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Cold Takes: Vote.

by M.G. Siegler

"Business Model Innovation"

Emily Chang and Dina Bass, talking to Steve Ballmer:

What about that famous quote where Ballmer said Apple Inc.'s iPhone would never sell because it cost too much? He now wishes he'd realized how Apple was going to make it work -- through mobile carrier subsidies.
"I wish I'd thought about the model of subsidizing phones through the operators," he said. "You know, people like to point to this quote where I said iPhones will never sell, because the price at $600 or $700 was too high. And there was business model innovation by Apple to get it essentially built into the monthly cell phone bill."

I assume his high level point is that the iPhone sold less well at the full $700 price than once Apple got AT&T to start subsidizing it (giving up their cut of the monthly bill, in the process). But this reads as completely disingenuous. The idea of phone subsidies was hardly new -- this is how you got free flip phones in the early 2000s. Newsflash to Ballmer: those phones didn't actually cost $0 to produce. And you'd think he would know that since many Windows Mobile devices were sold this way...

At a high level, all that matters is that Microsoft totally missed the boat on smartphones. And, "business model innovation" aside, he was wrong to not view the iPhone as the biggest threat to his business ever. Both of those are on him. 


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