By John Gruber
After the gala announcement event in September at which Apple introduced Apple Watch and whatever last year’s iPhone was, I ran into SlashGear editor-in-chief Vincent Nguyen in the private hands-on area Apple had set up for select members of the media. I’ve known Vincent for years from various Apple events, and I always enjoy his perspective. I was actually looking around for him this time, though, because I really wanted to hear his take on Apple Watch. Vincent is a watch guy — he knows the watch industry, and his taste is excellent.
We greeted each other, walked in, and started staring, close-up, at the lineup. When we got to the Edition models, Vincent said, with some excitement, “This is going to cost $20,000.”
I’d already started thinking that the Edition models would cost thousands, plural, but $20,000 struck me as a price from Bananas Town. Vincent’s reply was something to the effect of, “Try to find a good 18-karat gold watch for less than $20,000. You won’t.”
Here’s what I wrote back in September, in my initial thoughts regarding Apple Watch:
In short: hundreds for Sport, a thousand for stainless steel, thousands for gold.
Most people think I’m joking when I say the gold ones are going to start at $5,000. I couldn’t be more serious. I made a friendly bet last week with a few friends on the starting price for the Edition models, and I bet on $9,999.
The more I think about it, and the more I learn about the watch industry, the world of luxury goods, and the booming upper class of China, the better I feel about that bet. I don’t think I was wrong to place a friendly late night bar bet on a $9,999 starting price. I think I was wrong to guess just $4,999 in my ostensibly sober published analysis.
I can see which way the wind is blowing. For months I’ve been asking friends who might know — or know someone else who might know, or even know someone who knows someone who might know — whether my guess of $5,000 is too high for the Edition starting price. The answer has always been “No”. But the way I’ve been told “No” has given me the uneasy feeling that I’ve been asking the wrong question. I should have been asking if $5,000 is too low.
I now think Edition models will start around $10,000 — and, if my hunch is right about bands and bracelets, the upper range could go to $20,000. I was off by a factor of two, and my friend Vincent, I think, nailed it back on the day Apple Watch was introduced.
Louie Mantia helped clarify my thinking on this by publishing this seemingly sparsely populated table of Apple Watch collection/band combinations. Study that for a few minutes, and you should come to a few surprising — to me at least — conclusions.
One of the selling points Apple emphasized in September is that bands are easily interchanged on Apple Watch. You just press a button underneath and it’s released; slide a new one in and it securely clicks into place. And they showed a wide variety of bands: Sport, Classic Buckle, Leather Loop, Modern Buckle, Milanese Loop, and Link Bracelet. Six different styles, all of them — other than the Milanese Loop — in multiple colors.
I walked out of the event under the assumption that all of these bands would be available to purchase as accessories, like iPhone cases. So that one could, say, buy an Apple Watch Sport with a white sport band, and buy a Milanese Loop or one of the leather bands to make it dressier.
I am no longer certain that’s going to be the case. And if it is the case, the non-Sport bands are going to be expensive — in most cases, even more expensive than the Apple Watch Sport itself.
What seems clear to me now is that the various bands signify tiers within the three collections — particularly for the stainless steel Apple Watch models. Take a look at Apple’s page for the steel Watch collection, and scroll down to the bottom, where they present a scrolling carousel of “all 18 models in the collection”. From left to right:
Things to note:
The “Modern Buckle” is only available for 38mm models. The Leather Loop is only available for 42mm models. The Space Black watch is only available with a single band option: the Link Bracelet.
Sport Bands are surely the least expensive. Link Bracelets, I’m almost as sure, are the most expensive. I think Apple placed these models in order from least to most expensive, going from left to right. (Including the fact that 38mm models will cost slightly less than their 42mm siblings.)
Why are there both Classic Buckles and Modern Buckles? From their descriptions, it sounds like the Modern Buckle uses a better leather, and without question it has a more advanced clasp mechanism. I conclude: Modern is more expensive. They both exist because they’ll sit at different price points.
Note too, that on the regular Apple Watch collection page, the Classic Buckle description states, regarding color options: “Available in black.” This, despite the same band being offered in Midnight Blue for the Edition collection.
So I’m thinking the regular Apple Watch will come in at least five pricing tiers:
You’ll pay a premium for color straps and advanced clasp mechanisms, and you’ll pay even more for the Link Bracelet.
I think the spread between these tiers could be significant, ranging from, say, $700 for the entry model with the Sport Band to well over $1,000 for the Link Bracelet. I still think the average for the steel Apple Watch will be around $1,000, but depending on your strap choice, you’ll pay several hundred less or more.
But wait. I would not bet against Apple bringing back the black tax. Remember the plastic MacBooks from 2006? Apple charged $150 more for the black one than the white one, even though they had nearly identical specs.
Note that the silver Apple Watch Sport only has four band color choices: white, blue, green, and pink. The space gray Sport edition has only one band: black. I think Apple might charge more for both the space gray Sport model and the space black stainless steel model.
