Apple’s Sly Wink At Unlocking

by Eric March on April 29, 2008 at 6:28 pm

MacWorld had a pretty good piece on Apple secret love affair with unlocked phones. The point made was that Apple really don’t mind unlocked phones. Even if they don’t see any residual income from those phones, whether they’re being used on carriers that share revenue or not, Apple is still all smiles on the inside.

And why not? You may recall reports that surfaced after the iPhone was released that Apple’s margin on the iPhone was in excess of 100% above cost. In the highly competitive tech industry where margins are often razor-thin, that’s a huge profit, and the trickledown effect since its debut has undoubtedly reduced their costs, which in turn only increases their margins further. So why shouldn’t Apple smile? They’re making a bundle from each iPhone sold. In the short term, anyway, the income from revenue sharing programs is just gravy; that part will only become significant when the iPhone starts approaching market saturation, and they’re a long way away from that.

So why does Apple publicly make frowny faces over unlocking? Because they have to keep up some semblance of concern for the sake of the carriers they partner and share revenue with. It is they who complain the loudest over unlocked iPhones, because it is they who ultimately reap the most benefit from carrying the iPhone in the first place. As you will learn in a forthcoming Touching Up article, AT&T’s profits are on the rise, and the majority of that of that is due entirely to the iPhone. Apple has to appear to be at least a little sympathetic to the plight of the carriers bemoaning the “loss” of iPhone revenue from unlocked devices being used on their service. (Those are the same “losses” the recording industry “loses” to music piracy — which is to say that most of them never had the potential to become sales in the first place, and thus are only losses on paper.)

But of course, when their backs are to him, The Steve can’t help but beam. His company’s sales are just fine, thank you, and continue to rise regardless of how the iPhone is used. But yes, he understands your concerns, AT&T, and sympathizes. But really — unlockers, whaddya gonna do, right? In the end the widespread sales of unlocked phones — estimated to be as much as 30% of all iPhones sold to date — has been a significant factor in making the iPhone as popular as it is now, and will only continue to do so. If it means the loss of revenue sharing, this is more than made up for by the profit margin on the iPhone itself, and its value as a vehicle to spur more iPhone sales and increase its market penetration, which in turn just gives them ever more leverage with carriers.

Of course The Steve is smiling. He has no reason to frown when the carriers aren’t around.

(Source: Macworld)

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