On the Pricing of Apple Watch | Hacker News Reader

On the Pricing of Apple Watch

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60 pointsnnain76 comments

There is one massive different with usual watches.

Expensive watches are often sold under the idea you will never have to buy another watch, and neither will your children, or your children's children. I will reasonably surprised if any new Apple Watch hasn't been made forcibly obsolete by Apple within 5 years or so, and shocked if it is still functional in 10.

Furthermore (and more worrying perhaps for people paying that much money), once a model of Apple Watch comes out with a better CPU, then your watch is no longer the latest-and-greatest, whereas older watches don't have the same degree of last year's begin inferior (of course, they can still go out of fashion).

Yes, exactly, this seems so obvious that I don't understand why Gruber is ignoring it.

The iWatch will be obsolete in 24 months at most (less if you are the type who values status and want a "$20,000" watch as the next model will probably come out 12-18 months later)

Maybe there are enough uber-rich people that are ok buying $20,000 watches every year, but that seems like a really, really small market.

Then again, maybe the bands will remain the same, so if the primary investment is in the band, then that could last a bit longer. Even then I'd expect that every 2-3 years they will have a form factor switch that will make all previous bands obsolete.

We'll see.

In Apple's models there has to be enough people willing to pay that much money for a watch that will likely be made obsolete. That is mind-boggling to me. I have enough friends who have consternations about buying a new phone every two years let alone buying a watch that can be just as expensive to go along with it. Based on my personal experience I bet they're relying on the 5%-ers to make this thing work.

Also the first thing came to my mind. Keeping the bands intact makes sense. Given the size of the watch there won't be much gold used in the watch head anyway.

And this is purely fantasizing, maybe you can upgrade golden models by paying a comparatively small upgrade fee...return the old watch head and get a new one with upgraded electronic parts... :-D

I'm not sure Gruber is ignoring it as much as he's making a statement about the economics of precious metals. It's definitely a factor in the market for such things though. Apple could potentially offer some sort of trade-in for the metal I suppose but this does seem to be one of those cases (as in autos) where there's a mismatch between the lifecycle of electronics and the lifecycle of the thing the electronics are part of.

Phones were once something you bought once and rarely bought again, but that changed and now we all buy new phones once every 2'ish years.

That's mostly because people now lease them on multi-year contracts from their service providers.

I recently switched back & bought an early 80's model western electric telephone. Hopefully it will last another 30 years!

Sure, but I pay ~$400 every couple of years for a phone. I also bought a Moto 360 for $175 (normal non-sale price $250). I may replace that in a year or two when the tech has improved enough to justify the update.

Either way, these are still mostly luxuries (I could get a passable smart phone for under $100 and any old watch for $30-50 or just not wear one) but it wouldn't be the first time a company put out a range of products so people of different budgets can become customers while still offering some high-end model for status seekers to shell out for and mortals to drool over.

I'm not interested in the Apple watches at the moment but it makes sense for them to sell a "mere mortal" version for $300-500 as they typically charge a bit more than competitors for their name and reputation for polish. If they sell a Rolex-grade version for rock stars and wealthy heirs then I guess it just adds to the status of the brand as a whole even if nobody normal would ever buy one.

The Apple watch will tell time far better than a Rolex for decades to come. CPU and memory and Moore's Law can't change that.

Well, sure. But it's also way uglier than a Rolex, and it needs to be charged nightly.

I don't regard "OMG it needs to be charged nightly" as a big problem ordinarily, but if your point is that the smartwatch degrades gracefully into a normal watch, then it's relevant the ways that it's inferior to a normal watch.

More to the point, presumably anyone who shells out for a smartwatch wants, you know, an actual smartwatch.

For starters, it's not called "iWatch".

The idea he presented previously is that you'd be able to go in to Apple and upgrade the tech innards of your fancy gold iWatch when new, faster, more awesome bits are released.

That's a bold bet on the form factor itself. What's the guarantee that Apple won't launch a round face watch in the 3rd iteration?

