The Elephant in the room...

[netposer]

With all this talk about new upgrade plans from T-mobile, ATT and now Verizon, where is the discussion about the inflated retail prices of almost EVERY smartphone? (Nexus 4 is and exception)

How is that an iPhone or Android phone is well over $600 retail with little to no discount for the life of that phone?

Subsidies? They don't make sense either. If you bring your own phone to most carriers you'll pay the same monthly fee (except T-mobile, and that's a recent plan change).

There has to be collusion between the manufacturers and the carriers to let this happen.

Even Apple does this. You won't find refurbished iPhones on Apple's site. But you will find refurbished iPod Touches and iPads.

Nothing is going to fix this until the manufacturers break away from the carriers.

All I'm asking is why isn't this issue ever discussed in blogs, podcasts, or even twitter among the tech/phone sites?

 

[Unicorn Rancher]

If the cost is inflated, don't buy it. It doesn't matter if we're talking about phones, cars, or houses. Don't pay more than you think it's worth.

 

[netposer]

If the cost is inflated, don't buy it. It doesn't matter if we're talking about phones, cars, or houses. Don't pay more than you think it's worth.

Phones are very different since a handful of companies control the market. Buying a house is based more on market forces not 3 big telcos.

And as I said, why don't podcasters and tech journalists visit this subject?

 

[JHBThree]

With all this talk about new upgrade plans from T-mobile, ATT and now Verizon, where is the discussion about the inflated retail prices of almost EVERY smartphone? (Nexus 4 is and exception)

How is that an iPhone or Android phone is well over $600 retail with little to no discount for the life of that phone?

Subsidies? They don't make sense either. If you bring your own phone to most carriers you'll pay the same monthly fee (except T-mobile, and that's a recent plan change).

There has to be collusion between the manufacturers and the carriers to let this happen.

Even Apple does this. You won't find refurbished iPhones on Apple's site. But you will find refurbished iPod Touches and iPads.

Nothing is going to fix this until the manufacturers break away from the carriers.

All I'm asking is why isn't this issue ever discussed in blogs, podcasts, or even twitter among the tech/phone sites?

It isn't discussed because the model Google uses isn't sustainable and isn't good for technology long term. Strip out that profit (which is smaller than you think, because marketing and other costs get rolled into that too) and there won't be money left to invest in research and development.

Sent from my SGH-M919 using Tapatalk 2

 

[Rule9]

It isn't discussed because the model Google uses isn't sustainable and isn't good for technology long term. Strip out that profit (which is smaller than you think, because marketing and other costs get rolled into that too) and there won't be money left to invest in research and development.

Sent from my SGH-M919 using Tapatalk 2

unfortunately you're right.

But the real elephant in the room is that I think too many people want to have a new phone every 12 months without being willing to pay over $600 per year or lock into contracts in order to do so. Well the hard truth is that if you want to have the latest and greatest high end phones every single year, you are going to have to be willing to pay for it. If you're not, then you're going to have to investigate other options. If Google keeps going forward subsidizing Nexus phones, that's one option for you. If you're willing to sacrifice a lot of Android functionality and features the mid range Nokia Lumia phones like the 720 pack a pretty impressive hardware punch (for the money you pay for it).

While I make a good salary, the cheapskate side of me does still kind of view the cost of chasing top-end gadget tech almost like a thousand dollar pay cut to my annual income. But if you truly enjoy buying new gadgets - and I mean truly enjoy it, not feel 'forced' to, which is more like a gadget addiction not a gadget hobby - then you could view this the same way as any other hobby. People pay a lot of money for golfing, skiing, hunting, fishing, etc. However, I'm hesitant to equate feeding a need to constantly upgrade a smartphone to actual hobbies/activities.

Call it our materialistic possession based society. There's no lack of people who will enslave themselves to car and house payments just so they can portray themselves as owning high end "stuff". My workplace parking lot is a good example of that. There are some people driving BMW's, and some driving total lemons and everything in between. Same salary, same personal life circumstances. I drive a honda I paid $25k for. I have a coworker who's actually a pay grade below me driving a Lincoln SUV he paid almost $50k for. He also paid a ridiculous amount of money for a house nearly 4000 sq feet...no kids.

 

[netposer]

So everyone is buying into the hype that these phones coast so much to manufacture and market? Nobody sees the price of an iPad or a 10" Android tablet costs less than most smartphones?

And how is it that phone prices stay artificially high even though they are a couple to a few generations old?

Every other type of electronic drops in price as it ages along with newer models.

There has to be collusion between the manufacturers and the carriers.

