Apple Doesn't Need a Cheaper iPhone

You can't deny the smashing success Apple has had with the iconic iPhone. Since it was launched in 2007, more than 100 million iPhones have been sold and the revolutionary device now accounts for about 40% of Apple's sales. But Google (Nasdaq: GOOG ) has caught and passed Apple in the number of cell phones running its operating system and is adding 500,000 devices per day to its ranks. That has some Apple watchers calling for a cheaper iPhone to compete with free (with a contract) Android phones. Should Apple listen?

Above the fray
Apple's history of sticking with the premium product is mixed. In the 1980s, adhering to a closed system and high margins let Microsoft (Nasdaq:MSFT IBM, NYSE: IBM get the upper hand in the PC race. But recently, the premium product is what has differentiated Mac in the PC market and has led to its success. Likewise, when netbooks were all the rage, Apple stayed away from the price-sensitive products and instead worked on the iPad, which revolutionized the industry.

With the iPod, Apple expanded a successful product into the Shuffle, Mini, Nano, and Touch varieties that cover any price range consumers may need. That's the model Apple would probably follow if it wanted to reach beyond its current base.

But the answer of what to do with the iPhone depends on how Apple could make the product less expensive without ruining the experience. You can’t just shrink an iPhone, reduce the size of the screen, and have a hit the way Apple did with the iPod Mini. The iPhone is all about a superior experience, and any "dumbing down" may bring in more buyers, but they may not be happy with their experience.

Of course, Apple already sells the iPhone 3G for $49 with a contract through AT&T. Verizon doesn't have that option because the 3GS doesn't work on its network, although newer models could be made available at reduced costs.

But remember that one of the reasons the iPod model worked was that Apple essentially replaced the iPod with the iPhone, so it never became a commodity business based primarily on price. Apple gets on a slippery slope if it starts trying to make every consumer price point happy with iPhones.

Increasing sales volume has never been the only goal of Steve Jobs or Apple; instead, they've had success sticking with "delighting their customers." Unless Apple has some magic trick up its sleeve (and it might), I hope it doesn't stoop to making a dumbed-down iPhone

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Samsung Sues Apple Over IPhone, IPad, IPod

Samsung Electronics Co., the world’s largest computer-memory chip maker, filed another lawsuit against Apple Inc. (AAPL), claiming the U.S. company infringed patents for technology used in its iPhone and iPad devices.

“Apple has copied many of Samsung’s innovations in its Apple iPhone, iPod and iPad products,” lawyers for the Suwon, South Korea-based company said in a lawsuit filed yesterday in federal court in Delaware.

Samsung also filed a complaint with the U.S. International Trade Commission in Washington on June 28 seeking to block imports of the devices containing the allegedly infringing technology.

The suit follows litigation in at least four countries as Samsung and Apple, the world’s largest technology company by market value, compete in the mobile-device market. In April, Cupertino, California-based Apple sued Samsung in federal court in Oakland, California, alleging the Korean company’s Galaxy phone and table computers “slavishly” copy the iPhone and iPad.

“They seem to have a lot to talk about,” Seo Won Seok, a Seoul-based analyst at NH Investment & Securities Co., said. “With these steps they are taking now, they seem to be trying to take a favorable position as part of the process to reach an agreement on cross-licensing in the end.”

Prior to the latest lawsuit, Samsung, which also supplies memory chips for Apple, had sued Apple in Seoul,Tokyo, San Francisco and Mannheim, Germany. Apple also has a case pending against Samsung in South Korea.

Trudy Muller, an Apple spokeswoman, didn’t immediately return a call seeking comment on the suit.

Samsung’s Delaware suit will be delayed if federal regulators agree to investigate the company’s complaints against Apple. The trade commission typically completes its reviews in 15 to 18 months.

Apple’s April 15 complaint claims Samsung is infringing seven patents related to the way Galaxy devices’ touch screens understand user gestures, including selecting, scrolling, pinching and zooming. Samsung is also copying three patents on the design, including the flat black face of the iPhone and iPad, according to Apple.

Apple also said on April 18 that Samsung “blatantly” copied its technologies and designs.

Samsung had asked a federal judge in the U.S. to order Apple to turn over samples of Apple’s forthcoming iPads and iPhones. It lost that bid on June 22.

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YouTube Commercial Kings Rhett and Link Talk New TV Show

Rhett & Link: Commercial Kings, a new television show premiering tonight on IFC, plots two best friends as they journey across the United States to understand the country—via advertising.

Rhett & Link won’t be a hyper-intellectual attempt to analyze our highest aspirations and deepest desires as a nation, as most media depictions of glamorous advertising do—from the Hucksters and What Women Want to Mad Men. Quite the opposite. We talk to the men behind the show below.

Rhett McLaughlin (left) and Link Neal (right) have one of the most subscribed-to channels on YouTube, where they show their clever commercials, each a viral hit in its own right. Although every ad boasts a different look, the pair deploy the same questionable production values, haphazardly written jingles, and guest appearances to make a hilarious final product. The IFC show documents the creation and production for each of these entertaining, more-rough-than-diamond, gems.

TOH: When did you develop a love for local advertisements?
Link: From the moment I started watching TV, I was developing a love for local commercials. When you see a guy trying to sell you used cars wearing a chicken suit, even if you’re not in the market to buy a car, even if you’re seven years old, you remember that. 

Rhett: One of things always grabbed our attention is the ‘unintentional funny.’  I don’t think every producer or business owner thinks it’s going to be really funny…

TOH: You started building your fan base on YouTube years ago.  Was expanding your channel into a television show part of the plan?
Rhett: Not really, but it’s something that you’re going to see more and more.  Anybody who wants to be in entertainment is going to be uploading stuff and if they’re good they’re going to build a following.

TOH: How will you use your YouTube fame to command a TV audience?
Rhett:  These crazy local commercials went viral. They make great stand-alone video. But then people start asking questions, like—is that real?  They want to see us interact with Rudy [the Cuban gynecologist-turned-American used-car salesman]. The commercial is candy; the TV show is a full course meal. You see the final product on the Internet, you can see the process on the show.

TOH: What has been your favorite commercial so far?
Link: Presidential carwash, with this great couple from India. They are committed to being the best carwash in town. This meant dressing them up as Presidents and having them rap. 

Rhett: My favorite is for Fountain of Health in Florida, which offers colatics. This stuff doesn’t sell itself. Often for local commercials, there will be a celebrity endorsement and we have a Grammy-award-winning musician famous for his 80s love songs, who will be making a cameo and [helped us] write the jingle.

TOH: How do you go about turning local business owners into Internet celebrities?
Link: With the owners of Presidential carwash, the owner said ‘why don’t you hire some actors or rappers.’  I said, ‘First of all – we don’t have a budget, but more importantly, we want people to see you and your wife starring in your own commercial.’  They are winsome. We want people to say, ‘I want to meet these people.’

Rhett: And what happens time after time a commercial goes up here, everyone who is local says, ‘I have to go to this carwash.’ Person after person in YouTube comments says, ‘I’m getting my car washed there,’ or ‘if I lived in America I would go here,’ or ‘I will drive across the country to go there.’

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