Last year, the days of sub-$700 new iPhones seemed like they were a thing of the past. The iPhone XR cost $749, making it the most expensive entry level iPhone of all time.
In 2009, the entry level new iPhone cost $599, and in the previous two years it cost $499.
Some customers had feared that Apple was pricing them out by abandoning the sub-$700 price. People have been holding onto their phones for longer, and Apple has looked for ways to increase revenue as people bought fewer iPhones.
Those prices are all a lot less than many analysts were expecting. Daniel Ives, a Wedbush analyst, called the Apple TV+ price tag in particular a “show stopper” in an investor note Tuesday, adding that investors had expected it to cost as much as $9.99 per month.
Apple is keeping its entry level prices low for a couple reasons.
That’s why Apple is looking to expand its base, offering a lower-cost device for the lower end of the market. The iPhone 5C, iPhone SE, iPhone 7, iPhone 8 and iPhone XR represent Apple’s other recent attempts to offer a lower cost version of the iPhone. And Apple has traditionally offered older versions of its products at lower price points, letting customers buy last year’s technology for about $100 less.
Apple has used slightly different strategies with its lower-end devices: The iPhone 5C, XR and 11 used lower-cost materials than the other phones Apple offered in their respective launch years. The iPhone SE, 7 and 8 maintained the same designs as older versions of the iPhone, and Apple just upgraded their internal components.
It did the same thing with the iPod a decade ago, introducing the Mini, Nano and Shuffle versions of the MP3 player.
Apple has been a phenomenon, its growth has been epic. But the days when that growth could rest simply on increasingly expensive iPhones is over. The pricing strategy behind Tuesday’s announcements indicates that the company knows that.