Apple Watch Prelude

Saturday, 7 March 2015

I realize there’s little purpose to further Apple Watch speculation at this point — in two days, we’ll know most of the answers. But there is one good reason for last-minute speculation: this is fun. Apple tends to be such a predictable company that we often know the basic gist of what to expect before one of their media events. Not this time. The many unknowns surrounding the watch are what makes it so fun to ponder prior to next week’s event. So let’s have some fun.

First, there’s this. The same day I published my piece on Apple Watch pricing, MacRumors forum member “pgiguere1” created a graphic with possible prices, posting it with the comment:

I made this speculative price list based in large part on Gruber’s speculation:

The graphic is a pastiche of genuine Apple marketing material. A trained eye can easily tell it’s not from Apple — the typefaces are ones Apple uses (San Francisco and Helvetica Neue) but the way they’re used is wrong. But it’s close enough to fool many, and the image has now circled the social media globe several times. I’ve received at least 50 emails and tweets from DF readers asking if I’ve seen this “leaked price list”.

So let’s put it to rest. This graphic is not a leaked price list. It’s speculation from a MacRumors forum member who read my piece on Apple Watch pricing. And, I think, it’s off in numerous ways.

But there is one thing about pgiguere1’s speculation that I hadn’t really considered: that the 42mm models might cost more than the 38mm ones, across the board. On pgiguere1’s list, the 42mm Sport models are $30 more expensive than the corresponding 38mm ones: $349/379. I’m torn on whether this will be the case. Apple isn’t referring to the two sizes as women’s and men’s — some women will wear the 42 and some men (and, I suspect, many boys) will wear the 38 — but in broad strokes the 38 is the women’s version and the 42 is the men’s. You can see that in the high-end leather straps. The feminine “Modern Buckle” is only available for the 38mm size, and the “Leather Loop” is only available for 42mm.

“Bigger costs more” makes sense — and it’s true for most Apple products, from iPhones to iPads to MacBooks. But with those products, your choice of device size is a matter of taste and personal preference. With Apple Watch, your choice of size is in large part determined by your anatomy.

If I had to wager today, I’d bet that 42mm models will cost more across all three collections. A nominal difference for Apple Sport — $349/379 looks right to my eyes. The difference for Edition models could be $1000 or more because they’re made from solid 18K gold. I’m not sure what to expect for the steel ones, though. $100 difference?

Bands as Stratifying Differentiators

I think Apple’s messaging back in September was misleading, and I don’t think it was purposeful. I think it was a mistake that they will correct on Monday.

In September, the basic message was something like this: Watches are personal, and different people have different tastes, so we created a wide variety of bands to choose from so you can pick one that reflects your taste, and we made them easy to swap so you can change them depending on your mood or the occasion.

Most people took that to mean that your choice of band will largely be a matter of taste — that the various bands will be close to each other in terms of price. I know for a fact — from my email and tweets — that many Daring Fireball readers are hoping to buy an entry-level Apple Watch Sport and an optional Link Bracelet or Milanese Loop for maybe $150 or $200. And I also think most people expect the steel Apple Watches that come with the Link Bracelet or Milanese Loop to cost only, say, $150-200 more than the entry level models with the rubber — er, fluoroelastomer — bands.

I don’t think this is the case, at all.

I wrote about this two weeks ago, and upon further consideration, I am now thinking that the various Apple Watch bands will be priced in significantly stratified tiers.

Consider Apple’s description of what I am convinced is the highest-end strap, the Link Bracelet:

Crafted from the same 316L stainless steel alloy as the case, the Link Bracelet has more than 100 components. The machining process is so precise, it takes nearly nine hours to cut the links for a single band. In part that’s because they aren’t simply a uniform size, but subtly increase in width as they approach the case. Once assembled, the links are brushed by hand to ensure that the texture follows the contours of the design. The custom butterfly closure folds neatly within the bracelet. And several links feature a simple release button, so you can add and remove links without any special tools. Available in stainless steel and space black stainless steel.

Now, if you start with the assumptions that (a) the various watch bands are largely a matter of personal choice, (b) Apple will encourage Apple Watch buyers to mix and match bands, and (c) even the most expensive of them will only cost $200 or so, the above description reads as marketing braggadocio.

But if you start with the premise that the top-of-the-line steel Apple Watch will cost $1499 or maybe even $1999, the above description makes more sense. It’s an explanation for why the bracelet is so expensive. If it truly takes nine hours to cut the links for each band, and each one is polished by hand, and they’re mechanically complex (and they definitely are), this is not a $200 bracelet. I’m thinking it’s about $1000, judging by the description, and based on the prices for replacement stainless steel link bracelets from Rolex, Tudor, and Omega.

The three collections of Apple Watch — Sport, steel, and Edition — will not, I think, be represented by three basic prices. Instead, the three collections will comprise a continuum of price points, ranging from $349 to $10,000 (or $20,000, if my hunch is correct that there are gold Link Bracelets waiting to be revealed).

