Why the Pre shouldn't be free 42
Wed, 02 Sep 2009 9:17 am EDT 
Over at Techdirt there’s an editorial suggesting that the Palm and Sprint should get together to set a new price for the Palm Pre: Free. It's an interesting idea, but I don't think it's a good one -- at all.
The first and strongest reason to drop the price to free: More Palm Pre phones sold, more users, bigger install base. As many developers have said, they aren’t going to develop for a platform until it is adequately established (they need to know there are customers first). To point to Apple’s App Store success is to forget that the App Store didn’t launch until a year after the iPhone, meaning there was an established user base before developers even had the SDK. That’s not the case with Palm, which we know had the SDK out before launch (as indicated by the apps in the Catalog), but clearly they’re taking the time to make sure they do the App Catalog right. More users would surely be good for the platform, but given that the Pre is a 1.1 device on only two carriers in only two countries at the moment, even at 'free' there's a ceiling to just how many of these Palm could reasonably expect to sell.
(As an aside, there was also the suggestion that Palm should have delayed the Pre until the SDK was available. The Pre had to be launched when it was, mostly because of the iPhone 3Gs. Palm and Sprint had both a deadline (first half of 2009) and the competition to consider. Publicity-wise, Palm got far more coverage for the audacious pre-3Gs launch than it would have gotten for a delay (bad coverage) putting it after the iPhone.)
Which brings us to the last point: knocking $200 off the Pre’s price tag and making it free on a contract. The problem here is one of perception. If something’s free there are two thoughts that come to mind: it’s not that great (most currently free-on-contract phones) or there’s some sort of catch. Considering that this is supposed to be the next great smartphone, the perception is that it should cost a pretty penny. Quite simply, it’s the perception of quality - expensive things cost a lot, therefore something that costs a lot should be a quality product.
Finally, let's face it - that $200 has to come from somewhere. Sprint surely wouldn't pay it - they love the Pre, but they're not willing to bet the entire network on it. Palm wouldn't take the hit either - they frankly can't (and shouldn't) afford to. No, with the current costs and carriers for the Pre, it's a safe bet that were it free, the customer would somehow end up paying that extra $200 in the form of longer contracts, higher fees, or via some other nefarious means.
What do you think the subsidized price of the Palm Pre should be?
42 Comments
They need to drop the price to something less then 200 and remove the MIR. its ridic that it costs so much but is missing features other similar phones have a la the 3gs
Stop comparing it to the iPhone. The iPhone is now a 3rd-gen device and is still not what the Pre is. The Pre will have more functionality in time -give it a rest, it's only 3 months old.
But the iPhone is the competition. He/she's comparing to the iPhone because it's the decision that he/she had to make: buy a Pre or an iPhone. Clearly that person bought a Pre. But he/she did so when it was competing against a 2nd and 3rd gen iPhone.
Those are the decisions that consumers make. It's completely reasonable for anyone to compare the features of the current Pre with the features of the current iPhone in light of the price for each.
But good luck getting consumers to compare the 1st gen Pre with the 1st gen iPhone. Seems quixotic to me, but maybe I'm wrong.
I think you're missing the real point here. You're arguing about the iPhone vs. Pre hardware, not the potential of the iPhone OS vs. webOS platform. The GP was trying to make a point, I think, that webOS has more potential than iPhone OS. And the truth is, the platform DOES exceed the hardware these days. If the hardware is slick but the OS running on it isn't all that, that phone is going to disappear.
OK then. Have a nice time waiting for Apple to make any given thing happen. In the meantime, I'm enjoying hacking my Pre to do just what I want it to do.
Sure. I agree that the WebOS has more potential than iPhone OS. But currently WebOS is utilizing a tiny fraction of that potential compared to iPhone OS. So, of course that *leads* people to compare the Pre unfavorably to the iPhone. And it seems foolish to me to ask people to stop making that comparison. It's all there currently is.
yes, it should have more memory for the price. 99 are ok for 8 GB, 199 to much.
It will probably stay at least $99 more than the Eos. The Eos will come out probably at $99, the Pre will be at $199. Eventually the Eos will be free with contract and the pre will be $99.
When Pre hits Verizon in January, they should release a 16GB version for $199 and drop the 8GB version to $149. The Eos (4GB) should be at $99 or $119. Droping the price any sooner than January will anger a lot of Pre owners (including myself), but I can understand it after six months.
Alternately, they could position them at $150 (Eos), $180 (Pre 8GB), and $220 (Pre 16GB). That would make early adopters feel a lot better, but it's hard to compete with the 8GB iPhone at $100 when your 8GB product is $180.
Is really tough coming from the iphone to the pre.
Made the transition because of the google voice fiasco & hate AT&T plus other annoyances with the phone overall specially the drop calls.
What the pre needs is a blooming app store. I know a few people that like the pre but dislike the fact that there is nothing really to it.
