
The Apple Watch’s Insanely Great Economics - r0h1n
http://www.wired.com/2015/03/apple-watchs-highlow-branding-insane-economies-scale
======
unimportant
It's kinda weird to suck up to Apple by claiming it's a great strategy upfront
without there being any proven sales success.

I don't think there is much of a demand for smart watches and the luxury
edition will make many people think if they want to support a company that
offers outrageously priced products along with normal priced products, as both
hipsters that can easily afford apple products and wealthy people might not
vibe with a dual strategy like this.

~~~
XorNot
One of the Tested guys pointed out there was a big hazard with Apple eroding
the feel of it's brand - no matter who you are, if you buy an iPhone then you
have the same iPhone as any celebrity.

With the watch...that's only going to be kind of marginally true: you'll have
the same electronics package, but there's an importance psychological
difference when Apple is also selling the $10,000 Kanye-edition watch in the
same store (and has to publicly assign importance to that - they can't do that
and then publicly be smug about it being a waste of money).

~~~
UnoriginalGuy
Legit point.

However I will point out that it hasn't hurt Beats headphones. They are VERY
big on celeb' endorsements, but sell tons of different editions/looks. Their
brand and ability to sell $14 headphones for $200 hasn't been damaged.

~~~
XorNot
But they don't sell $10,000 headphones direct. And Beats has the same model:
"same as the stars use to mix their tracks".

Of course that's complete garbage, but its a much easier sell when the only
headphones you sell are an affordable $200-400 range with "justifiable"
reasons for it.

~~~
TheOtherHobbes
Watch doesn't work as a Veblen product because it falls into the uncanny
valley of _not quite_ being unaffordable enough.

A $1,000,000 watch in a limited edition of 25 would do much less damage to the
brand than a $17,000 watch in a limited edition of ????

Median buyers know that they can never afford $1,000,000 for a watch. So at
that price it remains a celebrity fantasy product, and some the fantasy gets
reflected onto the rest of the range.

$small-number,000 is - paradoxically - almost, but not quite, affordable. It's
not any more expensive than many cars, and people buy those all the time.

But the only extra value is the case and the strap. So it looks a like you're
paying a lot to pay a lot, and getting something very mass market for the
money.

With a nicer strap and case. But people don't buy watches for the strap or the
case.

Now you have an "exclusive" product that isn't producing the right exclusivity
signals, but at the same time it's expensive enough to seem gratuitously and
irritatingly unreachable.

There's nothing insanely great about this. I don't think Steve Jobs would have
done it. (I mean - who knows? But historically, there's good reason to suspect
this wouldn't have worked for him.)

------
gnoway
I've now read that Apple Watch Edition gold has more gold per unit volume
(this article, [0]), and less gold per unit volume ([1], [2]). Which is it?

[0] [http://arstechnica.com/apple/2015/03/is-apples-real-watch-
in...](http://arstechnica.com/apple/2015/03/is-apples-real-watch-innovation-a-
gold-case-thats-as-tough-as-steel/)

[1]
[http://pdfaiw.uspto.gov/.aiw?PageNum=0&docid=20140361670](http://pdfaiw.uspto.gov/.aiw?PageNum=0&docid=20140361670)

[2] [http://www.businessinsider.com/apple-watch-special-gold-
cera...](http://www.businessinsider.com/apple-watch-special-gold-ceramic-
alloy-2015-3?op=1)

~~~
542458
More gold per unit volume than what?

Early reports mistakenly reported that Apple was using a gold-ceramic mix,
which would result in less gold used by total weight. However, these reports
turned out to be nothing more than speculation, and Apple is apparently using
a relatively normal high-end gold jewelry alloy (without ceramics). As such,
the Apple watch should contain a fairly typical amount of Gold for it's
volume.

------
pmontra
"We’re okay with one brand making everyone’s cellphones, because no company
could do so without enormous scale"

Is this claim backed from any market figure? I believed there are far more
Android phones than iPhones.

Anyway, most of the reasoning in the post is sound but I wonder how a smart
watch (Apple or anything) will appeal to people that grew up without wearing
watches (it's been only a fashion statement in the last 20 years) or decided
to do without it (like me since the beginning of the '90s, there is always a
clock around). Is this market really going to be as large as the one for
phones?

