Apple’s rising prices may be bad news for more than just consumers

Apple has launched a bevy of new products this fall, from iPhones to iPads to laptops and more. Some are fantastic upgrades, others are perhaps more questionable, but whatever the merits of any particular new device, there’s one thing that’s indisputable: They’re all more expensive than they used to be.

That’s disappointing for many consumers, who will be either squeezed to pay more for the devices they want or simply priced out altogether. But Apple’s deepening love for the high end might not be good for the future of the company, either.

The iPhone XS Max raised eyebrows when it became clear the top-of-the-line model costs $1,449, or more than many laptops. The iPhone XR — now Apple’s “affordable” iPhone — starts at $749, or roughly the starting price of what was the higher-end model two years ago (the iPhone 7 Plus). The starting price for the 12.9-inch iPad Pro went up by $200, and maxes out at a spit-take-inducing $2,356 (including an Apple Pencil and keyboard case). Even the MacBook Air and Mac Mini, both formerly notable for their relatively low prices, are now significantly more expensive than their predecessors.

Some of this is due to inflation. And some of it is due to meaningful upgrades to entry-level models (for example, the iPhone XR has the same state-of-the-art chip as the more expensive iPhone XS), naturally raising the price of the whole line.

Apple’s high-end addiction

The trend didn’t just begin this fall. Apple has always leaned toward the high end wherever it aims to compete, and in recent years it’s appeared to consciously double down on that strategy. Its debut smart speaker, the HomePod, and the Apple TV are both priced much higher than competitors. The Apple Watch (which also got more expensive this fall) has perhaps been the poster child for Apple’s luxury brand aspirations, even if you put aside the absurdly expensive Edition models.

This, I submit, is not how Apple marketed the iPhone and iPad, at least at their early years. Apple was aggressive on pricing for both. Yes, the iPhone was expensive at launch, but it got cheaper quickly, dropping from $600 to $400 within a few months. The iPhone also had the advantage of carrier subsidies in its early years, hiding the device’s true cost. But however you slice it, the relatively low cost out of pocket led to lots of people buying an iPhone who otherwise might not have.

When Steve Jobs unveiled the iPad in January 2010, he said Apple had been very aggressive on pricing. Toward the end of the keynote, he said:

When we set out to develop the iPad, we not only had very ambitious technical goals… but we had a very aggressive price goal because we want to put this in the hands of lots of people.

He meant it: Revealing that the entry-level price would be $499, the crowd erupted with sincere applause. It was a surprisingly low price point given how novel and advanced the tablet was at the time, but the second part of the quote, getting the product in the hands of “lots of people” is what Jobs apparently understood better than anyone at today’s Apple.

The low pricing of the iPhone and iPad was a key part of how they defined their categories. The iPhone in particular went from aspirational gadget to growing phenomenon to ubiquitous, which in turn helped developers get on board. And it was apps that turned the iPhone and iPad from cool pieces of hardware into world-changing platforms.

Things are different now

Now those platforms are mature, and the markets are large. As such, Apple has responded with more models, at multiple price points, so customers need to pay more for the latest and greatest. That’s perfectly natural and appropriate: in a large, mature category, the number of consumers who will pay more for the best experience is proportionally larger.

However, the obsession with perfection and the high end is also evident in Apple’s other, more nascent platforms. HomePod is probably the best (or worst) example of this. Ostensibly Apple’s debut smart speaker, it costs $349, or more than three times the price of an Amazon Echo, or seven times that of an Echo Dot or Google Home Mini, the ground floor for the category.

Certainly, the HomePod is loaded with audio technology that improves the experience, which at least partially justifies the high price. But it’s hardly defining its category; the Echo is. With aggressive pricing, Amazon has been able to cultivate a rapidly growing audience, which in turn is encouraging developers to get on the platform, which in turn is improving the experience for everyone. As the platform evolves, those customers’ loyalty increases by the day, and they evangelize the product to others.

Sound familiar? This is the iPhone playbook, and Amazon is schooling Apple with it. To a lesser extent the same thing is playing out in streaming video: The Apple TV is undercut by Amazon, Roku, Google, and others, and Apple has also so far refused to make a streaming “dongle,” because dongles are, almost by definition, cheap.

It seems clear that smart speakers and video streaming will be two of the most important consumer product categories for the next decade. But it’s difficult to see Apple dominating them like it did with the iPhone if it keeps trending north on price. That’s a winning strategy for a mature, top-selling product like the iPhone — and may even win back the company’s trillion-dollar status — but less mature product categories would benefit from a different approach.

Look, I get it. Apple aims to define the “high end” of whatever category it chooses to compete in. And Apple’s brand counts for a lot: It can afford to charge a huge premium and simply watch the profits ring up.

Profits don’t equal influence, however. And if you look at the iPhone and iPad — the company’s most influential products so far — Apple was more aggressive on price than you might remember. They were premium, but they were still accessible compared to what they were competing against. That a lot less true today, and it may mean Apple has less of a voice in what happens tomorrow.