Further, I don’t think any of the stainless steel bands will be available for retail purchase. They’ll sell sport bands, which you’ll be able to use on any Apple Watch, but I don’t think any of the nicer bands will be available for retail purchase. Don’t hold your breath for a space black Link Bracelet to put on your $349 Sport model. The nicer bands aren’t accessories that Apple hopes you’ll tack onto your purchase; they’re signifiers of how much you paid for your stainless steel or gold Apple Watch.
Which brings me to the Edition collection’s curiously thin lineup of strap choices. There are only three for each watch size, and Apple doesn’t present them side-by-side in a carousel like they do with the stainless steel models:
That’s the order in which the six models appear on Apple’s page. It almost certainly does not correspond to price.
Things to note: None of these leather colors are available in the standard Apple Watch lineup. These are not regular Sport Bands — they have gold clasps. None of them have metal bands.
These are (I think) $10,000+ watches, but half of them come with rubber sport bands that are nearly indistinguishable from the bands on the $349 Sport collection.
Glaringly omitted is a gold Link Bracelet. I’d place a side bet Apple withheld it in September, and will unveil it as a surprise option at the event they’ll hold before releasing the watches. If you’re going to go gold, go gold. Some people buy a gold watch simply because they like it. Others buy a gold watch because they want everyone to know they wear a gold watch. The latter group will gladly pay $20,000 for a watch with gold band.
Perhaps I’m biased by my personal taste in watch bands, but at the hands-on event in September, the Link Bracelet was my favorite by far, followed by the Milanese Loop. It seems downright ludicrous to me to charge significantly more for the Edition models and not offer the best of the bands. Note too that among the Edition combinations Apple currently lists, there is but a single 42mm model with something other than a rubber Sport Band — the Midnight Blue Classic Buckle. Further, as stated above, I think the Classic Buckle is the low-end leather strap. I’m guessing Apple will offer Edition models with gold Link Bracelets for $20,000, and perhaps Milanese Loops for $15,000 and a Leather Loop for around $12,500.
Don’t try to guess the price of the Edition models based on the amount of gold they contain. I did it this week, but it’s the wrong way to look at this. It doesn’t matter if the gold in an Apple Watch Edition model is “only” worth $1,000 or $1,500 or whatever. The gold in a Rolex is only worth that, too — and their gold watches sell for $20,000 and more, for the exact same movements in their $6,000 stainless steel models. The value of a gold watch is only tangentially related to the number of ounces of gold it contains. And Edition isn’t just made of 18-karat gold — it’s made of the best 18-karat gold in the world. (I don’t know that for a fact — I don’t know anything about gold — I’m just saying what Apple is saying.)
Apple Watch Edition is not a tech product, so don’t try to price it like one.
Apple Watch Edition is a luxury wrist watch. Apple’s ambitions in this arena, I am convinced, are almost boundless. They’re not entering the market against Rolex, Omega, and the rest of the Swiss luxury watch establishment with disruptive prices. They’re entering the market against those companies going head-to-head on pricing, with disruptive (they think) features.
Again I point you to someone from the watch world, Grail Watch’s Stephen Foskett, who points out that gold watches typically cost $10-15,000 more than the same watch in stainless steel — and tens of thousands more if they come with a gold bracelet. Even if I’m wrong about Apple having gold Link Bracelets lying in wait as an April surprise, I don’t think a $10,000 starting price for Apple Watch Edition is even a step out of line for the watch industry.1
Will it work? Will people actually buy these? I have no idea. But I think Apple thinks it’s going to work. ★
At prices like these, an Apple Watch Edition is not an accessory for your iPhone — your iPhone is an accessory for your Apple Watch Edition. ↩
Apple is planning multiple versions of a smartwatch — dubbed the iWatch in the media — later this year, according to people familiar with the matter.
So far so good.
The devices will include more than 10 sensors to track and monitor health and fitness data, these people said. Taiwanese manufacturer Quanta Computer Inc. is expected to start producing the devices in two to three months, they said.
Not so good. Production did not start in September, not even close. And Apple’s website lists only two sensors for health and fitness tracking: the accelerometer and a heart rate sensor.
When Apple Inc. started developing its smartwatch, executives envisioned a state-of-the-art health-monitoring device that could measure blood pressure, heart activity and stress levels, among other things, according to people familiar with the matter.
But none of those technologies made it into the much-anticipated Apple Watch, due in April. Some didn’t work reliably. Others proved too complex. And still others could have prompted unwanted regulatory oversight, these people said.
That left Apple executives struggling to define the purpose of the smartwatch and wrestling with why a consumer would need or want such a device. Their answer, for now, is a little bit of everything: displaying a fashion accessory; glancing at information nuggets more easily than reaching for a phone; buying with Apple Pay; communicating in new ways through remote taps, swapped heartbeats or drawings; and tracking daily activity.
Apple declined to comment.
If we’re to take Wakabayashi’s reporting, and his sources “familiar with the matter”, at face value, here’s what we’d need to believe:
As of 20 June 2014, Apple planned on shipping Apple Watch by the end of the year — which means October, in order to hit the holiday season. I.e., that in June, Apple thought they were four months away from shipping.
