[CGI]

Does a blackberry really cost $599 or $699 as some of these phones sell retail? I mean... you can buy a decent full size laptop for that money.

Is the device cost falsely inflated to pull the average consumer into a contract to subsidize the expense of the device?

If you could get an honest price for the device, say $299 and no contract... just imagine how competitive the cellular industry would be.

Ever notice most everyone is at odds with their cellphone provider? Not everyone... but a lot of us despise Verizon, AT&T, Bell, etc. because somewhere along the line we've been jaded by them. I don't have this animosity with any of my home utility providers; Satellite TV, Cable, or Internet.

What am I saying? There is something crooked about the cellular industry.

[mrking.id]

If it sells for $700, the carrier gets it for $350 which means RIM most likely makes it for $175 or less. Everyone puts their markup on it to make money.

Nothing really crooked about the cell industry, all industries do it. If you buy any product, divide your retail price by 4 and you get the cost of what it takes to make it. Then again it depends on how many 'hands' the product goes through.

[CGI]

If it sells for $700, the carrier gets it for $350 which means RIM most likely makes it for $175 or less. Everyone puts their markup on it.

Exactly. Mark it up to draw the consumer into a contract.

Imagine if RIM sold the devices outright for a profit and left the carriers to make their money on their ACTUAL SERVICE?

[cd36]

Exactly. Mark it up to draw the consumer into a contract.

Imagine if RIM sold the devices outright for a profit and left the carriers to make their money on their ACTUAL SERVICE?

No its marked up so they actually make money to stay in business. Trust me this is no different than any other industry.

Do you think those laptops that you mentioned before you could get for $600 actually cost $600? No.

Best Buy probably gets them for $400, it probably costs the manufacturer $300 to make them.

Also I think there is a difference of where the profits go, depending on a phone sale and the service sale. As in an actual retail store will probably see most of their money coming from phone and accessories sales, while the corporation probably gets most of the Wireless Service profits. How do you expect retail stores to stay in business if they have no way of generating money?

[CGI]

No its marked up so they actually make money to stay in business. Trust me this is no different than any other industry.

Do you think those laptops that you mentioned before you could get for $600 actually cost $600? No.

Best Buy probably gets them for $400, it probably costs the manufacturer $300 to make them.

Also I think there is a difference of where the profits go, depending on a phone sale and the service sale. As in an actual retail store will probably see most of their money coming from phone and accessories sales, while the corporation probably gets most of the Wireless Service profits. How do you expect retail stores to stay in business if they have no way of generating money?

Okay, fair enough. But do you believe the device is worthy of a $599 or $699 price tag retail? If so, you are saying it costs as much to build a blackberry as a laptop.

I think the device is jacked up to an unreasonable level to draw you into the contract. There is something wrong with that IMO.

EDIT; Would you sign a contract with your cable TV provider to get their tuner? Why is it acceptable practice with cellular?

[cd36]

no it doesn't cost $600 to build it, it also doesn't cost $600 to build a laptop.

Don't forget that the final price doesn't just cover the cost to build it, it also includes:

Marketing (Both RIM and the Carrier)
Engineering
Programming (Both RIM and the Carrier)
Extra Applications (do you really think their Facebook/MSN/AIM/ICQ/Etc. clients are free or is the price of developing them bundled into the price of the phone) (Both RIM and the Carrier)
Distribution (Both RIM and the Carrier)
Promotions (Both RIM and the Carrier)
Building Maintenance and Upkeep (Both RIM and the Carrier)
R&D of new products
etc. etc.

The difference between phones and laptops too, is you are paying somewhat for the small size of the phone. Its the same reason an equivelant laptop is always more expensive than an equivelant desktop, you are paying for the small size.

Don't forget that volumes on smartphones are probably much smaller than the volumes that laptops see, so you have fewer units to recover your investment with. Especially when buying parts for them, do you think there are more Core2Duo's produced every day or Qualcomm MSM7600's.

