How much is your iPhone contract worth to Apple?

Apple gets $11 a month for new customers brought to At&t and $4 a month from existing customers that bought an iPhone. Thats the current arrangement they have with At&T. The arrangements they made in Europe are different but similar. the Euro is also worth $1,50 to 1 now.

I think Ron Green is on to something about this Web site. In absence of real news, they just revert to parsing the minutia about iPhones. (It's not a blog unless someone is posting every other minute to keep it fresh!) Thank God they've got a staffed iPhone jailbreaker to keep the minutia rolling! As a proud Mac user (since 1987), iPhone owner and fan of this site - I'd love to see these junk posts go away.

The purpose of the EUR999 price tag is not to compensate Apple for lost revenue, but to discourage consumers from buying an unlocked iPod.

@Ron Green: Who reads an article he doesn't care about, and then posts a comment? What a waste of time.

I think that there is no way in hell Apple is getting a flat rate for each contract - it's gotta be a percentage - because AT&T knows that a percentage of contracts default before reaching fruition anyway.

And like Zeke said, the iPhone is NOT subsidized - at least, not for consumers. From a production front, I doubt it's subsidized either (since the Touch sells for the same price), what is happening is that AT&T & Apple are in a very, very strange cellular arrangement. Typically, the carrier makes next to nothing off of the phone anyway (because they basically give it away, or at least heavily discount it for new customers), it's like selling razors -- the difference in price between a Gillette Fusion with the base and two blades is basically the same price as a pack of 4 replacement blades. Gillette gives the base away and makes its money on the refills -- same thing with printers/ink cartridges. With this deal, Apple is still recouping full MSRP from the iPhones (less whatever percentage they have to fork over to AT&T - I'm sure the profit sharing goes both ways) and AT&T is willing to gamble that the number of new contracts (and contracts at at least $60 a month) that come in as result of exclusive iPhone sales will end up being worth giving Apple a percentage of those monthly plans. It's a risky proposition for AT&T, though it certainly looks to be paying off in the short term -- but for too many reasons to list here, this is type of deal could only work with a company like Apple that isn't a real phone manufacturer. The big players like Motorola, Samsung, Nokia, would never get this sort of thing - and I doubt they would want it.

I think that there is no way in hell Apple is getting a flat rate for each contract - it's gotta be a percentage - because AT&T knows that a percentage of contracts default before reaching fruition anyway.

And like Zeke said, the iPhone is NOT subsidized - at least, not for consumers. From a production front, I doubt it's subsidized either (since the Touch sells for the same price), what is happening is that AT&T & Apple are in a very, very strange cellular arrangement. Typically, the carrier makes next to nothing off of the phone anyway (because they basically give it away, or at least heavily discount it for new customers), it's like selling razors -- the difference in price between a Gillette Fusion with the base and two blades is basically the same price as a pack of 4 replacement blades. Gillette gives the base away and makes its money on the refills -- same thing with printers/ink cartridges. With this deal, Apple is still recouping full MSRP from the iPhones (less whatever percentage they have to fork over to AT&T - I'm sure the profit sharing goes both ways) and AT&T is willing to gamble that the number of new contracts (and contracts at at least $60 a month) that come in as result of exclusive iPhone sales will end up being worth giving Apple a percentage of those monthly plans. It's a risky proposition for AT&T, though it certainly looks to be paying off in the short term -- but for too many reasons to list here, this is type of deal could only work with a company like Apple that isn't a real phone manufacturer. The big players like Motorola, Samsung, Nokia, would never get this sort of thing - and I doubt they would want it.

Your values also fail to take account of Germany's 19% VAT. Taking that into account, the increase T-Mobile/Apple is getting is just €486, or $716.61, which is about $100, more than 10% less than the Times' estimate.

Still a lot of money, but your maths is a little off.

Who cares?

At&t is perhaps the worst move apple ever made in terms of customer relations ! those contracts are traps that allow At&t to ignore customer service and that reflects on apple the corporate culture is just lousy. i think the high German price has nothing to do with Apples contracts its just an end run around the sprit of the german law. making it available but not affordable means all the Berliners (i know that means hamburger) will cue up for the contract. im buying more apple stock friday! To Illustrate i went to an at&t store and arrived before they opened i had to use a bathroom and 15 minutes later i was hooked to a tow truck 260 dollars later i was unhooked when i complained to At&t the answer was "since i did not make a purchase on that day i was not a customer and the tow was legit. only an old boy corporation could find logic that convoluted . Apple has learned just how much customer satisfaction is worth . the two cultures do not mix (letters to each company were sent I got a call from Steve Jobs office ,AT&T came in a week later with the quote above . they lost in small claims and i got my 260 back .

@Mo-

I don't think that this means that the iPhone is "subsidized" by the carrier in the normal way that cell phone plans work. In most cases, an OEM (say, Motorola) may charge $250 for a phone. The carrier will pay the carrier full price to the maufacturer, and sell the phone for, say, $99 (or even free) to the customer because they will recoup that cost over two years when the customer is locked into a contract.

Apple and the carriers are treating the iPhone differently. Almost all of the $399 in sales goes right to Apple. Also, because this is such a high-demand product, the carriers are paying a fat chunk of their monthly rates to Apple for the right to carry this phone exclusively in their market.

So from Apple's perspective, the iPhone means $399 to them up-front as well as about $18 per month over two years. An unlocked iPhone does not guarantee that monthly payment, so that is why they want to charge so much for an unlocked phone.

I'm not saying that I agree with how they're doing things, but it's very different from the subsidies paid to other phone manufacturers, who set high retail prices (often just as high as Apple's $399 retail) but never see another dime of it.