Apple’s Higher Prices Are Pure Greed
iPhone sales are flat, but revenues are up 29 percent
Anyone who’s bought an Apple product in the past few years will be able to tell you that the company’s products, which were already sold at a premium, have gotten even more expensive in recent years. A growing number of Apple customers — even long-standing ones — are starting to feel it’s getting to be too much, and they’re absolutely right.
2018 will likely stand out in the minds of Apple followers as the year its price-hike strategy took effect. In September, Apple announced its iPhones: XR, XS, and XS Max. The iPhone XS remained at the same price as the iPhone X: $999; and the XS Max brought in a new top price of $1,099 just a year after Apple established the $999 category. They keep adding even more expensive iPhones to increase the top price, but they’re also increasing the base price.
With no update to the iPhone 8 or 8 Plus, the iPhone XR has become the new base model. In 2014, the iPhone 6 was announced at $649; last year, the base price was bumped to $699 with the iPhone 8; and now the iPhone XR sets the starting price at $749. The entry cost to Apple’s smartphone world just keeps going up — a trend across the larger product line.
Just look at the Macs. When Apple revamped the MacBook Pro line in 2016, the base price of the 13" model jumped by $200 to $1,499, but to get the Touchbar — a feature that has proven to be basically useless — customers had to shell out a minimum of $1,799. For the larger 15" screen, it cost $2,399.
The persistently high price of the 12" MacBook — it starts at $1,299 — was a barrier that kept customers buying the MacBook Air. That ultimately justified Apple’s decision to refresh the Air in October, but the company’s leadership failed to learn their lesson: they hiked the Air’s price from $999 to $1,199, added the keyboard everyone’s been complaining about, and took away its USB-A ports for the USB-C ports that have turned the MacBook line into dongle hell. That same day they also increased the base price of the Mac mini from $499 to $799.
But don’t worry, Tim Cook didn’t forget about the iPad Pro. Its updated design is really nice — but you’ll be paying for it. The cheapest iPad Pro is now $799 — up from $649 — and its accessories even got a boost: the Apple Pencil is $30 more expensive at $129 and the Smart Keyboard jumped $20 to $179. And with all these price hikes have come increased repair costs and, in some cases, higher AppleCare prices.
If this doesn’t scream greed to you, I don’t know what would. Apple knows how tied into its ecosystem its customers are, and it’s taking advantage of that fact by hiking prices across the board. The products have some new features, but not enough to justify all of these price increases. Apple might use the innovation excuse, but its higher prices are more about building in larger profit margins to keep its investors happy.
iPhone sales growth fell off a steep cliff in 2016 and hasn’t recovered. In response, Apple added the $1,000 premium phone tier and began more aggressively raising the base iPhone price. As a result, the average selling price of an iPhone soared above $700 in the first quarter of 2018, stayed there in the second and third quarters, and hit $793 in the fourth quarter.
Apple reported its fourth-quarter results on November 1, and even though iPhone sales growth was flat and sales of iPhone XS and XS Max were below expectations, it still reported smartphone revenue growth of 29 percent thanks to those higher prices. That’s Apple’s new strategy: sales growth may be disappointing, but by steadily increasing prices, they can keep shareholders happy — and it’s working. In the future, Apple won’t even share unit sales numbers for the iPhone, Mac, or iPad, which could make it more difficult for analysts to calculate the average selling price — a key measure in this new approach.
Just look at the iPhone XS Max. Analysts suggest it’s outselling the iPhone XS and that the 256GB model is its most popular configuration. TechInsights estimated it to cost $453 to build, but it’s being sold at $1,249. Apple’s margins have always been high, but they’re getting increasingly ridiculous as the company becomes even more greedy by trying to suck as much money as possible out of its customers.
Apple will keep raising prices to see when its customers finally reach their collective breaking point, and while that seems to be happening for some, it clearly hasn’t reached the point where the company sees the need to stop. The product line is increasingly a mess because profits are put before products, but that doesn’t matter as long as investors keep seeing revenue growth, profit growth, and more money in their pockets — even if it comes out of those who have much less because they need to fork over so much to join or remain in the Apple ecosystem.
It’s pure greed, and that’s what Tim Cook’s Apple is all about.