~~~
melling
You didn't think about what you said. Yes, Apple only has a small market share
but they are one of the biggest manufacturers.

[http://www.macrumors.com/2015/01/28/apple-samsung-
strategy-a...](http://www.macrumors.com/2015/01/28/apple-samsung-strategy-
analytics-q4-14/)

I see the new smart watches as a new market. Health and fitness will convince
many people to buy the new wearables.

Since Apple is always a premium brand, I wonder if Pebble or Android is going
to be the new dominant wearable brand.

~~~
visakanv
Agreed re: new market + health & fitness. It's worth remembering that our
phones aren't really phones– they're really computers with "phone" as one of
the apps on it. And there wasn't really a big market for it when it launched
(outside of geekdom), until people started discovering how useful it was.
Facebook, Twitter, etc are things that people can do on the subway with their
pocket computers.

Similarly, I think if wrist computers take off, it'll be because of the
health/fitness tracking stuff, rather than anything to do with the time.

------
newaccountfool
I find the idea that writer thinks they have a chance competing with $17,000
Rolex watches laughable. Yest they may all be machine made, but they long
heritage and are globally recognized as a high end watch.

~~~
moe
Moreover Rolex are said to retain their resale-value pretty well.

A Rolex can live 30+ years, be re-sold or inherited many times, and still work
like on the first day. Some of them even increase in value.

Resale value of the Apple watch? Well, after 2 years it's a slab of gold with
obsolete electronics inside. After 4 years it's a slab of gold with obsolete
electronics and a dead battery inside...

In just a few years your $10k watch will be worth as much as the material its
made from, minus the cost to salvage it...

~~~
Rexxar
I think they will do an exchange program for the gold watches when the second
version will be out.

~~~
XorNot
Doesn't matter. A watch you get upgraded every year? It's not a watch - it's
not a complete item any more. Rolex's retain their value, in part, because the
complete item stays in service - thus the history of the device is maintained.

------
jcadam
I'm still not sold on the idea of a 'smart watch'. And I'll admit I have a
thing for mechanical watches, so if I'm going to spend hundreds (or thousands)
of dollars on a watch, it's probably going to be a nice 'real' watch, rather
than one of these things. And for a 'sports' watch, just a cheap velcro-strap
casio/timex with a stopwatch function is all I need.

Until these watches integrate real 'phone' capabilities (so I don't have to
_also_ carry a bulky smartphone), I just don't see the point.

~~~
matwood
Great points that I agree with. For many people the ubiquitous phone has
replaced the previous _need_ for a watch. Now if someone wears a watch it is
typically solely for fashion.

If like you said, a watch could stand on its own as a communication/fitbit
device then it might take off. Perhaps Apple is simply out front here?

------
wongarsu
"A hundred-dollar gadget would have to sell to virtually every middle-class
family in the country to yield meaningful revenues for Apple"

Since when does Apple only sell to one country? Last time I checked, the US
accounts for less than 5% of the population of this planet

