Price cutter's delight as 2014 kicks off on a discounting note
Google's (GOOG) Motorola greeted the new year with good news for smartphone customers: the tech giant cut the no-contract price of its well-reviewed Moto X to $399 from $549.
It's probably a good move by Motorola but it's also a sign of things to come. After a few aggressive price choppers made news last year, 2014 will be the year almost everyone else responds.
Last year, it was mostly Amazon (AMZN) and T-Mobile (TMUS) cutting prices. Amazon focused on web services and tablets in 2013, while T-Mobile shattered several of the phone industry's most anti-consumer
rules as it reduced the cost of monthly service and international roaming.
This year, rumor has it that Amazon finally may enter the phone market and will also start marketing its streaming video service as a cheap, standalone product to take on Netflix (NFLX). T-Mobile CEO John Legere will unveil his latest twist next week at the Consumer Electronics Show, rumored to be a refund of early termination fees and/or discounted family plans.
Related: T-Mobile's blunt-talking CEO shakes up the mobile industry
No stranger to pricing blunders, Netflix is proceeding carefully amidst the Amazon rumors, testing out a variety of different pricing tiers for new customers. The one getting the ink, of course, is a new $6.99 per month option that undercuts the company's current lowest price by a buck.
Amazon has so far only offered its Netflix clone video service as part of the $79 a year Prime plan that also includes free shipping on all orders. Amazon did however run an ad focused solely on the
video offering, sparking rumors that it will offer just the video service for $5 to $6 a month.
Netflix investors, beneficiaries of last year's near-quadrupling of the company's stock price, were hoping for a price hike. That seems unlikely if Amazon decides to spark an all-out price war. And with Netflix stock in the stratosphere, trading at over 300 times its earnings per share, a price war is the last thing investors want to see. Jeff Bezos' minions have already fired some price cutting shots at Apple's iPad and the big question is will Apple (AAPL) be forced to respond.
The iPad line has been troubled of late, with sales growth evaporating, but new models were
supposed to get customers excited again. The earliest report, an admittedly limited snapshot from online ad network Chitika, showed Apple losing tablet market share over the holidays as Amazon and Microsoft (MSFT) gained. Apple introduced the cheaper iPad mini in 2012 but that hasn’t been enough — maybe lower prices will arrive this year.
It's a whole different story for the iPhone, where growth has continued apace. Consumers love the iOS software, the huge variety and quality of apps and unmatchable Appley-ness of it all. And the iPhone has
the highest repurchase rate of any smartphone. Motorola's price cuts aren't likely to change that or force
a reaction from Apple. In truth, the price cut more likely resulted from slow sales than any strategic stab at the iPhone.
Apple won't cut prices on the iPhone this year, instead continuing to depend on its loyal cadre of carriers to subsidize the price for consumers. The 5C was rumored to be a cheap play for emerging markets but
turned out to be a cheaper-to-manufacture device with the same pricing as the previous year's mid-range model.
Some day, when wealthy shoppers worldwide have had their fill of iPhones, maybe Apple will offer a lower-priced model. But it won't be because of a cheap Moto X.
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