Last night, Apple debuted the iPhone commercials on national TV. While Apple can essentially choose to air this commercial on any show, on any network, they chose to air this commercial first on CBS on the show 60 Minutes. Now, as far as I can tell, Apple doesn't really have much of a relationship with CBS or 60 Minutes -- they sell some TV shows for CBS (CSI, Survivor) but that shouldn't make them any different from NBC or ABC -- almost all the networks sell shows on Apple's iTunes store. And while 60 Minutes is a longstanding television show, recent primetime ratings were released last week, which put 60 Minutes just above ABC's still flailing "24", and just below Fox's "Extreme Makeover: Home Edition", at number #26. Amongst the age group 18-49, 60 Minutes ranks #68. This is not a good show to be advertising a $500 phone on -- the demographics of the show is clearly aimed for a much older age set.
Previous surveys have netted about a 6 - 10% early adopter rate for the iPhone, and another 7-10% gift rate (would buy for someone else), and another 20% adoption rate if the price drops to $200-$300. There's an estimated 300 Million people in the United States -- if Apple can manage 20% of that number -- approximately 60 Million in the first year, it would b far beyond a reasonable sales figure. The iPod took 6 years to sell 100 million worldwide, and that's counting all the iPods in the iPod family, including the nano and the shuffle. So, I think that all the survey predictions of 13-20% in the first year is far too big a number -- Apple has said that they'd be happy if they could hit 1% of the worldwide market -- about 10 million units. Ten million units would translate into only about 3 percent of the US population.
There are approximately 2000 locations that customers can purchase an iPhone from, 160 Apple retail stores, and 1840 Cingular outlets and a rumored 40 iPhones per outlet, putting the estimated number at launch to be a mere 80,000. If Apple wants to hit that 10 million unit sales goal in the first year, it needs to sell approximately 834,000 units a month. Let's imagine that the U.S. market consitutes 75% of the market for Apple (the other 25% being Japan and Great Britain). Of those 834,000 units per month, 625,500 need to be sold in the U.S., which basically amounts to 312.75 iPhones sold per month, per retail location. To meet this goal, Apple/AT&T needs to sell 10.4 iPhones per day, per retail location. Can you see Apple selling an $500 iPhone every hour to a customer? Consider this: Apple sold 1.79 iPods per minute in 2003, and 88 iPods per minute in 2006. Can they sell an iPhone every hour? I think it's well within the realm of possibility, but the limited outlets for sales (along with the average cellphone contract taking an hour to complete) will certainly slow down their sales rate.
This is what I predict on Friday, June 29th: a line before opening at all Apple stores, and a line at all AT&T stores for the iPhone. All locations will be underprepared for this. One employee will have to man the phones saying "Yes, we have iPhones, we have a line, we only have X, and we don't know if you'll be able to get one, and we don't know when we'll be getting a new shipment." The $100 cheaper 4GB iPhone will sell out first, but the 8GB iPhone will also sell out on the first day. Saturday and Sunday will be spent by employees at these locations repeating iPhone sold out, next shipment unknown. On Monday, newspapers around the world will herald Apple's sale of 80,000 iPhones in a single day as a front page business section article. A few weeks after that, another shipment would arrive, doubling Apple's iPhone market to 150,000 or 200,000 before the end of July. End of August, beginning of September would see them hit the half-million mark, and by the end of October, perhaps 1 million units. November and December could possibly sell another 1 million each month (in the shopping season frenzy), to finish off the year with 4 million iPods sold.
If they can manage to keep the 1 million per month rate up, by the end of June in 2008, they'll have met their 1% of the world wide market.
To put that four million iPhones number into perspective, over the last ten years, 4 million new Toyota Camrys have been sold in the United States. Now, imagine if all the Camry owners you know with a 1997 - 2007 Camry have iPhones, and that's the sales number Apple is shooting for at the end of the year.
Let's stop and take a look at another revolutionary cellphone device that debuted a few years ago which was at the time remarkably expensive -- the Palm Treo 600. When the Treo 600 was released in 2003, the PDA market was finished, with PalmPilots having pretty much decimated all competitors -- not too much unlike Apple and the iPod's dominance on the personal music player industry. The Treo -- a new smartphone incorporating a cellphone and a PDA was the phone of choice for programmers and executives. At an initial price of $500, the Treo 600 was out of reach for most consumers, and it took 2 years for them to sell 1 million Treos worldwide.
Initially the iPhone will be very difficult to get -- I'm expecting a similar supply-demand curve to that of the Playstation 3, in that June, July, August and September will be very incredibly difficult to find an iPhone. late September to mid-October should see supplies stabilize somewhat before being thrown into chaos once again by the holiday shopping season. In January, Jobs will give a status report at MacWorld SF on the iPhone, possibly saying that they've met their 1% goal, but more likely than not, to announce global partners for the iPhone.
Apple is expected to announce a 3rd party application SDK for the iPhone at WWDC next week.
I think demand for the iPhone is extraordinarily high -- with 6 months to let the $500-$600 cost for the iPhone to sink into the minds of consumers, there are plenty of people who have, for the last six months, delayed upgrading their smartphones. So you have people who ordinarily would be upgrading to the next Treo or Blackberry or Sidekick delaying those upgrades. A Treo 750, for instance, retails for $549 -- a 2-year commitment cuts that price down to $399, making the difference in price between a Treo 750 and a 4GB iPhone a mere $100. As a smartphone consumer, I can justify this $100 premium any number of ways: the iPhone has a better screen, I can watch movies on it, it takes the place of my 4GB nano (which costs $150) I can surf the web on it, and honestly the iPhone's just so much cooler than a Treo.
The iPhone and the Wii share certain similarities -- whereas in the months before the PS3 launch we knew that people were buying them to resell on auction houses, the Wii had a solid group of interested buyers who were planning on keeping them for themselves. By keeping them and showing them off to their friends and family (conveniently at Thanksgiving (the following week) and holiday family gatherings), the Wii buyers also generated a larger market for the product. I feel the same is possible with iPhone. The timing of the iPhone release falls the week before the Fourth of July Weekend, making sure that it will be the conversational item talked about around the grill.
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