Three years ago, while beta testing his abilities as Apple’s CEO, Tim Cook famously told journalists on an earnings call that Apple doesn’t build netbooks because it can’t find a way to make a great notebook for $300. It became a famous and contentious statement from a company that pitches great products for a good price in an industry of barrel scrapers.
Thanks to its masterful supply chain command and response to the challenges of mobile phone competition, Apple capitalized on the culture of the wireless industry to do for the iPhone what it never has for the Mac: offer a good product not just for cheap, but for free.
During that earnings call, writers prodded Apple executives on why the company doesn’t make a cheaper notebook or netbook to compete in the sub-$500 market. Cook explained that Apple only makes the best computers it can for the best price it can. For quite some time, that means Apple’s best and most affordable attempt at a great, traditional computer has cost a minimum of $599 as a desktop and $999 as a notebook.
To make already cheap PCs look even more affordable, other computer makers have tried the subsidy thing, but I dare you to find one of those machines in public. Maybe more heads will turn once Verizon makes good on its promise of delivering shared data plans this summer. So far, though, customers just aren’t buying into subsidized PCs, partly because of the cheap-garbage factor, but largely because the burden of a second, costly data plan is a deal-breaker.
In smartphones, though, subsidizing does work, and Apple has capitalized on that difference in consumer culture. After hooking up the smartphone market in 2007 to the lightning rod of life it sorely needed, Apple has consistently responded to competition and leveraged its supply chain to drive down the iPhone’s barrier to entry from $400 in 2007, to $200, then $99, and now free, as of last fall.
Sure, the free-with-contract iPhone 3GS isn’t the top-of-the-line 4S, but it’s still a good phone and still supported by the latest iOS updates. It marks an accomplishment unique in Apple’s long journey: making one of, if not the, most important product in company history extremely accessible and free for more customers around the world than it can ever dream of reaching with the Mac.
