Will the price be right for Apple's rumored iWatch?
Source: Erik Sherman
Apple (AAPL) will reportedly announce its long-expected new wearable device next Tuesday along with the iPhone 6. Dubbed by the press the "iWatch," it's unclear whether the product would actually be a smartwatch or some other type of wearable device, like a fitness monitor.
According to Re:Code, the new product will ship sometime next year. Apple has considered prices as high as $400, which would be at the category's high end, keeping company with a Timex Ironman One GPS+ that comes with a 3G wireless connection.
Apple typically has a keen sense of the perceived value it brings to customers and the amount of money it can charge consumers. However, finding the right price in this case could be tricky. There are some significant differences from selling the iPhone or iPad, and finding the right number could make the difference between a good source of additional revenue and a runaway hit.
One reason the iPhone was such a hit was that the apparent price to consumers was just low enough to get them to spring for the new type of phone. But it's easy to forget that the adoption was nip and tuck at first, largely because it dropped its initial price by $200 a month after introducing the product at $599.
By the following year, the price dropped to $199 because AT&T (T), the initial exclusive third-party retailer, offered a major subsidy.
Of course consumers eventually paid for the devices over time through higher monthly charges. But the perceived price was low enough to court impulse buying, and the sales of iPhones suddenly took off, even as Apple saw enormous margin levels, making the iPhone the chief driver of company profit.
Not that all Apple products need to be at that level for success. The Mac has done well at far higher prices, and the iPad has seen strong sales. But they have dropped off where the iPhone still goes strong.
At $400, an iWatch would be near the early price of an iPhone: low enough for some impulse purchases, but possibly too expensive for many to embrace. And unless there is a direct wireless connection offering the possibility of another account to bill, carriers are unlikely to be interested in any subsidy, because it wouldn't encourage longer term increased profits for them.
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