Read that title again, and realize that the iPhone 3G will sell for LESS than the infamous price drop given the original iPhone before the holidays. (Recap: it's started at $599 and was dropped to $399 with early adapters getting an equally infamous $100 Apple Store gift certificate Jobs-a-culpa).
And while the price drop was big news then, the retail price of $199 should be HUGE news today.
At $199, that's HALF the price of the original iPhone at its lowest. It's the SAME price as an 8GB iPod Nano. It's LESS than an iPod Classic, and MUCH LESS than an iPod Touch!
When we consider the possibility of carrier subsidies on top of that (Europe has been heavily rumored, with Orange at the extreme gossipy end of giving them away free to current iPhone owners), the iPhone may just be cheaper than "competing" Blackberries, Windows Mobile, and Treo smart phones.
Profit margins (averaging 30%) on hardware have historically been Apple's bread and butter, but this isn't the personal computer market (where they're a founding name) or the MP3 player market (where they have a dominant market share already), this is a much bigger, much less saturated market for Apple. Consumers will buy for a variety of reasons. Features often tops the list. Fashion certainly plays its part. But price can be the difference between dream and reality for a lot of shoppers.
Apple knows this, and they've developed an unparalleled 360 degree, spherically integrated business model to support it. A share of App Store sales and MobileMe subscriptions are just two examples surfaced today. Apple Retail Store profits, accessories, Mac hardware, licensing fees, iTunes sales, and a host of other factors let them maintain profitability while minimizing sticker shot for their users.
Steve Jobs once said that the mistake made by the management prior to his return was to go for money rather than market share. By keeping high prices in the present, they all but killed the platform's future.
Judging by today's WWDC 2008 Keynote, Jobs learned that lesson well.
8GB iPhone 3G for $199. Perfect price-point storm?
What do you think?