I don't doubt that it can actually cost $600 to build a smartphone. And you are really comparing apples to oranges when you are comparing the price to build a Laptop to a phone.

[VZ iPhone]

I cant post links yet, but...

consumer-electronics-teardowns.html: Personal Finance News from Yahoo! Finance

[cd36]

somewhat misleading, because for the phones it is showing the subsidized price, not the actual price of the phone, but it shows how most things have a huge markup. Consoles are the one famous thing where they are sold for a loss, in hopes of making money on games and accessories. But most things do not work that way.

[Riders On The Storm]

I think the OP raises a fair and interesting point. The frustration is by buying a phone retail, you pay $XXX in markup and then still have to pay for service. While comparing laptops to phones is like comparing apples to oranges, the one difference is that a laptop out of the box can preform a job without any other fees. I think that is what the OP is touching on, that one pays so much for a telephone, while with that comparable amount could buy something with much more power and capacity.

[CGI]

no it doesn't cost $600 to build it, it also doesn't cost $600 to build a laptop.

I agree. I also agree comparing a smartphone to a laptop isn't apples to apples and I'm only doing that to suggest there is just as much - if not more - cost associated with a laptop.

My point is; the mark up

Best Buy or whoever is making a profit off the sale of the laptop.

Verizon or whoever is making a larger profit off the smartphone but their primary goal is to box you into a contract.

If you could buy a smartphone at retail (a fair price rather than the bloated one), like you can a laptop... then shop for your service provider... imagine how competitive the providers would get. They would HAVE to focus on service.

We as consumers would benefit big time.

[lordcliff]

Does someone have a problem with profits? Isn't that capitalism? At least RIM is from Canada and doesn't have to answer to a pay czar. Of course, they have to try to stay in business because they also have 0 chance at a bailout too.

Posted from my CrackBerry at wapforums.crackberry.com

[cd36]

So you choose your priorities and pick the one you want. For the same price as a laptop you can get a more powerful desktop, but you don't hear anyone crying foul about that. Its because you are paying for size.

What about satellite boxes? YOu pay $200 for the box, (depending on what model you want), but you still have to buy the service? They are just different devices for different purposes, you choose the one you want. Just because a phone doesn't operate in the similar manner as a laptop doesn't mean there is something wrong.

YOu have to pay $500 for a console, yet you also pay $60 a pop for each game, before it can actually do anything.

YOu pay $20,000 for a vehilce but until you register/insure it for X amount and put Y amount of gas into it you can't do anything with it.

Lots of things require more money invested into them to actually be useful, phones aren't alone in that sense.

[cd36]

I agree. I also agree comparing a smartphone to a laptop isn't apples to apples and I'm only doing that to suggest there is just as much - if not more - cost associated with a laptop.

My point is; the mark up

Best Buy or whoever is making a profit off the sale of the laptop.

Verizon or whoever is making a larger profit off the smartphone but their primary goal is to box you into a contract.

If you could buy a smartphone at retail (a fair price rather than the bloated one), like you can a laptop... then shop for your service provider... imagine how competitive the providers would get. They would HAVE to focus on service.

We as consumers would benefit big time.

But who determines what a fair retail price is? Of course youa re going to say fair is lower, because you the consumer, don't want to pay more. The company is going to say fair retail is higher because, as the business, they want to make money. Who determines what a fair price is? ANd how do you know the markup on a phone is any more than a laptop? I would almost guess that the markup is about the same amount.

ALso how is the retail wireless store going to stay in business if you take away their main method of making money (selling phones and accessories)? Now you'll have to pay more for services because the parent company is going to have to support all those stores that now have no source of profit. So whats your preference, pay less for a phone but more for the service to support the retail stores, or pay more for the phone to support the retail stores and less for the service?

[CGI]

So you choose your priorities and pick the one you want. For the same price as a laptop you can get a more powerful desktop, but you don't hear anyone crying foul about that. Its because you are paying for size.