~~~
robinhoodexe
But the US accounts for a lot more than 5% of the people willing to buy their
products. My guess would be closer to 30%.

~~~
wongarsu
Right now it's certainly closer to 30% than 5%, but I imagine a well made $100
Apple device would sell really well in India and China. I doubt it would be a
good investment for Apple, but the problem isn't that there aren't enough
people to sell to.

------
wrongc0ntinent
It's interesting that "luxury" gets invoked so often around this watch,
compared to Rolex, etc. It's pretty clear they're going for the Veblen goods
[0] category. No need to rationalize functionality, either.

[0]
[http://en.wikipedia.org/wiki/Veblen_good](http://en.wikipedia.org/wiki/Veblen_good)

------
gargarplex
Disagree with the author's claim that making a $17k watch would be bad for G
Shock. It would do phenomenonally well in the hip hop community, promote the G
Shock brand, anchor the other watches' price point, and be a great contest
giveaway

------
cletus
You can count me as a big fan of Apple products. For me, the Macbook Air is
about the perfect laptop. Apple networking devices have served me pretty well
over the years. I've used an iPhone for years (since the 4) and see no reason
to change. My iPad is easily my most-used computing device at home.

However, I have no desire to get an Apple Watch and I just don't see it being
a huge market.

Now you have a lot of people who don't wear watches. Are they suddenly going
to start? I'm skeptical.

For those that do the reasons tend to boil down to need, desire and habit.

"Desire" is the easiest category. Many people like fine (generally Swiss)
watches. Some just for the perceived "status". Others because they're geeks
for watch movements. I can't see them buying into _any_ smartwatch.

Normal watches aren't wind-up. Wind-up watches are wound daily. Watches with
batteries can last years on a single battery. Self-winding watches last
basically "forever" (wear in the movement means servicing every 5 years or
so).

Who really wants a watch that you need to separately charge every day?

Let's look at the applications. And here Apple has taken an unusual approach
in what I tend to call shotgun marketing. They tout 9 or so use cases. Usually
Apple tends to focus on 1-2 key use cases and even then they talk about them
in terms of experience. Go back and look at old iPod ads to see what I mean.
Obviously an iPod is a single use device (ignoring the Touch) but the same
applies for iPhone/iPad advertising.

Fitness is one such category. It's unclear if their heart rate sensors are
suitable for, say, running. Fitness HRMs are almost exclusively done with a
chest strap. It's much more accurate and reliable although less convenient.
There are other devices that don't use a strap (like the Basis watch) but, for
this reason, they're not suitable for exercise.

But I guess the HRM functions make it fine for tracking your _general_
activity during the day.

Which is why Apple touts "medical research".

The whole heart rate "sharing" and tapping someone's arm strikes me as
gimmicky, even creepy, but who knows? Maybe there's a market for that.

The sort of person who doesn't want to take their phone out to make a phone
call is the kind of person who has a Bluetooth headset.

Being able to glance at texts or emails? Maybe... but is it something people
will pay $500+ for and charge every day?

Wrist watches came to exist because seeing the time on your wrist had a lot of
uses and is pretty convenient. The smartwatch movement is attempting to co-opt
that form factor but really what is the killer use case(s)?

Apple is a pretty conservative company and doesn't tend to get into markets
without good reason, which is the _only_ reason I'm watching to see what
happens. Anyone else and I'd simply dismiss it.

Apple have had other products without widespread appeal like the Apple TV.
Sure it's sold millions of units but not, say, the 70M/quarter kind of numbers
the iPhone is up to (I believe it's probably <20M over the life of the device)
but Apple hasn't put their full weight behind Apple TV like they seem to be
with the watch.

I'll be shocked if this turns into a major product line (in terms of revenue)
for Apple.

------
chernevik
I think they're going to get killed on the luxury end. People buy Rolex and
Hermes and Vuitton to get exquisitely made and differentiated items that act
as status markers. The prices are out of all proportion to the utility of the
items, and everyone knows the margins in those prices are enormous, but there
is at least some story of manufacture and design behind that price.

Apple's "story" for a $17,000 watch is, that's how we priced it. It's an
arbitrary decision without any plausible claim behind it. Any one buying one
of these things is marked, not as a person of taste and means, but a sucker.

Apple, of course, claims industry-leading margins on its products because of
its brand, and that brand is founded in part on design and appearance. But
it's more of a "style" brand than "luxury" \-- the items aren't expensive
beyond the reach of most people. They can mark an owner's taste, but not, past
a certain point, their means.

My fear is that Apple is allowing this luxury approach to taint its whole
approach to the watch. Watches are definitely different than other technology,
because they're constantly on display, and so many people insist the
appearance of the watch fit their overall look. That does require a variety of
looks and bands and such. But Apple has decided to position the watch as other
watches are positioned -- either high-end luxury items, or more accessible but
fashionable brands.

It's a missed opportunity to re-invent the branding and positioning of
watches. What if Apple had instead recognized the need for options for the
appearance for the watch, but had instead priced them simply on the basis of
manufacture and development? The message could have been that next step for
technology is to admit enough variety of appearance to blend in with a user's
preferred look, without sacrificing the convenience and enablement and cost
advantages of technology in the first place. "A watch for the rest of us"
could have been a device that left the luxury people behind, stuck with a
tradition that did less for them than that of the wider population.

Better still, such an approach could have been a big step against the idea of
technology as commoditizing and homogenizing. It would have been an
opportunity to look at technology, not as simply utilitarian, but a real
opportunity for the expression of personality.

Apple would have been far better off, and far more revolutionary, to quietly
say that marking status with contrived pricing for outmoded technology is just
silly. Better to mark one's self with one's choices, within ranges available
to many, and achieve status by the quality of those choices. They might have
created a brand that in ten years made Rolex look ridiculous, and opened some
really new approaches to thinking about how technology can interact with
fashion.

------
WorldWideWayne
> We want not be dominated by our technologies, but rather, to control them.

If that were true then nobody would choose Apple products, which always lack
control-features that are offered elsewhere. It starts with their hardware and
continues on throughout all of their software. Apple is the company of "one
button" and "why would you want to do that?"

Their most basic mode of operation is to offer the bare essential amount of
control to users. It's a great way to do business for them because it costs
less to make things that have fewer options and if they perfect the few
options that they do offer, then they can claim to be "better" than other
products.

Apple products will force you to do things the "Apple way" and if you don't
like it, then you're not going to have a good time. If you do like the Apple
way, then perhaps you can fool yourself into believing that you actually have
some control over your technology.

