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Discounts on last year's bigger iPhones give Apple weapon to continue strong sales

Gregg Keizer | Sept. 7, 2015
Majorities of iPhone owners in U.S. and China have yet to upgrade to larger screens.

That's the usual drill.

What's out of the ordinary this cycle, Milanesi contends, is that it will be the first time Apple will be selling its larger-screen iPhones at a discount.

Historically, Apple has retained last year's model or models and sold them at a discount of $100. Under that practice, the subsidized price of the entry-level iPhone 6 will drop from $199 to $99, while the bottom-end iPhone 6 Plus will fall from $299 to $199. The same discounts have applied to non-subsidized prices as well.

In a follow-up interview today, Milanesi said she is confident Apple would continue the discounting next week, although she added that carriers in some markets may tweak the deal.

The move by U.S. carriers to an installment plan model, most recently adopted by Verizon last month, probably won't impact sales of the lower-priced 2014 iPhones, said Milanesi, even though the $100 savings will be spread out over a two-year span and thus seem like a minor deal when compared to the larger up-front discount under earlier subsidized contracts. "Some phones still have an upfront cost," Milanesi said of installment plans, "while others are zero down and then monthly payments [for the device]. It depends on the what the difference is [whether consumers believe they're getting a better deal with last year's models]. But it all goes back to the total cost of ownership."

Because Chinese iPhone buyers are more likely to spring for the larger iPhone 6 Plus -- since September 2014, 24% of buyers there selected that model versus 16% in the U.S. -- Milanesi said that the discounted price of the iPhone 6 Plus will matter most in that market.

"I definitely think Asia will make a big difference to Apple [in the remainder of 2015 and throughout 2016]," she said.


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