, better phone or I’m forced to change to keep up with iOS.

  • brownlee

    I’m debating on upgrading my daughter from a Virgin Mobile no name Android pos to an iPhone for xmas. Question is to save 100 bucks and go with a 4S instead of a 5? Can’t imaging getting her a 4 given the lack of Siri.

    I don’t personally see much point in saving $100 when you’re already talking about dropping, what, $600 on an unsubsidized iPhone. Still, it is the holidays, and there’s never enough money to go around.

  • Eric

    The iPhone5 is incompatible with many old accessories. Previous iPhone releases retained at least most of their back compatibility with accessories. Surely, if Apple had done a better job of preparing the accessory partner community, the numbers would look quite different. Perhaps it was an oversight (can you say goodbye Mr. Forstall), or perhaps it was a calculated risk putting secrecy on a higher pedestal than profits…

    While the analysis is partially correct, it ignores the obvious. Further, the economy continues to drag. It is rarely as simple as a single factor as this study suggests.

    No doubt, once the accessory market rises to the occasion, and economic factors improve, we will see a return to the mad rush for the 5s and 6.

    The emerging market for N-1 and N-2 models helps them to reach the less affluent market segments without having to compromise the brand. This further boosts the value of the brand as early adopters know their suddenly obsolete iDevice is still worth a lot to others. How many other brands have such a strong resale market?

    As well, the iPhone 5 isn’t that considerably different from the 4S. At least for me. I’m waiting till the next model to come out, which will be as much a difference from the iPhone 4S, as the 4S was from the 3GS. And I’m sure many people who bought the 4S last year, are thinking the same. After all, money doesn’t grow on trees. And people who bought the 4S under contract (2 or 3 years), will not be able to break that to jump on the iPhone 5 without consequence. And with the revised iPhone 5 (iPhone 5S?) coming out early 2013, I’m glad I held off on the iPhone 5.

  • Eric

    I’m debating on upgrading my daughter from a Virgin Mobile no name Android pos to an iPhone for xmas. Question is to save 100 bucks and go with a 4S instead of a 5? Can’t imaging getting her a 4 given the lack of Siri.

    If you are thinking of switching over via new contract, I would just go straight to the iPhone 5. The upgrades from the 4S aren’t considerable, and your saving $100 on a subsidized iPhone 5. But if your buying full pop and saving only $100, the upgrades aren’t worth the $600 you’d be spending on an iPhone 5. IMO.

  • AdonisBlood33

    Did they even consider the massive supply constrains of the iPhone 5?

    My mom was able to buy an iPhone 4S 1 week after it was released. Now over 2 Months later iphone 5 supplies are finally catching up to demand.

    This is a short sided article.

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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