Okay, this is my last post on the Apple Watch because I have better things to do. After writing the last post, however, I continued thinking about it (I had a three hour meeting last night so I had some time to think...) and I thought that there might be one angle that I had alluded to in my very first post on the subject, but didn't mention yesterday. What if $400 is a perfectly reasonable price for the Apple Watch?
I had originally concluded that based on what it could do, $350 seemed like a reasonable price for the technology that was included in it. If a Jawbone UP 3 now costs $179, with no display and no notification system built in or no way to add apps, you can start to see how maybe $400 is worth the technology that's included, especially when you factor in a healthy profit margin which Apple most certainly did (for the rest of this post, $400 is the price point for the Apple Watch because that's the least expensive model at the size that I personally would buy.) The real challenge for me is figuring out how I could justify $400 for something that doesn't really do anything I need it to do. It really is just something that I want, because I think it's pretty cool.
So here's the thing. It is pretty cool. It's neat technology. Yes, it's going to be obsolete in a few years. That's life. But the question is, what should that neat piece of technology cost?
My mistake was thinking that I could compare it with something else on the market, but I now think that's misguided. Should we compare it to watches? Watches are mechanical devices, at the $400 dollar range they are definitely into the "fashion" category, and you tend to keep them. The Apple Watch is something different than that. So is it a fitness tracker? Fitness trackers are relatively simplistic, largely just sensors wrapped in rubber with a battery and some LED's, and are very much single purpose. The Apple Watch is something different than that.
In the end, the Apple Watch is something completely new. And I think that the price points Apple has come up with–thinking primarily about the technology aspect and not the fashion aspect–is that this is what a piece of technology like this should actually cost, especially if the company wants to make any money. The reason I differentiate between the technology and the fashion is that the technology is the same in each of the devices. The Sport, Watch, and Edition contain exactly the same internals. It's the case and the band that are different, and that is the fashion aspect. It's the fashion that ultimately gets the price so astronomically high. But what should the technology cost for this brand new device, the likes of which really doesn't exist on the market, or if it does, is not as well made and really hasn't gotten any traction?
This is a question that played itself out in a similar way with the price points of the original iPad. One of the criticisms of the iPad, or even the Mac throughout the years, is that there is an "apple tax". People think that Apple charges higher prices for the same technology, and so they are a rip off. Increasingly, that's not the case, since Apple products have become more competitively priced, particularly as their volume has exploded. Nevertheless, you will still pay a bit more on an Apple product. And here's why: because that's what it costs for the technology in the product. Apple isn't going to make a crappy iPad. They are going to make a great iPad, and they are going to price it like it costs, with their profit margin built in. They don't make any apologies for needing to make money as a company. That's their job. They are a business. So they aren't going to sacrifice profits for the sake of sales. When the iPad was released, you could get one for $499. Because that's what it cost for that type of technology.
Compare that with an Amazon Kindle Fire, for example. People look at it and say, "see, I can get a good tablet for almost half the price of an iPad. Apple is too expensive." Except they aren't. Apple isn't overpricing; Amazon is shooting themselves in the foot with a ridiculous business model. Apple makes a great device and says, "here is what it costs." The device is going to work, Apple will make money, and you will be pleased, because they are going to sell you a device that works at a price that makes sense. The Kindle Fire might work pretty well (not as well as an iPad), but Amazon isn't making any money off of it at all. They have sacrificed build quality to get it at the price point they wanted (something Apple won't do) and then they basically forego any profits in order to keep it as cheap as possible.
Again, Amazon will orego profits on it's product in order to sell their devices. That truly is a ludicrous business plan, but it's the business plan that most of the tech industry operates under. It's the reason that year after year, Apple takes some ridiculous percentage of the total profits of all tech companies combined. They are the only ones that are selling the device for what it actually costs.
What that means for the consumer is that even though you are going to be paying a little bit more for the product, you can know at least two things. One, the transaction Apple is making with you is one in which they have put together what they consider to be a great product, and they are giving it to you for what it costs, so that they can continue doing what they do. The only way that system works is if, when you buy that product, it actually is better than some other product you could buy, either because of build quality, technology, or customer support. Apple does well on all three. Two, because of the nature of the transaction, where Apple is simply telling you what it costs and what they need to make on the product (the profit margin) to continue to do business, when you buy it, you have an implicit understanding that because they have gotten all the profits they need from the consumer, they don't need to go searching elsewhere for more income. Practically speaking, they don't need to sell your data. They don't need to serve up ads. They don't need to commoditize you. They already had a profitable transaction with their consumer, and everyone can be happy.
So back to the Watch. Apple has not asked, "what are people willing to pay for this type of technology?" They have built a product and asked, "what does this type of technology cost?" Whether or not people are willing to pay it is yet to be seen. My guess is that for those who are willing to spend the money for that particular technology, what will disappoint them is not the technology per se, but their experience of the technology. It won't be the question of whether that piece of technology should cost $400 (it should), but whether or not the benefit to their life was worth the $400 (or more) that they spent. Again, I think that's the experience of the iPad. I don't think you can walk out with a $500 iPad and think to yourself, "I overpaid", as you hold a piece of glass in your hands that is more powerful than most of the laptops I've recently owned. I think discouragement that you spent $500 creeps in when you realize that you don't really have a need for the iPad, or you don't use it as often as you thought you would. (For the record, I've never felt that way about either of my iPads. Every time I've used it, I've felt like I got a great deal for what the thing can do, and it meets my needs perfectly.)
Will people feel that way about the Watch? I don't know. What I think I can be certain of is that the technology costs $400. And if you want that type of technology, then that's what you'll need to pay, no apologies. And not only are there no apologies this year, but there won't be any apologies two years from now when you'll need to spend another $400 for newer technology. That's just what this type of technology costs.
The unanswered question is whether or not people are willing to pay that type of money for this type of technology. It's not a watch. It's not a fitness tracker. It's something totally different. It's a computer on your wrist.
Some people will definitely buy it. I think the first generation will probably be a mild success. Good by Apple's expectations, bad by analysts. I think the real indication, however, will happen overtime, as people wrap their heads around the cost of this particular type of technology. Eventually, when we think of wrist-computers, we'll probably just think to ourselves, "wrist-computers cost $400", just like we might think that "phones cost $200" (they don't, by the way) or "tablets costs $500" or "laptops cost around $1000".
From there, we'll decide, "do I really want a wrist computer?" And if we decide we do, then we'll happily go out and spend $400 on one. Because that's what this type of technology actually costs.