Lost in all the excitement about the launch of the iPhone 15 with a price tag that can rise above $1,000 is the fact that wireless carriers and Apple still have inventories of iPhone 14s. The price deals on the iPhone 14s with the fewest features can be ridiculously low. (These iconic gadgets have shape our lives since the 1950s.)
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Verizon offers the iPhone 14 for $20.27 a month. The trick is that the buyers need to take out a 36-month wireless construct, part of the transaction on which Verizon, AT&T and T-Mobile make money.
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The business principle behind the iPhone 14 low-priced model is that many people do not want an iPhone 15 or the higher-priced contract that comes with it. Analysts have argued that the features in the iPhone 15 are not much of an upgrade from the earlier generation. This observation is probably accurate since most people only use 20% or less of the available features. And there are still people with iPhone 12 and iPhone 13 models. They will eventually upgrade but may not see the benefit of the latest model.
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The carriers play a risky game each time a new iPhone generation is launched. While none publicly says what it pays for the iPhones it sells to customers, the number is in the hundreds of dollars. These are “loss leaders” to bring customers in. A customer who takes out a contract for an iPhone 15 that requires a $35 payment over 36 months brings the carrier $1,260. This is not all profit. Beyond what the carrier pays for the iPhone, it has costs that range from its network infrastructure to its stores.
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Tiered pricing is part of many industries and has been a staple of the auto industry. Some customers are just cheap, and there might as well be products to sell them.
The $20 iPhone
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
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