Apple screwed up by launching 3 iPhones at once
Apple shares dipped last week on the type of news that Apple most fears: weak sales of a new iPhone.
According to Consumer Intelligence Research Partners, iPhone 8 and 8 Plus sales made up only 16% of all iPhone sales in the third quarter. Compare that to the 43% of iPhone sales that iPhone 7 and 7 Plus contributed in the same quarter last year.
AT&T, T-Mobile, and Verizon (parent company of Yahoo) have all added to the bad news for Apple by reporting slow customer upgrades to iPhone 8 or 8 Plus in the quarter. AT&T, for example, said 3.9% of customers have upgraded to iPhone 8 or 8 Plus, compared to 5.1% last year when Apple launched iPhone 7 and 7 Plus.
The CEO of Canadian mobile giant Rogers Communication went so far as to call iPhone 8 and 8 Plus interest “anemic.”
What went wrong? The biggest culprit: Apple announcing iPhone X at the same time it announced iPhone 8 and 8 Plus.
Apple cannibalized its new phone with its other, flashier, pricier new phone. It also confused consumers, many analysts are saying, by giving too many options at once.
Apple devotees are used to getting one new phone every year, and, beginning with the iPhone 6 in 2014, a Plus model, as well. This year, Apple suddenly gave them three.
The iPhone X is almost guaranteed to be a massive hit. But the iPhone 8 and 8 Plus look like they won’t be—they’ve been one-upped, at the moment of launch, by the X.
“A terrible case of FOMO”
When Apple unveiled the iPhone X at its September event, CEO Tim Cook said the iPhone X is “the biggest leap forward since the original iPhone” and that this model would “set the path for the next decade” for iPhone.
“If that’s the case,” asks Ramon Llamas of IDC Research, “why would you want the 8?” Apple’s own on-stage hyperbole diminished the first two phones it had just unveiled before the X. The company, Llamas says, “gave the impression that the 8 is good enough if you’re not going to use all of our forward thinking and new innovations. It’s good enough if you don’t want to participate in all those things. But within the US we have a terrible case of FOMO. [That’s “fear of missing out.”] Nobody wants to miss out on the best.”
Indeed, Verizon CFO Matt Ellis said last week on its Q3 earnings call that he expects more upgrades next quarter as people flock to the iPhone X, which ships on Nov. 3. “As we get into the holiday season and some of those new devices come out, we think we will see strong demand.”
Discounts on iPhone 8 and 8 Plus are spreading in China due to low demand. Forbes calls the iPhone 8 “a placeholder phone released just for the sake of releasing something because Apple can’t produce iPhone X in high quantities fast enough.” (And a different Forbes post calls launching three new phones at once a “failed gamble.”) The Wall Street Journal calls iPhone 8 “not the upgrade you’re looking for.”
Still, IDC doesn’t expect iPhone 8 to be a total sales dud. There are many people for whom the incremental model—rather than the $999 “leap forward” option—will be good enough, once they’re ready to upgrade.
“More than anybody, Apple knows the stratification of market segments,” Llamas says. “So how many people want something similar, and how many people want something more advanced? There normally is an appetite for both. I do think the X is going to overshadow the 8 in popularity and units, but the 8 is good enough for a lot of people. If you want the new bells and whistles, you get the X.”
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Daniel Roberts is a writer at Yahoo Finance, covering tech and media. Follow him on Twitter at @readDanwrite.
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