In June, Apple thought the watch would contain “more than 10 sensors to track and monitor health and fitness data”, but by September they’d abandoned most of them and still didn’t expect to ship until “early 2015”. In June they expected to ship a watch with more than 10 sensors by October, but by September they’d scrapped all those sensors other than the accelerometer and heart rate monitor and moved the shipping deadline back by six months.
In September, when Apple thought it was seven months or less away from shipping1, they deemed it strategic to pre-announce the Apple Watch. But in June, when, according to Wakabayashi’s “people familiar with the matter”, they thought they were only four or five months away from shipping, they did not pre-announce the watch at WWDC.
Maybe that’s exactly what happened. I don’t know. But it doesn’t sound anything like how product development within Apple works from my knowledge. I do know that up until some point, Apple expected to release the watch in 2014. I find it hard to believe they still believed that in June. I find it even harder to believe that they still planned on things like blood pressure monitoring and stress level detection as late as June while still thinking they could ship in 2014.
To be fair, Wakabayashi’s June 2014 story doesn’t say “blood pressure monitoring” or “stress level detector”, but it does say “more than 10 sensors to track and monitor health and fitness data”, and that turned out not to be true.
I also do not doubt for a moment that Apple looked hard at all sorts of sensors like those during the three-year development of Apple Watch. That’s how they develop products: come up with a slew of ideas, try the ideas that seem best, iterate and refine and change (narrowing focus) until they get to something that feels right. The iPhone, for example, started as a tablet project.
The way it reads to me is that Wakabayashi’s sources for the June 2014 story were not “familiar with the matter”, but rather were familiar with, at best, already-outdated plans to ship a more fitness/health-focused Apple Watch in 2014. And his report this week reads more like an attempt to make it look like it’s the Apple Watch that is actually coming in April that is wrong, not his reporting from last year.
The artful dodge: the rumor was actually right; it’s the shipping product that contradicts the rumor that is wrong. ★
Tim Cook, during January 27’s quarterly analyst conference call: “And just to clarify, what we had been saying was early 2015, and we sort of look at the year and think of ‘early’ is the first four months, ‘mid’ is the next four months, and ‘late’ is the final four months. To us, it’s sort of within the range, so it’s basically when we thought.” ↩
Lorraine Luk and Daisuke Wakabayashi, reporting today for the WSJ, “Apple Orders More Than 5 Million Watches for Initial Run”:
Apple has asked its suppliers in Asia to make a combined five to six million units of its three Apple Watch models during the first quarter ahead of the product’s release in April, according to people familiar with the matter.
I would wager — heavily — that these numbers come from supply chain sources, not Apple executives. I can’t see why anyone at Apple would see a strategic advantage to leaking these numbers, especially the split between Sport, regular, and Edition models:
Half of the first-quarter production order is earmarked for the entry-level Apple Watch Sport model, while the mid-tier Apple Watch is expected to account for one-third of output, one of these people said.
Orders for Apple Watch Edition — the high-end model featuring 18-karat gold casing — are relatively small in the first quarter but Apple plans to start producing more than one million units per month in the second quarter, the person said. Analysts expect demand for the high-end watches to be strong in China where Apple’s sales are booming.
Even in the initial quarter, 17 percent of “5 to 6 million” is 850,000 to 1,000,000 units. That’s a lot for a model that is going to be expensive. More interesting to me is that, according to this WSJ report, Apple is indeed going to assemble the Edition models in China. I have wondered, idly, whether Apple might assemble the Edition models in the U.S., like they do with Mac Pros, to further their prestige. At a million or more units per quarter, I can see why they might have to do it in China just to achieve the scale, but I believe it is unprecedented in the watch industry for a luxury model to be assembled in China.
Apple Watch Sport will start at $349. Apple hasn’t announced pricing for the other models, but Apple Watch Edition is expected to be among the most expensive products the company has ever sold, likely surpassing the $4,000 Mac Pro computer.
When I was a freshman at Drexel in 1991, there was a kid in my dorm with a $12,000 Mac IIfx. (He was an asshole who cheated at Spectre.) So the record — particularly inflation-adjusted — is pretty high.
Ancient Mac history aside, consider the numbers. If Apple actually sells 1 million Edition units per quarter, and they sell for an ASP of $5,000, that’s $5 billion in revenue per quarter — just for the gold Edition models. If the ASP is closer to $10,000, which I still think is possible, double that.
3 million Sport units at $350 comes to “only” $1 billion or so. 2 million stainless steel regular units with a $1,000 ASP would be an additional $2 billion.
So as a business — if the WSJ’s sources are correct,1 and if Apple is correctly predicting demand — Apple Watch revenue will be dominated by the gold Edition units, accounting for double or more of the revenue from all the other models combined. The Edition models would thus do to the Apple Watch lineup as a whole what the iPhone, iPad, and Macintosh do to the entire phone, tablet, and PC industries, respectively: achieve a decided majority of the profits with a decided minority of the unit sales. ★