In the NewYorker Article, Jony made it clear that they considered a round face, but realized quite quickly that one of the principal functions of the watch was to deal with lists, which work much better on a rectangle.

Yeah, and Steve Jobs dismissed tablets in 2003 ("people want keyboards") and dismissed smaller tablets in 2010 ("the 10-inch screen size is the minimum size required to create great tablet apps") and dismissed putting a screen on an iPod in 2004 ("It's the music, stupid"), and dismissed larger-than 3.5" screened phones in 2010 ("Nobody's going to buy that.")

Ive has to say that rectangles are clearly the superior form factor. It's his job. That doesn't mean that two years from now Apple won't have a round watch. It doesn't mean that they will, either.

EDIT: Also, uh, what if someone comes up with a really good use for smart-watches that isn't lists-related? "Dealing with lists" is not selling me on the need to buy another multi-hundred dollar gadget.

It's funny - when I read the Ive comment, that was exactly what my first response was as well. I'm on the fence - there are probably some good reasons for a rectangle, given the jobs-to-be-done, but their is something timeless about the round-face of a watch.

I guess we'll see over the next few years.

Jony Ive was pretty clear about why they didn't go for a round face in his interview with The New Yorker:

> Ive later tested watchbands by wearing them outside the studio with other watches. The shape of the body, meanwhile, barely changed: a rectangle with rounded corners. “When a huge part of the function is lists”—of names, or appointments—“a circle doesn’t make any sense,” Ive said.

The way the processing module is designed as a little encapsulated nugget-thing suggests that maybe this upgrade idea is more feasible with the watch than it would be for other devices.

This wouldn't even need to be a quick process, they could swap out the watch face and harvest the materials from them at a later date. Do a quick restore from your iPhone to get your apps/settings back to the watch and you're done (just like buying a new iPhone, the only difference is you keep the watchband).

There is speculation in some circles that Apple will offer a servicing program, in which the S1 could be removed and replaced with the next generation SoC for the Apple watches.

Also just me speculating here: For the high end watches, it might be reasonable for Apple to include some number of SoC upgrades as part of their package.

which would be highly unlikely because when has Apple ever done that for its current consumer items? The iPod, iPad, and iPhone, have all been user pays the cost to replace when a new model drops.

I think some people are just trying to justify an expensive purchase they have already decided to buy. If it was a wholly stand alone device I might under stand its pricing but as it stands now I do not.

If the article prices are to be believe then this is pure pretentious pricing, going for the vain and honestly after owning Apple products for so long boy have I met some of the most vain people on Earth. (the number of gold colored phones that sold is amazing/depressing)

And none of those things comes in $10K+ enclosures. Things are different. People aren't going to throw away big chunks of gold... either Apple is going to do it or someone else is. Upthread idea that people will just be out $20K after 2-5 years is what's ridiculous here.

Stop thinking of the Apple Watch as a technology product. It's not called iWatch for a reason. It's called Apple Watch and if you think you're going to take it to the Genius Bar to get it looked at, you're dead wrong.

@Shivetya: All other Apple products have been priced appropriately given the lack of upgrading or service available for the product. Additionally, Watches are an entirely different product category from consumer electronics, and they carry different expectations on pricing + product longevity.

I have no plans to purchase an Edition, nor do I have any clue about how Apple plans to sell them. I'm just trying to provide insight into how Apple might make this work.

I'm absolutely amazed that Gruber and the smart folks who read him have missed this.

My dad has a Rolex. It belonged to his dad. My eldest brother will likely inherit it one day.

That Rolex is a family heirloom. It's style is timeless (sorry) and it isn't going to run out of RAM or processing power anytime soon.

He hasn't missed this. On several episodes of his podcast he and his guests have pondered whether the watch may have some standardised internal bay with upgradable innards, to keep it up to date year-to-year.

Or just trade it in for the newest model, as the gold will be the most valuable (and reusable) part.

Gruber's talked about that before on his podcast, so he hasn't missed it -- but I think you're right that it'd be good to address in print. I know I'd be hesitant to fork over even a "mere" $1000 for the stainless steel one if the expectation was that it'd be obsolete in a few years.

