In my free time (by which I mean "when I'm using the facilities") I follow several apple blogs. I've been interested in technology ever since I started using the Apple IIe in the computer lab in my middle school. My family got our first desktop, an Apple Performa LC575, and for a while as a teenager it was housed in my room. I had a series of PC desktop and laptops over a period of years, but about eight years ago got my first Macbook Pro and I've been a fan of Apple ever since.
In any event, the big news out of Cupertino is the upcoming release of the Apple Watch, and whenever these big releases come up it ends up occupying a decent amount of brain-space and I find myself theorizing over certain matters that I may or not see being discussed. For example, that the high-end Apple Watch, the "Edition" model, is going to cost $10,000+. That's definitely out of my price range. But then, so is the Sport model at $349. In fact, when the Apple Watch was announced around six months ago, my thought was, "eh". It looked cool, but I didn't own a watch now, had basically made the assumption that I'd never wear a watch again, and even if I did buy a watch I wouldn't spend $349 dollars on it. The most expensive watch I owned was probably a $75.00 Fossil watch. I wasn't sure why I'd spend more than that on a watch.
Where I did see value was in the fitness tracking. I've had two UP bands. The first one was the first generation that was plagued with problems and ultimately recalled by Jawbone. A friend of mine had it, got it refunded, got to keep the band but since he didn't use it, gave it to me. I used it for a little while and enjoyed it immensely until it busted. When the UP24 came out and it had wireless bluetooth syncing, I was excited, and requested one for Christmas. At $150, it seemed a little pricey for what it was, but I got it and was even more pleased with it. Until it died less than three months later, and thanks to Jawbone's incredibly crappy customer support who just made me go around in circles for several months even though I new the daggum thing was busted, I ended up with a nice looking Jawbone UP24 in my sock drawer, aka the place where electronics go to die. I vowed that I wasn't going to get another fitness tracker until Apple released whatever it had up it's sleeve.
When the Apple Watch was announced, I viewed it primarily through that fitness tracking lens. I watched the Keynote and figured that the fitness tracking capabilities plus the added features were worth about $200 to me. That was the price point that would convince me that this was something I should go out and get. To be clear, my financial situation is such that it would not be a wise move on my part to go out and blow 200 beans. Five kids means 200 bucks is the equivalent of feeding them for a week. Until I get a week off of that racket, I'm not just going to go buy the watch. My point is that $200 is a price that I could at least convince/justify myself to go stand in line for. At least that was my initial thinking when it was first announced.
After considering it a bit more, however, I came to the conclusion that for the technology, $349 seems like a very reasonable price. If my UP24 was $150, and this Apple Watch not only did more of the same (meaning the fitness tracking), but additionally included advanced notification, an exceptional screen, on-board apps, communication tools, and much, much more, then surely $349 was a reasonable price. That still didn't mean I was going to buy it. It's a sweet piece of gear, but was I really going to use it? Again, the value to me was as a fitness tracker. That's something I don't have the ability to do right now. I can already take phone calls, send messages, send pictures, view pictures, and all that other neat stuff that was actually a bit silly and more inconvenient 95% of the time using a Watch. $349 for a fitness tracker still seemed steep.
As purely a fitness tracker, it also looks like it's going to fall short of some of the others on the market, primarily because right now the assumption is that battery life is going to be somewhat of a drag. There's nothing definitive on that right now, but the rumor floating is maybe a full day charge. One of the reasons I enjoyed my UP24 was because of the sleep tracking, which is essentially nullified on the Watch if you have to take it off and plug it in all night if you want to use it the next day.
This led me to a few thoughts which I figured I'd share here. I really have no idea whether the Apple Watch is a great idea or a terrible idea, whether it's something Apple hopes will be game/life-changing for the consumer market or something they just think they can make a reasonable amount of profit in and figure, why not? And by the way, I do think it's one of those two reasons, if not both. As far as I can tell these are essentially the two questions Apple asks: can we make it better, and can we make money doing it? Or, "is it better for the consumer?" and "are there profits here?" In cases where they excel, the answer to both of those questions is clearly yes (in their mind–you may disagree with whether or not their products are better.) With a new product, my guess is that they think the answer to the first one is "yes" and the answer to the second will be "yes" as a result. Will it be a game-changer like the iPhone or iPad? I don't think anyone is willing to give a definitive answer, unless they work at Apple and they have to say that for marketing reasons, or because they've used it and genuinely believe it will be a game-changer. Whether it's a hit or not, I'm sure Apple is poised to make significant profit, because that's how they operate.
In any case, whether it will be a game-changing hit or not, here are a few thoughts in no particular order.
The Tech in the Watch Costs $349
Basically, I think that at the base end, the Sport model, what you are paying for is the tech. I think that $349 is the cost of the technology in the watch, whether you are getting the Sport, the Watch, or the Edition.
For those people who are like me, who really don't care about watches, but do care about fitness trackers, this is the reason that Apple is selling the "Sport" edition. It's a fitness tracker that's going to cost you $349. They have done their research, crunched the numbers, and decided that this is a reasonable price that people might pay for a premium tracker, and that's basically all that they are paying for. The "case" and the "band" (more on that later) are essentially just required components necessary for holding the fitness tracker in place. Granted, the Apple Watch is much more than a fitness tracker, but it's not less. $349 is the "no-less-than" price. In other words, Apple can't sell the technology in this watch for less than $349 and still make a comfortable profit. So if the tech is all you want, that's what you are going to pay.
But that leads to the second point about the whole Apple Watch branding and strategy.
