Apple's $10,000 question: How to stop Apple Watch from becoming obsolete
Apple enters the high-end watch market with the 18-karat gold Apple Watch Edition. But CEO Tim Cook stays mum about how to keep the smartwatch relevant a year or two down the line.
Apple expects some iPhone owners to shell out more than $10,000 for a smartwatch. And it hopes they don't care if it becomes outdated in a year.
The Cupertino, Calif., electronics giant on Monday revealed pricing for the three models of Apple Watch, which will be available April 24 in nine countries. The device starts at $349 for the basic Apple Watch Sport version and goes up to $17,000 for the premium Apple Watch Edition.
That huge price gap comes from the use of the materials in the watches -- 18-karat gold for the high-end Edition versus aluminum for the Sport -- but not for any of the actual features. iPhone owners won't be able to do any more with the expensive gold number than with the entry-level model -- beyond showing off their ability to afford a wearable device that costs more than some cars.
By pricing its smartwatch that high, Apple, one of the world's largest makers of smartphones and tablets, is setting itself up as a luxury watch seller. But the transition could be tricky. The computing world is moving faster than ever before, as technology executives like to tell us, and what's new one day may easily be outdated a few months later. Spending $10,000 to $17,000 on a golden gadget that could become obsolete in a year is a risky proposition, especially since we don't yet know if Apple will have a trade-in program, how it will support older devices in the future and whether any of the components in the device are replaceable.
"Although the watch's features are exceptional, almost all activities can be done with an iPhone, rendering the watch a completely discretionary gadget, highly dependable on disposable income, price and recent expenditures," noted Sarah Kahn, an IBISWorld technology analyst.
Apple declined to comment for this report beyond the comments made Monday by CEO Tim Cook.
"Apple Watch is the most advanced timepiece ever created," he said during a press event in San Francisco. "It's a revolutionary new way to connect with others and a comprehensive health and fitness companion."
History has shown that buying the first generation of a new Apple product often isn't the smartest move. Apple tends to update its products in short order -- usually within a year and sometimes even earlier. And it incorporates new features in each update that make the prior model less attractive. Consider the bigger screens and Apple Pay mobile payments in the iPhone 6 and 6 Plus, introduced in September 2014, the TouchID fingerprint sensor for the iPhone 5S the year earlier, and the Siri digital voice assistant for 2011's iPhone 4S.
And then there's Apple's fluidity with pricing. When Apple started selling the first iPhone in June 2007, it offered an 8GB version for $599 and a 4GB model for $499. But in September of that year, it discontinued the 4GB model and slashed the price of the 8GB model by $200. After early iPhone buyers complained, they got a $100 gift card to use at Apple retail or online stores.
But they still paid a cost for being an early iPhone adopter.
It was the second-generation iPhone, the 3G, that really attracted consumers in high numbers. Apple sold more units of the iPhone 3G in the first quarter it was on the market (6.9 million) than it sold of the first-generation device in its first five quarters combined (6.1 million), Apple reported in April 2009. That's partly because it had more wireless carriers on board, partly because the second generation was just a better device and partly because the app store, then one year old, offered iPhone customers thousands of apps that extended the functionality of the phone.
When you're spending more than $10,000 for a watch, you expect it to last. Typically, high-end watches that retail at the levels of Apple Watch Edition are worn for years. Some become heirlooms, passed down from generation to generation. Old iPhones may be treasured, but more often than not, they become a hunk of metal and glass you "store" in a drawer when you buy the new model.
Junking a $200 phone or a $300 to $500 smartwatch is one thing. A $10,000 piece of gold is an entirely different matter (though the cash-for-gold stores may be pleased).
Apple will likely will redesign the Apple Watch many times over the years, making it thinner and lighter. But it may not be able to update the sensors, processors, batteries or other hardware components in the device -- all things that likely will improve with the future generations.
And what happens when your battery dies, as all batteries eventually do? The videos and information posted on Apple's website about the watch don't say. Apple also hasn't said anything about a possible trade-in program or other way to make sure its first Apple Watch will be as relevant in five years.
There also comes a point when software updates no longer work on aging devices or hinder old devices more than keep them up-to-date. (For instance, whenever a new version of Apple's iOS mobile operating system hits the market, devices more than a few years old tend to face battery issues and other problems,)
And then there are the apps, the programs that many believe truly make the watch interesting.Will app developers make sure their new software remains compatible with years-old devices?
"I'd love for Apple to float some kind of trade-in program where they would swap the older electronics for newer electronics for a certain price," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "That would take that objection off the table."
Some people willing to spend $17,000 for a watch won't care if they have to do the same thing the next year. They're in because they covet the newest Apple products or because they're watch collectors. They may have enough expendable income that $17,000 is just that -- expendable.
If you're one of the first people buying an Apple Watch, know this: What you're really buying are bragging rights, not functionality. Now, you just need to figure out if that's worth $17,000.