Here are my final guesses (38mm/42mm):

• Apple Watch Sport (all colors, with Sport Band): $349/399
• Apple Watch, steel, Sport Band: $749/799
• Apple Watch, steel, Classic Buckle: $849/899
• Apple Watch, steel, Milanese Loop: $949/999
• Apple Watch, steel, Modern Buckle (38mm only): $1199
• Apple Watch, steel, Leather Loop (42mm only): $1299
• Apple Watch, steel, Link Bracelet: $1499/1599
• Apple Watch, space black steel, Link Bracelet: $1899/1999
• Apple Watch Edition, Sport Band: $7499/7999
• Apple Watch Edition, Modern Buckle (38mm only): $9999
• Apple Watch Edition, Classic Buckle (42mm only): $10,999

And purely based on my own speculation — the following configurations have not been announced, have not even been rumored, and have not been suggested to me by any sort of sources:

• Apple Watch Edition, Gold Milanese Loop: $14,999/$16,999
• Apple Watch Edition, Gold Link Bracelet: $17,999/$19,999

In my first draft of this piece, I had the regular steel Link Bracelet models at $1899/1999, and the space black ones at $2299/2499, and there’s a notion in my gut that I should have stuck with them. I’m out on a limb here, and it’s quite possible I’ll be serving up some home-cooked claim chowder Monday. Every single number above other than $349 is truly just a guess on my part. My predictions are way higher than almost everyone else’s:

• Marco Arment ($5000 starting price for Edition).¹
• Kirk McElhearn (steel starting at $500, Edition at $2000).
• Gene Munster (steel starting at $500, Edition starting at $5000 with an average sale price of $7500).
• Citi Group analyst Jim Suva (steel starting at $550, Edition at the cuckoo price of $950).

Back in September, I wrote:

When the prices of the steel and (especially) gold Apple Watches are announced, I expect the tech press to have the biggest collective shit-fit in the history of Apple-versus-the-standard-tech-industry shit-fits. The utilitarian mindset that asks “Why would anyone waste money on a gold watch?” isn’t going to be able to come to grips with what Apple is doing here. They’re going to say that Jony Ive and Tim Cook have lost their minds. They’re going to wear out their keyboards typing “This never would have happened if Steve Jobs were alive.” They’re going to predict utter and humiliating failure. In short, they’re going to mistake Apple for Vertu.

The only thing I would change about this is that I now think it’s the steel Apple Watch pricing that is going to cause the massive collective shit-fit. Most people have wrapped their heads around the fact that the gold Edition models are going to cost at least $5000, and so have already written off Apple Watch Edition as something for the wealthy luxury market.

But the steel Apple Watch, that’s something that most people still look at as for them. And so they expect the starting price to be around $500, and the various leather and metal band options to cost $100-300 more.

But if the starting price for the steel Apple Watch is $500, I don’t see why Apple Watch Sport exists at $350. $150 difference does not justify the difference. If they were that close in price, there’d only be one of them. Sport and steel only make sense as separate collections if the steel collection is significantly higher in price, even at the entry level with the rubber Sport band. People are looking at this as a $100-200 upsell, like going from 16 to 64 to 128 GB iPhones and iPads. Technically that’s possible, but it doesn’t make any sense to me strategically or in terms of operational efficiency. With storage tiers in iOS devices, the only difference is the capacity of the flash memory chip. That’s it. All the other components, and the machining and tooling required to produce them, are the same. With Sport and steel Apple Watches, everything you can see or touch is different. Different metal (aluminum vs. steel), different finishes (matte vs. highly-polished), different displays (glass vs. sapphire), different case backs (plastic vs. ceramic and sapphire). If the marketing argument doesn’t persuade you, the operations angle should. I just don’t see why Apple would bother with all this if the starting price for steel Apple Watch wasn’t at least around double that of Sport.

That’s why I think the pricing for the steel Apple Watch collection is what’s going to raise a ruckus, because there are a lot of people who want one and expect that they’ll only have to pay $500 or $600, regardless of their strap preference.

At the introduction event in September, Tim Cook explicitly billed Apple Watch as the next flagship product line in the company’s history: Apple II, Macintosh, iPod, iPhone, iPad, and now the watch. There will be no brushing it off as a mere “hobby” if it isn’t successful.

The thing is, for all the griping about the prices that I expect come Monday, at $349, Apple Watch has the lowest entry-level price for any first-generation flagship product from Apple. The first iPod cost $399. The iPhone was $599 (before the infamous $200 price cut a few months later, which still left the entry model at $399). iPad was $499.

The fact that so many people want the steel Apple Watch and non-Sport bands shows why they will cost more: desire. Apple sets prices not based on what people want to pay, but what people are willing to pay.

This is without question new territory for Apple. They’ve never sold products with the same computing internals at different pricing tiers based solely on the luxuriousness of the materials.

Third-Party Bands

No matter what the pricing is, third-party Apple Watch bands seem like an inevitable thing. But will Apple stock them in its stores? Will there be a Made for Apple Watch program to certify them? I don’t think so.

