Google's Android is a free OS given to manufacturers and certified on different carriers. Google (GOOG) derives revenue from advertising, rather than on selling the OS itself. Hardware manufacturers like HTC, Motorola (MOT) and Samsung can focus on what they do best: building great commodity hardware to complement Google's OS.
Apple (AAPL), on the other hand, has to build and maintain its iOS without much help (yet) from advertising revenues. It also has to build its own phone hardware, which many believe is the pinnacle of high-end industrial design, antenna-gate notwithstanding. At the same time, Apple has to please its shareholders with its fat 40% margins (plus or minus) quarter after quarter.
So the question is: Why does a high end Android phone cost roughly the same as an iPhone? Shouldn't Android devices sell for hundreds less?
On the surface, there isn't an easy answer. Verizon (VZ) touts its Droids from Motorola and HTC at $199/each (left). Apple's iPhone 4 with 16GB of RAM (right) costs the same..
Samsung's high-end Galaxy S Android device also sells for $200 with plan at T-Mobile and AT&T (T). The Sprint (S) version will sell for $250 with plan.
AT&T exclusivity takes a bigger cut of the pie?
One would have to think that AT&T is subsidizing a higher percentage of the iPhone 4 than it would if there was no exclusive agreement in place. If not, what does AT&T pay for its privilege of being the only carrier in the US to sell the iPhone?
In France, an unlocked iPhone 4 16GB is €620 or about $800. France is different than the US because French law doesn't allow phones to be locked to carriers (Vive!). So, you can buy your iPhone at Orange and put a SFR SIM card in it without missing a beat.
In the U.S., you can buy an iPhone 4 without a plan, but that phone is locked to AT&T. If that phone is to be used (without Jailbreak/unlocking) AT&T will get revenues from it.
AT&T sells their 16GB iPhone 4s without plan for $599, but it is hedging that it gets more revenue out of the unlocked phone from customers who perhaps don't qualify for post-paid plans or maybe lost their original iPhones soon after buying them.
So, if an iPhone is worth $600 tied to AT&T and $800 on the open market, the price of AT&T's exclusivity is the difference...or somewhere in between. Apple typically charges significantly more in Europe for its products than it does in the US because of taxes and other considerations.
What is interesting about the exclusivity issue, and one that hasn't been talked about in iPhone terms, is that when AT&T loses its iPhone exclusivity, one of two significant things has to happen:
Apple has to make significantly less profit on each iPhone or AT&T will have to charge more to consumers. Could this jack up the price of the iPhone on both AT&T and Verizon?
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