What about satellite boxes? YOu pay $200 for the box, (depending on what model you want), but you still have to buy the service? They are just different devices for different purposes, you choose the one you want. Just because a phone doesn't operate in the similar manner as a laptop doesn't mean there is something wrong.

YOu have to pay $500 for a console, yet you also pay $60 a pop for each game, before it can actually do anything.

YOu pay $20,000 for a vehilce but until you register/insure it for X amount and put Y amount of gas into it you can't do anything with it.

Lots of things require more money invested into them to actually be useful, phones aren't alone in that sense.

But... for these items; there is no contract.

Xbox, Wii. Playstation... you choose your console and competitive natures keep them competing for your HARDWARE dollar. They are not inflating the price to box you into a contract.

[Dr_Strangelove]

Customers are jaded with the cellular industry because they refuse to educate themselves about the product and service. No one is forcing anyone to have a wireless phone, humans got along just fine for thousands of years before the phone was invented.

Wireless service is a convienance that many have choosen to see as a necssity. I see it every day, customers refuse to take care of thier equipment, then freak out when they have to purchase new handsets after they drop one in a toliet or get it rained on.

There are some issues in the industry that I don't agree with, but I signed a contract knowing what I was getting into. No one forced me to get a wireless phone.

If you don't want a contract, go prepaid or purchase the equipment outright.

[CGI]

But who determines what a fair retail price is? Of course youa re going to say fair is lower, because you the consumer, don't want to pay more. The company is going to say fair retail is higher because, as the business, they want to make money. Who determines what a fair price is? ANd how do you know the markup on a phone is any more than a laptop? I would almost guess that the markup is about the same amount.

You are correct. If the smartphone REALLY costs $599 - $699 to make and sell via retail with profits in line for consumer elecrtronics... Then my argument is moot.

I am suggesting in this argument though that the phone is falsely increased with the sole purpose of getting the average consumer into a contract.

Why do we accept this with cellular but not other services in our lives?

[CGI]

There are some issues in the industry that I don't agree with, but I signed a contract knowing what I was getting into. No one forced me to get a wireless phone.

If you don't want a contract, go prepaid or purchase the equipment outright.

You are right... but why are contracts the acceptable norm in this industry?

What would happen if the providers had to compete for your business without contract?

If I want the equipment outright... am I paying a ballooned price at $599-$699? Again... its the provider setting this price. Average Joe can't afford that and they know it.

[afropoika]

You don't "accept" it, you live with it. Of course from an economical point of view it is much better for the business to get the customer sign for a contract. As was mentioned here earlier, a phone is a convenience not a necessity so if you choose not to pay for a phone or service, it will be your own loss only. Companies know where to get their money elsewhere, they will do just fine even without your money.

I'm interested in knowing how much a BlackBerry really costs though; maybe a tear down of the Bold 9700? This way we would better know what the quality of a BlackBerry is.

Posted from my CrackBerry at wapforums.crackberry.com

[Dr_Strangelove]

You are right... but why are contracts the acceptable norm in this industry?

Contracts reduce the initial cost of the handset to levels acceptable to most consumers. The cost of acquiring customers by handset subsidy demands the industry use contracts to retain customers. The ETF fees are very reasonable considering the cost of continuing a contract and don't really represent a huge barrier to leaving for most customers.

What would happen if the providers had to compete for your business without contract?

Service plans would become less expensive overall, but probably more ala carte than today, and handsets would cost $300.00 - $600.00. Until customers demand "open" handsets and a standardized cell network in the US, we aren't going to see this happen. Phone prices would probably be a bigger deterrent to switching providers than contracts are today.

If I want the equipment outright... am I paying a ballooned price at $599-$699? Again... its the provider setting this price. Average Joe can't afford that and they know it.

It's up to the retailer to set their profit margin. It's up to you to decide if that is a fair price or not. You can buy used, even new equipment off Ebay or Craig's list for a lot less.

The best thing for consumers would be for the US to choose between CDMA and GSM, force the carriers to use one system, and force open handsets. Having handsets tied to a particular carrier hurts consumers.