My theory is the carriers make sure the manufacturers won't sell direct at fair market prices and in turn the carriers promote/invest in new devices.

A GS3 should cost no more than $300 brand new right now and a GS4 should be about $350 to $400 depending on storage.

So why can you get cheap refurbished electronics but not smartphones? I'm not talking from carriers with contracts.

The iPhone 4S had $188 in materials. Even if you add shipping, labor, marketing etc to each handset it shouldn't cost over $500 new.

 

[benhmadison]

So everyone is buying into the hype that these phones coast so much to manufacture and market? Nobody sees the price of an iPad or a 10" Android tablet costs less than most smartphones?

And how is it that phone prices stay artificially high even though they are a couple to a few generations old?

Every other type of electronic drops in price as it ages along with newer models.

There has to be collusion between the manufacturers and the carriers.

My theory is the carriers make sure the manufacturers won't sell direct at fair market prices and in turn the carriers promote/invest in new devices.

A GS3 should cost no more than $300 brand new right now and a GS4 should be about $350 to $400 depending on storage.

So why can you get cheap refurbished electronics but not smartphones? I'm not talking from carriers with contracts.

The iPhone 4S had $188 in materials. Even if you add shipping, labor, marketing etc to each handset it shouldn't cost over $500 new.

You are right. Retail prices on smartphones have always been inflated beyond belief. I do feel that there is a slow but steady movement in the U.S. away from contracts and starting to look at purchasing the phone/service separately. In the little time I've spent looking at these new programs the major U.S. carriers are rolling out, it seems T-Mobile's is the only one that may actually be a decent deal for the customer. Being an AT&T customer I laughed at their new plan as there is really no other sensible reaction to have. I think if Moto/Google can put out some nice devices in the 250-400 dollar range like the N4 and supposedly the Moto X, we will continue to see more people ditch contracts. The problem in the U.S. though, is the lack of a service discount for using your own device. All of the prepaid options I have looked into are terrible for data and have spotty service. Being that the carriers control the towers that the prepaid companies use, it's going to be difficult for a prepaid service to ever offer anything close to what you get on a major carrier. I like the direction T-Mobile is going, unfortunately like many others I have no T-Mobile service to speak of where I live.

 

[garublador]

So everyone is buying into the hype that these phones coast so much to manufacture and market? Nobody sees the price of an iPad or a 10" Android tablet costs less than most smartphones?

I'm going to go out on a limb and guess that you've never had to try to pack all of the hardware and features of a 10" tablet into a 4.3" cell phone. It's way harder than you're making it sound and way more difficult to manufacture. It's the same reason you get less while paying more for a laptop over a desktop PC.

 

[Farish]

Some items to put in this thread.

Cellphone companies pay a premium for phones also. That subsidize latest phone that retails for 600 dollars is still costing the carrier around 500 or more dollars which they turn around and sell you for 200 dollars. The carriers want cheaper smartphones too because their bread and butter comes from their packages. Cheaper phones means more potential consumers.
If the smartphone market was around 350 dollars retail, data plan adoption would skyrocket because the carriers would sell you the latest greatest phone at a much cheaper price.

At the same time 45-50 percent of Apple's income comes from the iPhone, I wouldn't be surprise if the S4 has a high percentage (30-40 percent) of Samsung's income.
As long as they can get away with it and still maintain their high profit, they aren't going to lower their prices.

In Finland, subsidize phones were banned for a while and cell phone companies ran into a problem.
People weren't willing to buy new phones as often at those prices. 3g adoption starting to fall behind because the carriers weren't selling enough phones to justify the expansion so the ban on subsidize pricing was lifted.

Refurbish phones still are highly price because the market is willing to pay for it a current generation model. Best way to look at this is on ebay. When the S4 first came out the S3 was still easily retailing and selling for around 300-400 dollars refurbished. Now the average price has dropped down close to mid 200s to low 300s.

T-Mobile has very limited coverage compared to the other national networks. If it wasn't for the 4 billion dollars and free wireless spectrum as part of the fail merger agreement, they would not have even started some of this new pricing model.
With the new jump plan though, technically you are now as a consumer paying retail price for your phone and now a subsidy to upgrade. Yes it is still cheaper compared to other companies.

The new Moto X might have a much higher cost because it is being manufactured in Texas. In the United States there are consumers who will are willing to pay more for an Assembly in a America product. Vitamix and Blendtec are great examples of that.