~~~
happyscrappy
I guess you have never used a MacBook.

~~~
WorldWideWayne
And I'm guessing the only reason you're guessing that is because you think
Apple products are the greatest and you could never imagine anyone not liking
their stuff?

No, I actually have a Macbook Pro sitting right next to me and we have iPads,
iPods, iPhones, etc. throughout the house. I actually recommend them to users
who don't care as much about control, which is most people. They're just not
for me though.

~~~
happyscrappy
You feel you don't have control of your MBP? You just need to do some
research, it is more congigurable than you realize.

~~~
WorldWideWayne
Which Macbook can I choose that has 2 physical trackpad buttons instead of
just one multi-touch pad? I need it because multi-touch sucks for video games,
but Apple only offers the one option. How about a laptop with a number pad?
You don't get these choices because it's bad for Apple's bottom-line.

I'd also like to replace the OS X Dock with a Taskbar app, but all of the
taskbar apps have the same bug because Apple doesn't let software developers
modify the NSScreen.visibleFrame property (only the Dock can do that). So,
windows always end up behind the taskbar. On Windows all of the APIs are there
to replace the Taskbar with a Dock if I want to.

I'd also like to turn off the Macbook display when plugged into an external
monitor.

~~~
mietek
_> I'd also like to turn off the Macbook display when plugged into an external
monitor._

sudo nvram boot-args=niog=1

[http://apple.stackexchange.com/questions/152203/turn-off-
mac...](http://apple.stackexchange.com/questions/152203/turn-off-macbook-pros-
display-while-connected-to-external-monitor-on-yosemite)

~~~
WorldWideWayne
Right, but according to one commenter "This works once you boot. But only
until the computer goes to sleep. Waking it back up turns the built-in display
back on." and according to another one there is a three step process which
must be implemented on every single boot.

So, wouldn't you agree when I say that _Apple_ just doesn't give you the
option?

------
throwaway22mar
by giving up hours, all of the precious times your phone is put away and you
can fully participate and be present in the world around you, you can save
seconds a day.

------
UnoriginalGuy
> “There are very few products that allow you to hand someone cash and be
> given back time. This will be the Apple Watch metric to track: time saved.”

Except all the other smart watches, including much better designed ones like
the Moto 360, released in the past year and a half before Apple got into the
market? Pray tell what is the Apple Watch's USP? The iPhone lock-in?

I don't own a smart watch, because honestly the only explanation for them
existing is: "it is too much work to take my $500 smartphone out of my
pocket." This article is clearly a puff piece, and even its only argument for
the device is "time saved" (which I'm guessing refers to that 5-7 sec it takes
to get your phone?).

Seriously someone please explain to me why you'd want this $350 brick or even
a $250 360? That's half the cost of a smartphone again and only so it can
relay events/info from your phone to your wrist?

PS - I loved Wired quoting TechCrunch. That's great "journalism" right there.

