As a reader of this site you are no doubt aware that Apple announced the iPhone 5S and 5C today, marking the first time in history that Apple will be launching two new models of iPhone. Apple has altered their traditional strategy of dropping the price of last years’ model to $99 and instead have completely discontinued the device altogether, leaving users in the $99 range who want an iPhone with the choice of the 5C. What’s even more interesting is that Apple has forgone the traditional metal and glass build quality of previous generations of iPhone for a completely plastic build. As Jonathan Ive of Apple put it, the iPhone 5C is “beautifully, unapologetically plastic.” If this sounds much like any number of high-profile Samsung phones as of late, you aren’t the only one thinking that. What’s puzzling though is not that the iPhone 5C is $99 on contract or that it’s plastic, which inherently is cheaper than metal and therefore raises profit margins, but that it’s $550 off contract.
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Off contract pricing is most important in basically every market in the world outside of the United States. Here in the US most carriers are still on a subsidized pricing plan, where you pay a higher monthly cost and get “discounted” phones for $199 or less when the phone comes out. This generally leads to higher profits for phone companies and network providers and leaves the consumer out in the cold. Other markets around the world have wised-up and offer off-contract pricing, giving consumers a break on the monthly bill while requiring them to purchase a phone outright. This means that those higher cost phones, which generally launch at $550 or higher off contract, are simply out of reach for the average consumer in these countries. As such phones that launch under that amount simply sell better, and as a general rule of thumb Android has taken off in these markets because manufacturers have offered cheaper priced phones. Since the iPhone 5C was supposed to be a “budget iPhone,” $550 isn’t exactly resting well with a number of people out there. As a result Android market share will likely continue to grow in the rest of the world as it has for the last couple of years.
Also as a result of this market share growth is the obvious app store revenue growth that follows it. Apple used to be the king when it came to both app store revenue, apps available and number of apps downloaded by users. Back in July of this year Google officially surpassed Apple in the race for 1 million apps available on the Google Play store, and as a result has matched Apple in meeting 50 billion+ apps downloaded. While Google still has a ways to go when it comes to revenue, Forbes is reporting that Google Play app revenue is scheduled to surpass Apple Appstore revenue by 2016. That prediction follows Apple’s report that its own Appstore still generated more than 2.3x the revenue of Google Play, a figure that was at 5x in 2011. All this adds up to something increasingly obvious; if Apple wants to continue to compete on a world scale, it has to provide a truly budget iPhone next time around. Android currently resides in nearly 80% of all smartphones sold worldwide according to the latest IDC numbers, and those numbers only continue to increase in Google’s favor every quarter. Developers will continue to flock to Google Play if this trend continues on the current path, and by 2016 we will no doubt see a complete flip-flop of developer exclusives from Apple’s Appstore to the Google Play store.