TheOverAnalyzed

Thoughts on Price ¶

John Gruber’s Opinion ¶

My primary source for price information comes from John Gruber, whose initial price projections have been widely accepted amongst the Apple developer/nerd community:

• Apple Watch Sport: $349
• Apple Watch: $999
• Apple Watch Edition: $4,999

Since his initial post, he has modified his estimates somewhat, but probably not in the direction you might think:

• Apple Watch Sport: $349
• Apple Watch: $999
• Apple Watch Edition: $9,999–$20,000

Wow.

My Opinion Then ¶

I was previously of the camp that Gruber had overshot things.

Here’s how I thought prices may end up:

• Apple Watch Sport: $349
• Apple Watch: $499
• Apple Watch Edition: $2,000

My Opinion Now ¶

More and more, and with every passing day full of Apple Watch rumors, the writing on the wall sure seems to be this: Gruber was much closer to the truth than I previously thought.

We know that it will “start at $349.” Obviously that’s got to be the Apple Watch Sport collection. The “cheap” one, made from aluminum and Gorilla Glass for the display.

What we don’t know beyond that is …a lot.

Besides the starting price, everything else is up in the air.

Questions Regarding the Collections ¶

Who Is the Sport Model For? ¶

It is for people who either don’t have a lot of money to spend, or do not want to spend a lot of money on a new platform, even one from our favorite fruit company. Gruber and John Moltz both seem set on getting the Sport model for this very reason.^[1] They aren’t sold on the viability of an Apple Watch yet, and thus, do not want to spend a lot of money on the 1.0 product. I have friends who feel the same way.

Who Is the Standard Model For? ¶

The regular model for the people like me. It is for people who buy new iPhones every year, ^[2] and likely buy new iPads and/or Macs every year as well. Thanks to the generally low depreciation of Apple hardware, I am usually able to upgrade to new equipment at a rather trivial cost.

The standard model is for people like me because people like me are the true fans. We are dedicated. We are the crazy ones.^[3] We watch all the keynotes, we buy all the things. Apple is a part of us. Apple products are not just products: they are a culture. And we live and breath this culture.

The standard model brings the Space Gray color, as well as the better bracelet options. It also includes a sapphire display. So it does bring some technical improvements, not just the aforementioned gravitas.

Still. $1,000?

Hear me out. It makes sense for Apple to keep the price of the stainless mid-tier model somewhat affordable. $1,000 is just at the border past which even fans like me might go for the Sport model. $500 would be even better. And Apple might even do that. They could have a $700 price point for the standard model with the Sport band, and maybe $1,300 for the standard model with the link bracelet. Who knows. And at an average selling price (ASP) of ~$1,000, they are in solid upper-end quartz territory. In the decent-ish quartz watch market, $1,000 isn’t chump change, but it’s also quite far from Rolex territory. Around this price point, it doesn’t seem completely outrageous to spend this kind of money on …a watch.^[4]

Who Is the Edition Model For? ¶

This is what I really wanted to talk about.Almost all of my questions I get go something like this:

Person: “How much will the Edition model cost?”

Me: “Well, we don’t know for sure, but if you believe the rumors, it could be as much as $5,000, $10,000, or even $20,000.”

Person: “😐”

Me: “I know. Crazy, right?”

Person: “How can they expect people to spend that much on a digital watch? Will it be gold plated or solid gold? Will it be upgradable? Will it come with a crazy warranty?”

Let’s focus on those last few questions.

1. How can they expect people to spend that much money? ¶

That’s easy. They’re Apple. They have never shied away from asking consumers to pay more than what they might have expected to pay. There have been exceptions,^[5] but Apple is not afraid of high margins. They have built their entire business on high margins. You need low production costs and high ASPs to achieve such margins.^[6]

The people who might by the Edition model are the same people who bought the Lisa. They are the same people who bought into NeXT. Simply put, they could care less about astronomical costs: they just want the best.

2. Will it be gold plated or solid gold? ¶

Again, this doesn’t matter when you’re filthy rich. Whether or not the Apple Watch Edition was made form solid or plated gold is inconsequential. Whether it is made from palladium or platinum or adamantium also doesn’t bear on the conversation.

Do you think the people who spend $10,000 on Rolex and IWC masterpieces care whether their watch is plated or solid gold?

No. They don’t care. They’re rich.

Us poorer folks, seeking to justify [watch] purchases we just shouldn’t be making—yeah, we might care. “Oh, it’s solid gold, so it was okay for me to spend $8,000 on this watch. You, now you: you bought a plated gold watch for $7,000. That’s totally not worth it.”

Most of us aren’t in that super rich category. We are in the aforementioned idiot category of people who make silly arbitrary and rather semantic rules defining intrinsic and extrinsic value, and use those rules to justify terrible purchases.

Edition isn’t for us, it’s for them.

3. Will it be upgradable? ¶

This is probably the most compelling argument for not getting the Edition, even if you are super rich.

Why spend $20,000 on a watch in early 2015, when, in less than 12 months, Version 2.0 might be coming out, one with GPS and wireless Apple Beats Boom EarPods™ to boot?

$20,000 sounds crazy at that point.

But, that assumes you are like most of us. The rich people who are going to buy the Edition aren’t us. They are rich people who could care less about dropping another $20,000 on Version 2.0 if need-be. Edition It is for people who do not have to justify their outrageous purchases. Edition is for the 0.01%. Edition It is for people who buy Swiss mechanical watches costing more than the latest 911. Edition is for people who have both the F40 and the F50^[7] in their garage. Simply put, the Edition model is for people who are rich.

Further Discussion ¶

Much of the discussion about Edition—and Apple Watch as whole for that matter—makes more sense when viewed from a fashion/luxury-oriented point of view, rather than a purely technology-centric point of view.Ben Thompson had thinks the same. Here’s his take last September:

The question is likely more fraught than it seems: the entry price for Apple Watch is $350, nearly half the price of an iPhone (and $150 more than the up-front cost for a subsidized consumer). Moreover, I suspect Edition models will go for ten times that, if not more. Surely such a price demands a device that is capable of doing more, not less.

In fact, I would argue the contrary. Swiss watches are less accurate, but the benefit they confer on the user are so much greater. Those benefits are about intangible things like status and fashion, but that doesn’t mean they are worth less than more technical capabilities like telling time accurately. Indeed, they are exponentially more valuable.

Moreover, it seems clear to me that Apple wants to play in this space: Jony Ive wasn’t joking when he allegedly said that Switzerland was in trouble. I believe Apple’s long-term plan for Apple Watch is to own the wrist and to confer prestige and status with options like premium bands and 18-karat gold. To do that, though, they must compete not on technical merit but on the sort of intangible benefits that they always win with; chief among these is the user experience. A premium smart watch will win by yes, being fashionable, and yes, conferring status, but above all by doing a few things better than any other product on the market, and – this is critical – dispensing with everything else in the pursuit of simplicity.

This is Apple’s first foray into the fashion industry. And understandably, the sharp minds^[8] who have spent careers analyzing Apple don’t initially know what to do with this.

Apple Watch represents a huge fork in Apple’s business.

We shouldn’t treat it like we do the new iPhone, or the new MacBook, with tech-focused spec analysis.

Apple Watch will launch not only as a new product category, it will launch in a completely new industry for Apple.