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September 6, 2007
Razr vs. iPhone: Instant Pricing Obscolescence in the Cell Phone Business
Some useful price-cutting context via the NY Times on the unexpected $200 iPhone price cut yesterday:Motorola, for instance, introduced the ultrathin Razr phone for $499 with a two-year service contract in early 2005. Six months later, Motorola realized it had a hit on its hands and dropped the price to $199 in an effort to aim at more mainstream buyers. By the end of 2005, the price was $99.If you make that 60% price discount linear across the six months, that puts the three month percentage price reduction for Motorola's Razr after launch at 30%, which is darn close to how much the iPhone's price has come down. Granted, you could argue that it should be linear, that the value should stay fairly firm at first, and then fall off quickly later, but linear isn't a bad first approximation.
[via NY Times]
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On the other hand, at no point did Motorola release a much cheaper product with much of the Razr's appeal and functionality.
You really can't evaluate the iPhone price drop in isolation as if it's just another phone price cut. You need to take the iPod Touch into account, too.
Motorola: welcome to our world Apple...
It aint fun.