The Bottom Line on the iPhone

A lot of people have been talking about the fact that the iPhone is not priced for the average consumer. With a $500-$600 price tag and a potential $2,000 a year phone contract attached, this phone is priced for the business community, but it’s not a business smartphone. So what’s the deal? What is Apple thinking with all of this?

The answer can be found in Michael Malone’s great piece on the iPhone in Thursday’s Wall Street Journal. He writes:

That is the crucial, often overlooked, key to Apple’s continuing success. Other wildcatters have to pray the market recognizes their brilliant new products quickly enough before they go bankrupt. Apple, by comparison, always knows that it will be able to finance versions 2.0, 3.0, etc., on sales to its captive market — and by then, it will have perfected a definitive product the whole world wants to own. Mr. Jobs recognized the power of communities a generation before the current Web 2.0 crowd and is now its greatest master.

If you remember, the original iPod was overpriced too. That’s because Jobs was counting on a bunch of Macsturbators like me to buy it to fund rounds two and three of production and their subsequent drops in price point. Now, my eleven year-old brother has an iPod. We never would have bought one for him when it first came out. The same will likely be true of the iPhone.

I also want to unpack Malone’s statement about the power of communities. He couldn’t be more spot-on. Jobs has released a 0.9 product that he’s billing as version 1.0. In the next six months, he’ll monitor what everyone is saying about the phone. Likely, there will be some minor changes to the software (and possibly the hardware) depending on what people want. When the original iPhone is released, the success and feedback from the Mac faithful will give Apple a mandate to redesign, update, and come up with a 2.0 version for the general consuming public by Macworld ‘08.

Now the question is, will I be able to wait that long to hold an iPhone in my hot little hand? With the original iPod, I didn’t even have a choice. I was in college living on Top Ramen noodles and did not have two pennies to rub together let alone enough cash to drop on a generation 1 iPod. But eventually, the price came down enough that my mom was able to buy me my first iPod and the heavens sang.

Then everything changed. I graduated from college and started working. My pay slowly increased to the point where dropping the occasional (and I do mean occasional) Jefferson or two on a pair of shoes no longer felt like a major life decision. Now, I could conceivably afford to have a generation-one iPhone in my life if I decided prioritize it ahead of pretty new shoes. The question is, whether or not it’s worth making a priority at this point in the production cycle. Two years down the road, it will probably be better and cheaper.

I guess I have until June to figure it out…

Incidentally, for a laugh, go read Alexis Kayhill’s absurd diatribe against Malone for daring to diminish the shininess of Apple’s newest product. I love Mac just as much as she does, and I’m not offended by Malone’s article. Maybe she just takes herself and the all-holy Steve Jobs a little too seriously.