The Watch is more of a Fashion Accessory than a Tech Gadget
Or, perhaps a better way to say it is that Apple is selling their technology wrapped in a fashion accessory. In other words, what you are buying is the fashion accessory. That is where the money is at. Will Apple make money on the technology? Of course. Whatever the profit is on the $349 technology will be the same across the board. Profits will increase, however, as the costs of the particular model goes up, because what you are really buying is not the technology, you are buying the fashion. In this case, the fashion consists of two elements: the case and the band.
Here's the thing. Historically, If you buy a watch, you keep the watch. If Apple is entering into the fashion arena, which clearly they are, I think there has to be something that you keep. I don't think that the assumption here is that the paradigm for fashion is suddenly going to change, and watches will suddenly become something you turn in and replace every two years. In the case of the Apple Watch, the thing that you will keep is not the technology–technology will get old and will need to be replaced in order to have the latest and greatest functionality–but you will keep the fashion, or the case and the band.
Here is how this plays out in real life:
Sport model? Replace it. All you bought was the tech wrapped in some rubber. You really didn't buy into the fashion aspect of it. What you wanted was the tech, and Apple made it possible for you to get into the game, knowing full well that the technology will be essentially obsolete in two-three years. When that time comes, you can upgrade with the same mentality you upgrade all your other tech. You knew it was depreciating the moment you bought it. This is the "watch equivalent" of the digital watch you bought at CVS when you were 12. Lifespan? About two years.
Apple Watch? Keep the band, replace the tech. I still have two $75 Fossil watches, one I bought for myself and one that someone gave me. I could replace the battery and they'd work as good as the day that I bought them. It's not like that cheap drug-store watch, but it's also not a family heirloom. It's a decent watch that ought to last me for a significant period of time and isn't something you just throw away. Of course, I'm pretty cheap and I'm not a watch guy, so maybe most people wouldn't keep a $75 watch. I'm told that even casual watch guys, however, will typically buy a watch that costs several hundred dollars. This is the target market for the Apple Watch.
I'm seeing that the Apple Watch will sell for a minimum of $749. If that's true, that means that the case and the band cost $400. In other words, you've essentially bought yourself a $400 watch. That's why I think that unless the watch buying paradigm where you keep something of the watch dramatically changes (and I don't think it will), there has to be something that you keep on the Apple Watch, and in this case, I think what you are keeping is the case and the band. It cost you $400. It's not depreciable. In fact, good fashion in this category seems to me to be appreciable, meaning that it increases in value over time. Maybe that's not entirely the case for even a $400 watch, but I still think that at very least, a $400 watch is something you intend on keeping for a significant period of time, and certainly longer than the two-three year window at which point the technology within the watch becomes obsolete.
And then, of course, the Edition, where this is an especially poignant point. The suggested starting point I'm seeing is a minimum of $5,000, with a realistic starting point of somewhere north of $10,000. Now, I've seen it said that people who can afford a $10,000 dollar watch can also afford it every few years if they really want it. Maybe that's true. I just can't imagine (and again, I am not in the fashion industry, but from what I've read) that if you buy a $10,000 watch, you expect it to be worth anything less than $10,000 five, ten, or twenty years from now. Anything in this price range is in the family heirloom category. If you are spending that much on a watch, I have to believe that not only is the craftsmanship so superior to other watches that it is worth the premium, but also that when you buy it, you fully expect that it will hold it's value over time and you will expect that you can pass it on to a loved one at some point in the future. Applied to the Apple Watch, this means that the 10,000 dollar watch that you bought on day one will still be worth 10,000 dollars five years from now, and probably much longer.
The technology, however, won't. It will be obsolete in three years and worthless in five. This is the major difference between the Apple Watch and some other luxury watch. Everything about the luxury watch should hold it's value down the line. The internals and the externals. Not so in the Apple Watch. In the case of the Apple Watch, only the case and the band will hold their value.
Which leads me to the third point...
The tech will be replaceable in the Apple Watch.
I haven't seen this officially written down as a prediction, but it's what I'm thinking right now and I figured I'd throw it out there just to see if it sticks. Given everything I've read about how this is really a Fashion accessory, what I've learned about the watch industry as a result, and what my common sense tells me, I think this is the plan.
My premise is that what you really bought when you bought the Apple Watch was a $349 computer wrapped in a Rubber Band, a $400 Watch, or a $10,000 Watch. If all you want is the tech, it's going to cost you $349 and you can expect to replace it every two-three years with a similarly priced computer.
If, on the other hand, you want a piece of fashionable jewelry for your wrist-computer, that's going to cost you extra, but the good news is that Apple has studied the fashion industry and what they are making is on par or better than whatever else is out there. Were you thinking of getting a 10,000 watch? Why not buy the Apple Watch, which does far more than those watches, but carries the same prestige and luxury? Even better, it will always be up to date.
I think this is why on every image of the Apple Watch, the different levels are called "cases". My iPhone is simply an iPhone. The case is something I buy after the fact that I put around my iPhone. Now, maybe in the watch world a "case" is the word that's used for the entirety of the timepiece, excluding the band. To me, though, it makes me think, again, that you are buying a $349 computer, but to carry it, you can buy a variety of different cases ranging from the low-end Sport Watch all the way up to the Solid-Gold Edition.
Once again, two (or three) things you can select with the watch.
Tech: Two sizes, $349
Case & Band: Three levels, with corresponding bands, $0, $400+, $10,000+
The tech will need to be replaced every two to three years. The Case & Band are what you are really investing in, if you want to do that.
Will it be life-changing? Who knows.
Will Apple make money? Of course they will, otherwise they wouldn't have gotten into the category. Worst case scenario, they make whatever profit they can make off the mini-computer. Best case, they make the money from the mini-computer and a King's ransom off of the fashion, which typically carries a significant mark-up.
Of course, at the end of the day, I'm not a watch guy, and if I end up with an Apple Watch, it's going to be the Sport. Which is a big "if". I'll have to wait and see what next weeks Keynote brings.