 

[garublador]

I'll also point out that people expect every cell phone company to come out with some brand new, paradigm shifting feature on each iteration of each phone every single year. That's a lot of design hours to even try to do more than just make each phone just be a slightly better version of the last version when the life cycle for the product is, at most, two years. That's not a very long time to recoup what's certainly a very large R&D cost and a good illustration of why every new cell phone isn't groundbreaking. It's just too expensive to be groundbreaking all the time when you only have a hear to recoup R&D costs and make profits before your next groundbreaking device goes on sale. People act like there's a guy at Samsung and a guy at Verizon who each get $300 every time they sell a phone. Verizon has to wait months before they recoup the subsidy for each phone and Samsung probably has to sell millions of units before they break even.

A quick Google search shows that the Galaxy S3 is about $180 cheaper than the S4 if you buy it outright and it's only a year old. So the price of the S3 dropped $130 in just one year which is about 20% of the ~$600 it was when it came out. Do you really consider 20% to be "little to no discount?"

Manufacturers need carriers and carriers need manufacturers. Neither will work without the other. Customers will see the best products if they work together. I'm not going to say that this process is optimized and that all manufacturers and carriers do what's 100% right all the time, but I'd rather they be working together than working against one another.

 

[Rule9]

So everyone is buying into the hype that these phones coast so much to manufacture and market? Nobody sees the price of an iPad or a 10" Android tablet costs less than most smartphones?

And how is it that phone prices stay artificially high even though they are a couple to a few generations old?

Every other type of electronic drops in price as it ages along with newer models.

There has to be collusion between the manufacturers and the carriers.

My theory is the carriers make sure the manufacturers won't sell direct at fair market prices and in turn the carriers promote/invest in new devices.

A GS3 should cost no more than $300 brand new right now and a GS4 should be about $350 to $400 depending on storage.

So why can you get cheap refurbished electronics but not smartphones? I'm not talking from carriers with contracts.

The iPhone 4S had $188 in materials. Even if you add shipping, labor, marketing etc to each handset it shouldn't cost over $500 new.

I don't buy into hype but I also think people overestimate the markup and don't factor in other manufacturing costs like marketing, shipping, etc

 

[netposer]

From $200 manufacturing cost to over $600 in retail is BS. Apple can make the iPod Touch 64 GB and sell it for $399 full retail. Not to mention iPad pricing.

There's no way to tell me the iPhone 16 GB cost $200 more than a 64 GB Touch.

My point is the smartphone market isn't priced on market forces but rather an artificial market created by the carriers.

Don't get me started on volume discounts either. I seriously doubt ATT is paying $500+ for a handset with they are buying by the millions and providing tech support for that product.

And 20% off an already inflated $600 price tag is a ripoff.

Maybe it will take Google and Motorola to change things where the brand new top tier smartphones sell for $300-$400 at launch and then go down from there. That way you buy a phone like you would an iPod Touch and put a SIM in it from your carrier. As it is now you are "forced" to buy the subsidized $200 phone and pay the monthly cell fee rather than pay +$400 and pay the same amount per month. And that explains there is no subsidy for carriers. They just want to lock you in and make it hard for you to leave. Just last year T-mobile gave their customers a non-subsidized monthly fee if they bought or brought their own device.

 

[garublador]

I don't buy into hype but I also think people overestimate the markup and don't factor in other manufacturing costs like marketing, shipping, etc

Yeah, everyone thinks R&D is free. It costs a lot to make bleeding edge technology and that does not show up in the BOM cost. If you don't make a ton of money you can't spend a lot of money on R&D. R&D money is not spent on technology that won't turn a big profit. If you want awesome stuff you have to pay for it and component cost is far from everything.

Another thing worth considering is that the demand for out of contract cell phones is pretty low compared to subsidized phones. Subsidized phones can't get any cheaper than free, so there isn't really any reason to drop them below a certain price. Customers just don't demand it. It's not that manufacturers and carriers are conspiring to rip off those that don't want subsidized phones, it's just that it hasn't been shown that off-contract phones will sell super well.

Think about where we might be if selling phones hasn't been shown to be as profitable as you're claiming it is. Would Samsung, Apple, HTC, Google, Motorola and all the others have gigantic R&D budgets if the margin on phones was razor thin? Would phone technology be where it is today if those R&D budgets were cut proportional to how much you believe a cell phone should cost? One of the reasons we have awesome cell phones now is becasue there's a lot of money to be made by making them. If there wasn't money to be made the phones wouldn't be as awesome.

Now you're probably correct in assuming that the Nexus will probably show that less expensive, totally off-contract phones are worth making, but until people think they need to jump carriers and buy new phones more than once every two years (I see no reason to do that now and I'm clearly not alone), you'll never really see the latest and greatest following that model.