If the iphone is any indication price does not really matter. Give the customers app freedom to choose whatever they want and they will pay any price. I think the question here is why sprint & palm have not launched an incentive to attract developers?
We all know webos is a great platform but it does not need a price cut or anything it needs to compete with app accesibility. (lowering the price as outlined by the author will decrease its overall image)
Is tough when you can have any app for the iphone but on the pre you dont have that privilige.The way the end user see it is why pay 199.99 for teh pre when for the same price i can have 10 fold on the iphone.
Well coming from Australia, It's a rare thing to pay anything for a handset unless you're buying it outright. Most of the current plans that are running in Aust come with phones completely free. there are only 2 phones I know that you pay a premium for and that is the iPhone and the HTC Touch Pro 2.
I would have gladly paid $199 for the Pre on Bell.
However, that does not seem possible for existing customers. As Bell has changed their hardware upgrade policies this summer and removed all credits and eligibility until just three months before the end of the three year contract. Before, two years in you could upgrade and have the new customer prices plus get a credit.. you would get more credit the longer you held your plan.
As of June I was suppose to have a $50 credit and mid-Sept I would have got $100. Which meant I would have been able to get the Pre for $99, or $149 if I got it on friday when I intended to do so due to issues with my phone. And yes signed a new 3 year contract.
But now that is all canceled and even the credit I could see on my account in June has been removed.
So now I would have to pay the retail price of $599 for the Pre to get it or instead of waiting until June 2010 to get it cheaper...
The best part is I could pay the cancellation fees of $20/month and buy the Pre as a new customer which in total comes to less at $439.
Not to mention the HTC Magic on Rogers is now $79 and if we add up the my monthly $20 Bell cancellation fees it's only be $319 including the phone.
A thread on howardforums about this policy change:
http://howardforums.com/showthread.php?t=1564313
my post there with these numbers again:
http://howardforums.com/showpost.php?p=12974610&postcount=33
So it seems Bell is not going to help the Pre sell at all unless you are in the magic three months until end of term window or a new customer.
I have no idea what the price of the Pre should be. But neither does the OP or any of the other commenters. What we don't know:
1) What the demand is for the device.
2) What the profit margin is for Sprint.
Without that information, all we're really saying is what we, the consumer, wants. And that should be obvious. We *always* want it to cost less. But we don't have enough information to keep that desire from driving Palm & Sprint out of business.
If I were Sprint and knew the above two pieces of information, I might try an experiment in which I offered an instant rebate, and see what impact that had on:
1) increasing subscribers, and
2) the per subscriber margins
It may be that a zero cost Pre is the best for everyone. But none of us know. And only Sprint (in negotiation with Palm) is in a position to even experiment.
$0.02.
I have to say $99 for the storage space. I would have no problem paying $199-$250 range if it had either 16 gigs of memory or a micro SD card slot and no memory as long as apps could be run off a micro SD card or a micro SD card slot with 8 gigs of built in memory. I know they said it would be bulkier with a micro SD card slot but come on that is pretty standard these days. I don't know of any other current smart phones on the market besides the Pre and iPhone that don't have micro SD card slot. I mean in talk of the EOS 4 gigs is just too small with no micro SD slot. No way using 4 gigs as a phone and a media player is possible in most peoples daily lives.
$199, no rebate to mess with, and include a Touchstone by default.
That sounds like a reasonable price point to me, given the lack of expandable memory, video (yes, I know it's probably coming in an OS update) and full-featured multimedia playaback. I too abhor rebates, but I'm willing to go through the motions to get the bucks, and since a lot of people aren't, they're in effect a money maker for the manufacturer.
If you believe Sprint's advertising, they're already subsidizing some of the Pre's retail cost of $549, with $250 off the top for signing up for a 2-yr. contract. Can anyone honestly say they'd shell out $550 for this phone at straight retail? I love my Pre, but I can buy a darned good phone and a halfway decent netbook for that price. There's no way the actual retail cost is $549, unless Sprint is jacking up the profit margin 2-3x wholesale. But by showing such a high MSRP, the carrier gets to seem like they're really helping out the customer by knocking almost half price off.
Does anyone know the actual unit cost is to manufacture the Pre? I'd guess it's somewhere between $100-$150. $199 final cost gives Sprint a $50.00 profit (considering the high end of my supposed wholesale range), which is 16% of the wholesale cost. A 16% profit on a commodity item like a mobile phone is pretty good, IMO. And their actual per-unit profit will be higher b/c of the people who never take advantage of the rebate.
I think the MSRP assigned to the Pre has a lot more to do with the smart phones against which it is competing, combined with the perceived premium value placed on the Smartphone hardware category in general. In other words we're paying a premium for the Pre because there's a perception that the phone ought to cost a lot, even though its actual manufacturing cost alone probably wouldn't justify such a large price differential.
I'd like to see pricing that more closely reflects the actual manufacturing & logistics costs, but that ignores a lot of market forces that conspire to drive up the final cost.