I can't imagine, however, that this hasn't come up within Apple already; if you're really going to sell a $10K smartwatch, this will have been talked about in planning meetings. I can imagine ways to make it serviceable; my own guess is that there will be a trade-in program for the steel and gold watches.

Has there been anything official from Apple that they plan to sell a $10K smartwatch other than as a novelty?

I think this angle might be overstated. Are heirloom purchases really what drives the $60 billion luxury watch industry? Or it it people like my boss and his boss -- "watch guys" who buy at least one high end watch a year? Or the very rich?

Does Apple really need to target all the same people the current luxury market does? Or can the product be successful by targeting the many people who don't even wear watches?

When the iPhone debuted many people focused on the features it lacked compared to the competition but by and large it sold to people who had never used smartphones and didn't think of those features as dealbreakers. Yes people were going there (to smartphones) eventually anyway but we might say the same thing about wearables/watches.

Instead of saying "hey the Apple watch doesn't do these things just like other watches" what we should be saying is, that's obvious to anyone including Apple, why did they make that decision? Perhaps the current watch companies are the ones that have failed by fighting over a market that's 1% of what it could be and then puffing their chest up like RIM before the storm.

It's definitely one of the more salient counterpoints, but I think it's more the kind of thing that will limit the market size, rather than kill it altogether. The observation that Rolex sells $20,000 watches with the same internals as a $6,000 watch is where you'll find the counterpoint to the problem of obsolescence.

Yes, the Apple Edition watch will likely suffer from the same obsolescence issues as iPhones, but as others have pointed out, that will only matter for certain types of buyers. The market for $20,000 watches is pretty small, and it's composed of different types of buyers. The smallest of the market is the group who can fork over $20,000 annually for a fashion accessory, rather than buying something as a milestone that will become an heirloom.

However, Apple can absolutely afford to build a very small number of Edition watches when selling at this price point, because the cost of materials is so low, and they'll sell tons of them at lower price points, which gives them the scale they need to justify production. This is where the correlation to the ubiquity of Rolex movements come in. Apple is using the same strategy. They have one "movement" (a computer in this case), which they're packaging to suit a very broad set of price points.

I think Apple will succeed in this endeavor because they have the brand. Rolex is, again, a very good comparison. In really uppity horology[1] circles Rolex watches are considered pedestrian because they are mass-produced, and they don't include a lot of hand finishing like the more prestigious brands. That doesn't appear to matter to the broad market though, because Rolex enjoys two logic-defying distinctions: 1) they sell many more watches than any of their upper-crusty close-kin, and 2) their watches hold their value in a way that defies their mass-production status. Sound familiar?

Apple products are often lampooned for selling at a price-premium when compared to similarly specified commodity alternatives, and Apple devices fetch strong pricing on the secondary market. IMO, Apple & Rolex are as close as we've seen to companies who have deconstructed and are in the process of perfecting the formula required to bring to market products that uphold these attributes. If Apple can do this successfully with watches, they will have upped the ante significantly by jumping from one vertical to another; a feat for which I cannot think of another example.

1: Technically, the science of timekeeping, but often used to refer to the community of people interested in timekeeping devices (watches).

I was thinking about how long an Apple Watch could take to become obsolete, given how quickly electronics, and particularly mobile electronics, become obsolete.

I kept coming back to the idea that these things could last quite some time, possibly a very long time. The watch shouldn't need to do substantial processing, only has a limited number of pixels to push and shouldn't rely on substantial processing like graphics, crunching data, decoding a/v, and other things we push our smartphones to do.

It seems like if Apple launches with good enough hardware, that software updates can keep the watch hardware relevant for many times longer than software updates can keep phones relevant.

Sure, you may theoretically be able to keep an Apple Watch for 2 years, 5 years, or longer potentially... but Apple will be releasing a new one every year, too. And even though your watch is serviceable for 5 years, you'll be having FOMO after 1 or 2.

