- The new iPhone, “iPhone 8,” might cost $1,000.
- Many customers may think it’s just not worth it.
- Barclays analysts believe Apple may be planning to offer free Apple Music and free iCloud storage to anyone buying the $1,000 phone, thus making the device feel cheaper.
Apple will unveil its next generation iPhone on September 12, but there is a problem: iPhone 8 (or iPhone Edition, or whatever it is called) might cost $1,000 or more (£760).
The $1,000 level is a big ask for customers. It’s $125 (£95) more than iPhone 7 Plus’s lowest storage configuration. And iPhones already cost hundreds more than equally good Android phones, like Google’s Pixel and Samsung’s Note 8.
There is a real risk here: Apple wants the post-launch chatter to be about how cool the phone is, not how overpriced it is.
“Anything significantly over $1000 as the price for the lowest SKU of the iPhone 8 could be potentially detrimental to demand,” Bank of America Merril Lynch analyst Wamsi Mohan and his team told their clients recently.
So how will Apple persuade you to pay even more for a phone that runs the same operating system as the one you’re already holding in your hand?
Barclays analyst Mark Moskowitz and his team think they have figured that out. Apple will offer free subscriptions to Apple Music and 200GB of iCloud storage for one year, a deal worth $156, to anyone who buys iPhone 8. That will bring the perceived cost of the phone back down to a more palatable $844.
Moskowitz’s analysis is based on a survey of wireless service customers. It found that at $1,000, Apple might sell only about 40 million incremental iPhone 8 units. But if the new device was bundled with an Apple Music and iCloud storage deal, Apple would sell 64.4 million incremental units:
That would net the company 7% more iPhone revenue, or an incremental $9.8 billion, Barclays believes.
There is a compelling logic to the Barclays plan. Apple’s Services division — which houses Apple Music — is the only part of the company that is growing robustly right now. Locking new consumers into Services for free in the short-run pays big dividends to Apple down the road. It’s harder to switch to a non-Apple phone if all your songs and photos are locked inside iOS. That’s why Apple customers notoriously find it difficult to extract themselves from the various iPhone apps they become dependent on.