The price is fine @ $199. In four months you make that amount back on the Simply Everything plan compared to the iPhone with the $150-ish mandatory AT&T contract. To compare the phone without comparing the service as well is only looking at half of the cost. Sure, folks can debate the relative value of certain features and capabilities, but are wholly subjective because we all use these devices differently. For some, any given feature may be a deal breaker while that same item may be just a novelty to the next hundred purchasers. Ultimately, whether you are willing to buy the phone and continue paying for the service is the question, especially with exclusive models like these. Think: total perceived value (to the customer).
they aren't giving you cheaper plans that's how they make their money not on hardware. you might as well stop hoping for it.
if pre is having issues it's not the price. It's it's marketing and the fact that they haven't addresses many of the sloppy and easy to address issues yet. When the homebrew community can fix issues with the os before Palm that's a problem. Palm is slow to react.
It's telling that the entire front page of Precentral has no news that derives from Palm's actions and hasn't in weeks. It's all reviews of head sets, non palm homebrew apps, etc.
But palm isn't active. There is just not much to going on other then just the phone to keep any buzz going. Palm just seems to be clueless to that fact or it's importance. Hell they could at least release updates to the media player that say fix the crappy sorting, or the ignores the "the" in song titles, or adds a song search bar, of fix make it recognized that "b" and "B" are the same letter, etc, etc Hell, officially add custom notifications.
Shouldn't be left up for homebrew like two months after the phone was released. It's just not proactive from a business standpoint. Without homebrewers that media player would be crap. Palm wastes golden opportunities to keep positive public opinion with the only potential longterm winning product it currently has. They strike me as lazy.
i get the feeling that the business climate is differnet. Apple seems pretty detail oriented and perfectionstic and Palm seems less so. Maybe it's a resource issue cause they are broke but i get that impression. i hope they are just waiting to release a massive update but it would be better to have rolling ones
didn't say it implied stale development. nor did i say development was stale.
no news is means no buzz and no buzz means lower sales. And if the pre has declining sales it's not cause of the price it's because there is declining buzz.
there are several areas the pre doesn't match up to the big dog, aka the iphone and the media player is it. Iphone is after all originally just an ipod. So if you want more buzz, they need to get off their ass and create some news. one way is fixing the media player which isn't close to as good as the iphone media player. Doesn't mean they aren't working on it but when they are starved for news it wouldn't hurt to release small updates. Hell they released small updates at launch. And it's a case of positive news as opposed to no news. Right now Palm has no news and bad news and that's a marketing problem. The fact that palm enthusiasts are interested or satisfied is irrelevant to the bigger issue of building a long term profitable product that can compete for many years. And apple didn't have to release small updates cause they had sense enough not to release their original ipods with some of the silly things in it that palm overlooked. And even if Apple wanted to release several updates the simple fact is they are the market leader with an establish userbase. They don't have to be as good or as quick to release anything. Palm is not. They need to be better, quicker and faster then the competition. Excuses don't win marketshare.
Don't forget, when the iPhone came out it was higher priced. I think $399 and $499. At that time ATT's plans were resonably priced (I recall they were priced closer to Sprint's Everything plans but not including quite everything.)
When the iPhone price was lowered to $199 and $299 the ATT plans went up about $20 to $30 per month.
Also in case you didn't know, Apple gets a cut of the monthly service plans. I have read it was $9/mo for new customers and $5/mo for existing customers. I think Apple is the only manufacturer in the world that gets a cut of the monthly service plans.
An iPhone was originally sold as a touch-screen iPod with a phone built in, the price being the cost of an iPod + cost of a phone.
When iPhones were un-subsidized (first generation), Apple received a portion of the monthly bill. Now that AT&T is subsidizing the phones, I believe AT&T receives all the pay.
I think the price is fine-- just throw some more memory in this sucker to make it more competitive (16gb at least).
anyone that already owns the pre wants the price to stay where it is! who wants the price of something they purchased at a higher price go down?
I got mine for $0.99. That is right, ninety-nine cents.
Too bad you already have yours... I may have been able to help you out. If you do not, I may still be able to help...
The only people who are mad at the price being low are the ones who bought it at full price.
The poll is too simplistic. Look at what's already happened. Best Buy got a ton of press for dropping the Pre to 99 bucks for a few days.
So, the next time Apple has a big phone-related announcement scheduled, announce the day before that for one weekend only, the Pre is free with a 2-year contract. Then go back to full price after that weekend.
I don't think the Pre should be $199 with a 2-year contract after this xmas, though. It's a first generation phone up against a third generation competitor with the same speed, twice the storage and literally a thousand times as many apps for the same price. No one cares if there are forty thousand fart apps; they care about clever little charts comparing figures, even if the figures are slanted. Everyone reading this site knows that after you've gotten used to a phone that multitasks, going back to the iPhone feels like having all your fingers broken. But there's no way to really advertise that quality, just push the multitasking itself.