If Apple’s prices are as high as I’m predicting, demand for third-party link bracelets and leather straps will be high. It’ll be interesting to see how it plays out. I never would have predicted the size and scope of today’s iPhone case market back in 2007.

The Messaging

If I’m even close to correct regarding steel Apple Watch pricing, and if I’m also correct that there’s going to be a vociferous backlash, Apple has only itself to blame. The September event and Apple’s marketing to date have created the impression that the differences between collections are largely about style, not price.

Using the name “Apple Watch” for the stainless steel collection — the collection with the widest variety of straps — clearly establishes it as the “regular” collection. In turn, that has left many with the impression that it will be the best-selling, the most common, the one most people walk out of the store with — and thus priced near the $349 baseline.

“Apple Watch starts at $349” as the one and only mention of price left too much room for bad assumptions, I think.

To play devil’s advocate, perhaps Apple did this deliberately. They showed all these different watch bands knowing that they would spark desire, and that people get their heart set on a certain combination based purely on how it looks — including combinations which they wouldn’t have allowed themselves to consider in the first place if they’d known the eventual price back in September. In other words, someone who’s had their heart set on a model with the Milanese Loop, under the assumption that it would cost, say, $600, might still go ahead and buy it for $1200 even though they wouldn’t have considered it in the first place if they’d known it would cost $1200 back in September.

I think that devil’s advocate take is over-thinking things. It’s just the only explanation I can think of other than that Apple kind of botched the pricing expectations for Apple Watch. Actually, there is one other explanation I can think of: Apple didn’t want its competition to know how much Apple Watch and Apple Watch Edition were going to cost, and they decided the competitive value of keeping prices secret outweighed the value of setting accurate expectations for customers.

Storage Capacity

Apple has revealed nothing about internal storage capacity in Apple Watch. I could see this playing out two ways:

• Apple never talks about storage capacity for Apple Watch. It becomes a “secret” tech spec, like the amount of RAM in iOS devices. We’ll figure it out once we get our hands on them, but it won’t be something Apple talks about.

• If they do talk about it, each collection will get its own tier. Say, 8 GB for Sport, 32 GB for steel, 64 GB for Edition.

I don’t think Apple Watch will need much storage, but they’ve said you can store music and photos directly on the device. So it’s not like storage doesn’t matter at all. It’s just another upsell to push people to higher-priced models.

The Modular S1 and Upgradeability

There’s been a lot of speculation about the modular nature of Apple Watch’s S1 “computer on a chip”. Why brag about that? Why encase the whole thing in resin? Why make this photograph? My wild guess back in September: perhaps Apple Watch, or at least the Edition models, would be upgradeable in future years. Take it in for service, pay $500, walk out with your “old” Apple Watch Edition upgraded with an S2.

I now think this theory is bunk. Not going to happen.

Take a first generation iPhone. Now imagine if you could upgrade it to today’s A8 SoC. It’d be better than it was before, that’s for sure. But it’d still have a low-resolution non-retina display. It’d still be stuck with EDGE cellular networking. It’d still have a crappy camera that couldn’t even shoot video. Etc. The “computer” inside Apple Watch isn’t centrally important. Everything is important. The health sensors, the display, the battery, the Taptic Engine, the digital crown, the networking capabilities, everything.

A few years from now we might have Apple Watches that support Wi-Fi or even cellular networking. They might go several days on a single charge. None of those improvements would come from an upgrade to an S2 or S3 chip.

I’d love to be wrong on this one, but I don’t think it makes any sense. And if I am wrong, the upgrade would have to include the entire innards of the watch — new display, new electronics, new battery, new sensors. Everything but the case and the bands. That still seems unlikely to me, but it’s at least plausible. And it could put Apple Watch Edition on par with existing luxury watches in terms of lifespan. But even in that case, the modular nature of the S1 doesn’t really have much to do with it.

Lastly, many readers have suggested a trade-in program, where you could bring in your old Apple Watch Edition and get a significant trade-in on a new one. No way. First, as stated earlier, the value of the raw gold in a gold watch is just a small fraction of the price. Second, trading in used goods is not part of a luxury shopping experience.

One More Thing

Holding the event at Yerba Buena instead of the smaller confines of their campus Town Hall makes me think Apple has a lot to show. There must be more to learn about Apple Watch’s software and experience — Tim Cook even said so back in September, explaining that they simply didn’t have enough time then to show more. I’ve heard that Apple has been hosting over 100 third-party developers and designers in Cupertino for the last month, to test and refine WatchKit apps on production Apple Watch hardware, so I expect a bunch of third-party Watch app demos too.

The new Mac version of Photos is in public beta, so I expect a full demo of that and the now-complete iCloud Photos cross-device experience. And if they’re going to talk about Mac software, maybe they’ll reveal the rumored 12-inch thinner-than-ever MacBook Air, too. My gut tells me the new MacBook Air could be ready, and it also tells me that the purported bigger iPad is not.

Update: If Apple is ready to unveil the upcoming redesign of its retail stores, we will see Angela Ahrendts’s first on-stage appearance since joining Apple last year.