That all sounds reasonable. But I have to believe it's completely wrong. Because it's the same sort of "reasonable" that says every level of technology is pretty much all you need. That is finally (decades later) pretty much true of desktop computers (but not displays). And it's getting there for laptops (excepting their displays and batteries). It's still years away for phones. And to think that the very first generation of of Apple watch is somehow going to get everything right to last for even one decade? I think that's preposterous.

The only way I can see them getting around this is by saying that for, say $500, we'll be able to take your watch in and swap out its guts entirely. It feels like that has to be true. (Yet, it also seems "chincy" to talk about popping things in and out. I guess we'll see.)

I could just be completely off their target markets, but I just can't fathom why someone would spend $1,000 on a watch every two years. With phones, the case for upgrading every two or three years can be reasonably built. How much tech are they really going to add to a tag-along device that will require more hardware?

If the technology is going to change that quickly, I think those speculating of some sort of update process have to be correct.

> if Apple launches with good enough hardware, that software updates can keep the watch hardware relevant

The first release of the Watch is completely dependent on the iPhone, and that's mostly due to hardware limitations. It's wrong to believe that hardware won't see an update -- the battery life would soon start to seem very dated, new less power consuming processors would arrive and better communication chipsets would help reduce the dependence on iPhone. So a hardware update is imminent.

I feel like the general response is that, "this is aimed at rich people, they are not sensitive to price, so it doesn't matter."

You would take your watch to Apple and get it serviced. They'd buff it up, and swap out the S1 for an S2 and so on.

The other difference is that Rolex doesn't sell a $200 watch. I can't think of any legitimate luxury brand in the world that successfully sells to the common man and the uber rich.

There's no $20,000 Rolls Royce. There's no $100 Prada bag. There's no $50,000 Ferrari. Any brand that dips too low into the mass market loses its cachet among the top tier of the market (i.e. BMW and Coach as two examples)

Apple Watch will not sell for $10,000. Gruber is being Gruber.

Mercedes has marketed and sold low end (in terms of price) cars without tarnishing its image. And if you don't think they're a legitimate luxury brand, then I don't understand your definition. B&W speakers are a luxury brand, yet they make affordable headphones. I'm sure others can chime in with similar examples.

Prada also makes $200 handbags, so one of your examples is flawed.

As long as a watch holds a charge and tells accurate time, it is not obsolete.

Eww, that just reminds me of the fact that some people are wealthy enough to spend 20K for some status symbol, a sum of money I would try to build awesome stuff with. At the same time, I realize that those who can't afford a MacBook might think in similar terms about me, so thank you Apple for making me feel bad and to remind us once again how fucked up everything is.

It could happen, but that would be very aggressive and experimental. The perfect watch, the Rolex GMT, has a base price of about 8k in steel, and goes for about 26k in 18k gold, for a 3.5x multiple[1]. (Ignore diamonds, etc. Not relevant to this discussion.)

So a 10x multiple on plain 18k gold over steel would be quite aggressive. And I don't know of any other watch where the exact same base watch is available at 25x less from plain 18k gold. You can get high-quality swiss movement homages to the GMT at around 1k, but they are clearly different watches and movements.

Apple has of course done their homework on it and I have no understanding of the asian market, but if the pricing is that aggressive I would be surprised, particularly with the android competition.

[1] http://www.jomashop.com/rogmii.html

10 years from now Apple won't be a tech company, they will be an international luxury brand that creates products in many different areas. This is just the first step.

I don't think they'll ever make anything that isn't fundamentally a computer or an accessory in support thereof.

Of course, you're right that over time that will mean creating products in more and more different categories.

when Jobs returned to Apple, he gave a big speech about how market share never mattered to BMW, and that Apple should become the BMW of personal computers.

it did, and it went on to become much, much more. but its huge fame today is pushing the Mac away from being BMWs.

all of which makes me desperately wish there was a Lamborghini or Ferarri of personal computers. most people might only need a computer to look at Facebook, but if you're doing animation, making electronic music, and building web applications - all of which I am personally doing, often - then you absolutely need a great GUI and a Unix-like foundation.

if you're reading HN because you want to do a startup, please, give us the Lamborghini of personal computing. we will buy. Apple knows it, but they don't have time to care, because they're going to make so much more money selling digital watches to the people who drive actual Lamborghinis.

