Technology

Apple Averts a 'Fanboy Rebellion'


Amid outrage from even his most faithful fans over a surprise iPhone price cut, CEO Jobs issues a rare mea culpa and an even rarer rebate

Soon after Apple (AAPL) announced an unexpected $200 drop in the price of the iPhone on Sept. 5, Chief Executive Steve Jobs betrayed little sympathy for the chumps who had bought the device at the higher price. "Well, that's what happens in technology," he said in an interview with USA Today.

Jobs sounded a more compassionate note the following day: "I have received hundreds of e-mails from iPhone customers who are upset about Apple dropping the price of iPhone by $200 two months after it went on sale," Jobs wrote in an open letter to iPhone customers on his blog. "Our early customers trusted us, and we must live up to that trust with our actions in moments like these." Apple will take swift action: The company plans to issue $100 store credits to everyone who bought an iPhone.

So What's the Thing Worth?

Vitriol over the 33% price cut was broadcast far beyond Jobs' inbox. On blogs and Web forums, many early adopters railed against Apple for the timing and size of the price reduction, while others felt that the initial price was set too high. "A drop of $200 after just 66 days means that the iPhone decreased roughly $3.03 a day in retail value between launch and yesterday's announcement," wrote Terrence Russell on Wired's blog, Epicenter. "It's no secret that electronics drop in price over time, but such a deep and hasty discount makes trying to quantify the realistic retail value of the hardware confusing."

Some were jarred by the anomaly of Apple's move. "This 'upgrade' doesn't fit the usual pattern of Apple products going about six months before a change, and usually that change means adding more features to a product but keeping the price point the same," wrote Jason Koneshiro on Webomatica.

Others speculated the cut was motivated by lackluster sales. "To us, this move suggests the phone is not selling as well as Apple had hoped," wrote Dan Frommer on Silicon Valley Insider. Meanwhile Apple 2.0's Philip Elmer-Dewitt predicted that the company may be "clearing out inventory to make way for a 3G iPhone ASAP," referring to future product that might utilize a higher-capacity phone network.

Paying a "Cool Tax"

Still, many bloggers weren't so surprised by the announcement. "Hype breeds irrational desire based on impulse, and those with poor impulse control pay the price," wrote Dwight Silverman on TechBlog. "In this case, the price is $200. Think of it as your Cool Tax, gang, and an expensive lesson learned."

Whatever the reasons for their purchases, even the Mac faithful were miffed. In comment threads on The Unofficial Apple Weblog, posts from disgruntled iPhone owners numbered in the hundreds. "A $200 penalty for buying into their vision and trusting them?" asks a commenter going by the name Billy K. "Never again."

Really? Other blogs brought to mind the line made famous by Animal House, "Thank you, sir, may I have another?" "I'm cool with paying a high price to be first," wrote Robert Scoble on his blog Scobleizer, admitting that after buying three iPhones, his "early adopter tax" totals $600. "I'll be first in line for the next great innovation too."

Apple appears to have quelled at least some of the opprobrium with its $100 rebate offer, even if it came across as being unprepared for such a backlash. "Give Apple credit for acting quickly to put down any budding Apple fanboy rebellion," wrote Eric Savitz on the Barron's blog, Tech Trader Daily. "But let's also say that it now seems clear that Apple's master planners maybe didn't have all the pieces nailed down when it decided to cut the iPhone price by a third."

MacMillan is a reporter at BusinessWeek.com in New York.

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