 

[JHBThree]

From $200 manufacturing cost to over $600 in retail is BS. Apple can make the iPod Touch 64 GB and sell it for $399 full retail. Not to mention iPad pricing.

There's no way to tell me the iPhone 16 GB cost $200 more than a 64 GB Touch.

My point is the smartphone market isn't priced on market forces but rather an artificial market created by the carriers.

Don't get me started on volume discounts either. I seriously doubt ATT is paying $500+ for a handset with they are buying by the millions and providing tech support for that product.

And 20% off an already inflated $600 price tag is a ripoff.

Maybe it will take Google and Motorola to change things where the brand new top tier smartphones sell for $300-$400 at launch and then go down from there. That way you buy a phone like you would an iPod Touch and put a SIM in it from your carrier. As it is now you are "forced" to buy the subsidized $200 phone and pay the monthly cell fee rather than pay +$400 and pay the same amount per month. And that explains there is no subsidy for carriers. They just want to lock you in and make it hard for you to leave. Just last year T-mobile gave their customers a non-subsidized monthly fee if they bought or brought their own device.

Why do you ask a question and then trash the answers you're given? There's a reason they cost as much as they do, and it isn't the reasons you seem to want to be true.

Sent from my SGH-M919 using Tapatalk 2

 

[JHBThree]

So everyone is buying into the hype that these phones coast so much to manufacture and market? Nobody sees the price of an iPad or a 10" Android tablet costs less than most smartphones?

And how is it that phone prices stay artificially high even though they are a couple to a few generations old?

Every other type of electronic drops in price as it ages along with newer models.

There has to be collusion between the manufacturers and the carriers.

My theory is the carriers make sure the manufacturers won't sell direct at fair market prices and in turn the carriers promote/invest in new devices.

A GS3 should cost no more than $300 brand new right now and a GS4 should be about $350 to $400 depending on storage.

So why can you get cheap refurbished electronics but not smartphones? I'm not talking from carriers with contracts.

The iPhone 4S had $188 in materials. Even if you add shipping, labor, marketing etc to each handset it shouldn't cost over $500 new.

You have a totally flawed understanding of the costs built into every handset. There's the materials, the packaging, in store fixturing/signage, and the biggest cost, marketing. That $500 is actually more like $200-$250.

Sent from my SGH-M919 using Tapatalk 2

 

[Rule9]

Why do you ask a question and then trash the answers you're given? There's a reason they cost as much as they do, and it isn't the reasons you seem to want to be true.

Sent from my SGH-M919 using Tapatalk 2

I think ranting is his purpose, not understanding

 

[garublador]

You have a totally flawed understanding of the costs built into every handset. There's the materials, the packaging, in store fixturing/signage, and the biggest cost, marketing. That $500 is actually more like $200-$250.

Don't forget distribution, R&D, support (both hardware and software), fall-out, and certifications for safety, EMI (both intentional and unintentional radiator), environmental and carrier compatibility for each different configuration and required agency.

 

[JHBThree]

Don't forget distribution, R&D, support (both hardware and software), fall-out, and certifications for safety, EMI (both intentional and unintentional radiator), environmental and carrier compatibility for each different configuration and required agency.

Yup. The profits aren't exactly what everyone thinks. Apple has, I believe, a 30-40% profit on iPhones. That works out to $200-250 per device, nowhere near the $500 the op was trying to claim. (And I don't believe apple includes marketing in the costs for figuring out their margin)

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[troshs]

I'm not very good at debates, but I'll add my 2 cents. Whats good for one person isn't exactly great for the next. I think that its great that some people can upgrade when they want, but personally I wouldn't do that myself. When I was younger, I would go through phones like **** through a goose. Now that I'm older I have mellowed out and I seem to be more careful with them. I have a good working phone and wouldn't need to update every year. My upgrade comes up in a matter of weeks (earlier, if I make my account current) and my phone is just now starting to fail me, and **** me off. I was still very fond of it before it started acting up. I had no reason nor want to upgrade before then. 2 years is a perfectly good time for me. On the other hand, there are folks out there who have to have the newest and latest technology to be with the "in-crowd", so to speak, and full respect due, would be able to use the upgrade every year or so. Not to mention you have to pay the carrier more money in order to get these upgrades. That's just not my cup of tea...you win, if you want the upgrade, but not without some kind of catch. Can't expect anything more. Basically I'm going along the lines of what Rule9 said yesterday. I agree totally.

 

[Unicorn Rancher]

Right. Because HTC is making money hand over fist with their "artificially inflated" prices.