The Mac Pro is pretty much exactly that though. If you need a more specialized machine, you'll probably need to consider building your own machine in the first place with your specific needs.

If you buy a Rolex for $20k, it's not just that your watch will continue to be functional for 20 years or more. It's also that you can believe with a fair degree of confidence, based on a long history, that your 20 year old Rolex will still be a classy piece of jewelry at that time.

Whereas even if there's some kind of upgrade program to prevent computer-part-obsolesence, nobody knows if smart watches will even be a thing in five years. Maybe in five years, Microsoft HoloLens will have blown away the smartwatch market to the point that every important wearable is glasses, not a watch. Or maybe they will be watches, but they'll have moved to a snap-bracelet deal where there's a much wider screen. Or maybe wearables will just be dead, dead, dead. Nobody knows.

This speculation is insane. An Apple watch is no mechanical masterpiece like luxury watches in this price region. No watch lover will pay such prices for cheap Chinese electronics. If Apple pulls that stunt, the are geniuses in marketing.

Sounds like what the cellphone makers were saying about Apple when rumors of the iPhone began to circulate.

And I would disagree entirely with your argument. An iPhone [1] is truly a masterpiece of engineering and programming. An Apple watch will have a lot of that heritage, and will sell accordingly.

[1] I would classify most of the highend Android smartphones the same way.

I am really not sure, but maybe people will value the watch that way. We will see.

Considering the rapid obsolescence of electronics, why would I put a quickly decaying piece of hardware my wrist? In the luxury/heirloom department, I much prefer high end mechanical wristwatches. Those have an appeal that will last much longer (decades) then quickly outdated hardware (months). I only have to look at the replacement cycle for cell phones, which is already insane.

The point is you aren't most people and most people simply don't give a rip about mechanical watches. Just like most people didn't use blackberries in 2007 even though that was the most popular high end phone. The people that did have blackberries by and large preferred their blackberry's features -- just as the people who like mechanical watches prefer mechanical watches -- but that didn't mean Apple's new product didn't/can't find a market.

A $20k (or even $5k) gold Apple watch will be a litmus test for me - anyone I encounter will automatically be someone I wouldn't do business with. The idea of a gold Apple watch is akin to gold-plated cars / guns for drug dealers. The only value it adds it to show you have money.

The fact that Apple would even consider it only demonstrate the corrosion of values and vision to me.

Are you suggesting that you never do business with people who wear Rolex?

I don't know how that makes sense. I would never pay 5k for a watch but I do wear shoes which costs 1300$. That doesn't make me a bad person, just that I like to spend money on shoes. I can completely understand that someone may want to spend 5k on Apple Watch.

Would you pay $5k-20k for a gold-plated version of those shoes?

Regarding Rolex (which I also feel are also overpriced antiques) they at least have a lasting value. They're often heirlooms passed down to children, partners, etc.

A 100 year old watch is awesome. A 200 year old Rolex will be amazing, but possible. But I just can't imagine Apple supporting a first-gen iWatch 50-200 years after release.

Just a small correction: It will be solid gold, not plated. Your point still remains in tact.

Heh - I was assuming it would be hard to walk in solid gold shoes ;-)

The whole heirloom argument doesn't ring right. I mean, sure, this happens and is part of the market. But I'd wager it's a small part. There are many watch-guys and rich people who buy 20, 30K watches because they can and like them. Not because they might give them to their kids in 30 years.

Well, for you, a 100 year old watch is awesome.

For someone else, a gold plated watch designed by Apple is awesome. Everyone has their own taste.

basically everything in traditional business atire is just demonstration of wealth if you really dig into it.

what about the other ten thousand solid/plated gold watches? rolex watches containing gold are probably all over wrists of people you would be happy to do business with.

don't get me wrong.. 5k for an iwatch is ridiculous

I have no problem with expensive goods, even gold watches. It's the part of "slap some gold on my Apple device" that is counter-intuitive.

