A Million Unlocked iPhones Being Shown Off All Around the World – That’s a Tragedy?

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Even if the numbers of a million iPhones being unlocked are correct, that’s a MILLION iPhones walking around all over the world as FREE marketing and advertising for Apple – the most effective advertising of all – because it gives those users the cachet of doing something “not quite legal.” That they are “above the law,” and of course, eager to show off they know how to break the rules of normal society … (in reality, they just bought a phone but shhh, don’t tell them that 😉 )

Has Apple sold them a phone subsidized like nearly every phone on Earth at a 75-100% discount? No. Apple got full list price – even if someone marked it up, Apple made at least $399 or £299.

As for the revenue they are giving up that is recorded as future revenue in monthly chunks? Sure, but when you have to service cash, there are costs associated with servicing that cash …

Conversely, they also give up a lot of costs associated with it and saves them a lot of money. They don’t have to offer any tech support or service for these 1-million phones. How much accounting reserve is set aside normally for phone tech support that are locked to a service?

But it’s all just a gray number because how many tech-gadget companies would turn down an opportunity to seed a product in dozens of countries to build awareness & word of mouth? How much money would they have to spend to demo this product in dozens of countries – and less efficient than a “worldly” fan using word-of-mouth and a live demo to his/her friends? What could be better chachet than spending full price to own an “illegal” phone? AND then when the phone is available legally in that country? Won’t they be likely the first to convert anyway to get all the feature sets?

Isn’t all this worth the $10 dollars in revenue per month Apple “loses” (per person) if the phone were locked to its native carrier? Might this not be the CHEAPEST advertising possible AND Apple gets all the revenue upfront without having to share with anyone?

And of course, an “unlocked” phone is still entitled to the full range of services that the iTunes store sells. Of course, that varies from country to country but the most convenient choice is still the iTunes store. So it really a tragedy if Apple trades $10 from AT&T or Orange and instead sells a few iTunes movies, music tracks or videos?

It’s like anything else. When you sell something, you hope to garner a revenue stream down the line – as a car dealer hopes you always bring it back to them for service but at the end of the day, if you sold it at full price, then the rest is gravy.

Sure, you can view the future revenue stream as a 100% loss in accounting terms but if you look at the broader implications, it’s simply a tradeoff in overhead, advertising, marketing and a shift in revenues and expenses.

NY Times readers chime in on doing their part in advertising the iPhone everywhere around the world.

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6 Comments

Filed under Advertising, Apple, Computing, Design, Film, Financial, Gadgets, Internet, iPhone, Marketing, mobile, Music, Retail, TV

6 responses to “A Million Unlocked iPhones Being Shown Off All Around the World – That’s a Tragedy?

  1. Hari Seldon

    Thank you for the first sensible article that I’ve read about these ‘missing’ iPhones. Of course this is great for Apple, as you rightly say these phones are not subsidized and in some countries people are paying quite a bit more the $299/$399.

  2. David

    Finally someone talking some sense. The “missing” million iPhones are not losing Apple one penny of revenue from AT&T. The people who purchased unlocked phones rejected that tie-down and would not have bought the phone if it couldn’t be unlocked. Thus the “missing” phones are simply another half billion dollars of revenue for Apple.

    Even more importantly they’re proof that people all over the world are willing to sacrifice visual voicemail and official support while taking a big risk of bricking their devices just to have the latest Apple item. In other words Apple could have simply made an unlocked GSM phone, sold it worldwide and done just fine. Instead Steve Jobs wanted to change the world, as he frequently attempts, and get his hands on some of the telcos subscription revenue. He chose the lock down route and while it has brought in a huge amount of money from AT&T, O2, etc., it ensured that iPhone sales are much lower than they would have been for an unlocked phone sold worldwide. Of course that’s Apple’s usual modus operandi: low volume, high margin.

  3. Right on the mark with all your comments!

  4. Dag

    Apple’s products are all about ease of use and a great user experience. Hacked iPhones, on the other hand, are difficult to hack and then upgrade, may suffer from severe security holes due to holding off from upgrading, and the phones can easily become nothing more than expensive bricks if the upgrade process isn’t done exactly right. Of course, you got to expect this when you break the warrenty to hack the iPhone to get it to work on another GSM-network. But it’s not necessarily great advertising for Apple. Apple should stop being so greedy, and sell the iPhone unlocked.

  5. Rob

    My take is slightly different, the large number of unlocked phones means that the iphone has not progressed very far along the adoption cycle. It also means that eventual market for the phone is probably much bigger than Apple has either realised or is letting on.

    (METROXING: You’re definitely right there … there are some bigger issues that are involved here and certainly, you bring up interesting & valid points but that might rquire another 5,000 words 🙂 … I was only commenting on the narrow issue that having a few hundred thousand or million phones out there is not Apple’s perfect scenario but certainly not a tragedy under the circumstances …).

  6. Tom B

    Exactly correct.

    And right out of the MSFT playbook, too. MSFT allows a certain amount of piracy in the Third World to sucker people into adopting Windows.

    Obviously, it’s Apples an Oranges, though, in the sense that the iPhone is a great product, unlike Windows.

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