There's no way Steve Jobs thought "what we're really missing is a gold version". It's not zen. It's gaudy.

The few extremely-successful people I've met that have impressed me have been very low key. Can you imagine PG wearing a gold iWatch???

There's a word for judging people by what they wear or how they look...

https://newbeautifulera.wordpress.com/2013/03/30/how-nature-...

The $20k you pay for a Rolex is not for the watch. It's for the craftsmanship and the value of "legacy". A Rolex watch stays in the family. It gets passed around from generation to generation. My grandad had one. He gave it to my dad, who will give it to my brother, and so on.

Not really the same thing at all. Different value notions completely.

A decent amount of people wear rolexes which are > $5000. You probably just don't notice them because they are fairly understated.

I'd also imagine guns for drug dealers have a more practical use case than conspicuous consumption.

I think it is interesting how Apple might bring and entire industry into the general public.

I mean, I knew you could get very, very expensive watches, but now this is suddenly that is brought in front of everybody.

I think his $5k estimate is much stronger than his $20k estimate.

An Apple Editions is not a Patek Phillippe. There is a dramatically different replacement cycle which means that any attempt to cut and paste lux strategies is going to either fail entirely, or narrow the market so thoroughly as to be indistinguishable from failure.

That's assuming there's no upgrade story to be told at the launch event.

I agree it would be a little weird coming from the modern Apple, but I just can't see a marketing pitch that sells even a "merely" $5,000 device that's functionally equivalent to a $350 one and essentially guaranteed to be obsolete within 5 years.

Obviously there's a market that can afford to treat such a luxury as disposable, but that doesn't seem like a large enough market to justify creating the Edition line.

They're going to sell these things (at least partially) through upgraded Apple Stores, and presumably those stores will have to offer (possibly off-site) jewelry-like fitting and repair services. How much of an engineering obstacle would it be, really, to guarantee that the next N generations of Watch internals will be able to be retrofitted into the Editions? Probably with a nice markup on the labor, too! After all, if there's one thing they're good at, it's continuous miniaturization.

I think it would dramatically expand the market for the high end models. If it extended down to the stainless tier, I'd certainly buy a much more expensive Gen 1 version.

Or the watches will have significant trade-in value because they can ditch the electronics and melt down the gold.

Gold currently sells at $1200 per oz. Looks like smart watches are typically around 2oz in weight, though presumably a gold smart watch would be heavier. On the other hand, presumably also a large amount of the weight is non-gold. And you'd obviously pay a penalty for the cost of removing the non-gold bits and recycling the gold.

So, overall: The pure commodity value of the gold might significantly defray the cost of a hypothetical $5k aWatch, but not very much of the cost of a hypothetical $20k aWatch.

As long as a watch powers on and shows the correct time, it is not obsolete.

That's absolutely right. I'm assuming that these will have extremely limited upgradability.

What if the innards would be upgradable? Or owners could exchange the edition models for a newer model in store paying only a "modest" upgrade fee?

I'd think Apple is aware that the edition models don't follow the one to two year upgrade cycles of a smartphone. So, some kind of investment protection would be necessary.

The $20k estimate is for an edition watch with a gold link bracelet, which would presumably outlive the watch itself. Without the gold bracelet his estimate is a $10k starting point, which seems crazy but China.

I'd also expect one of two things to surface here - either the watch forever remains so incredibly lightweight in what it can do without the phone that upgrades are less necessary, or there will be an upgrade program for the expensive watches.

If there's an upgrade program (i.e. replace the S1 with S2/3/4 and upgrade the battery yearly) then I'd actually expect these gen1 edition watches to become quite the collector's items - especially a few years from now when there are only a handful of gen1s around but far more gen2/3/4 watches.

You do realize, that a nice luxury watch costs easily 20k, 30, 50k or even 100k. It's a whole other category. 20K definitely doesn't sound totaly out of the ballpark for a 18K Watch with 18K Gold bracelet.

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