Research in Motion’s curious “let’s make our declining brand $100 more expensive than our more-popular competitors” strategy for the launch of its new BlackBerry models is not going to win it any fans in the store aisles or on Wall Street. Even die-hard BlackBerry fans might do a double-take at what they are being asked to pay for the new BlackBerry 7 devices as compared to their other options for high-end smartphones.
When a company doesn’t reveal pricing in a press release, it’s an easy sign that something isn’t right. T-Mobile proudly announced that it would offer the BlackBerry Bold 9900 as part of a presale for its business customers starting today, with general availability coming at the end of August. However, you had to wander over to T-Mobile’s Facebook page to find out that the phone would cost $299 after a $50 mail-in rebate.
Simply put, that’s way too expensive for a phone that isn’t all that different from older BlackBerry models that haven’t been selling well even with lower prices. Reviews of the Bold 9900 have described it as a great BlackBerry device but still unable to match the Web browsing and application experiences offered by the iPhone and high-end Android devices.
The pricing strategy is even more bizarre given comments earlier this year from RIM (NSDQ: RIMM) co-CEO Mike Lazaridis, who in June described the forthcoming BlackBerry 7 devices as best suited for “lower-cost” markets “where cost is premium.”
The sweet spot for smartphone pricing these days is $199, and RIM and T-Mobile aren’t even coming close to that with the Bold 9900. Sprint (NYSE: S) and Verizon plan to carry basically the same phone for $249, which isn’t very aggressive either but is at least in the ballpark. Apple (NSDQ: AAPL) sells an iPhone 4G with 16GBs of storage for $199, and a 32GB-model for $299, as compared to the 8GB of storage available on the Bold 9900. A few Android models cost more than $199, but most fall into that category and an awful lot of them can be had for free with a two-year contract on any given day. And one could make a reasonable argument that the $49 iPhone 3GS, which is more than two years old at this point, is still a better investment than a $249 BlackBerry 7 device.
This is not entirely RIM’s fault. Wireless carriers ultimately determine the price of a phone by how much they are willing to subsidize its cost, locking customers into a two-year contract in order to make their money on data revenue. But RIM can help carriers by accepting less margin in order to help the end price reach a certain level.
That is, unless RIM is unable to lower its acceptable margin because it is scrambling to reach already-lowered full-year profit goals. The company is under an enormous amount of pressure to turn its fortunes around following sliding sales of its smartphones in the U.S. and the declining profits that accompany such a skid.
Which puts RIM in the proverbial rock/hard place sandwich: it probably won’t lure new customers to the BlackBerry with such high pricing, and it may turn off a few long-time fans. But if it lowers its prices to goose volume, it won’t hit those profit targets and investors will be very unhappy.
The new BlackBerry Torch models unveiled earlier this month will likely come with cheaper price tags and two other BlackBerry 7 devices are expected this year, but the Bold is the flagship product. With Apple almost guaranteed to offer an iPhone 5 at $199 and new Android models also expected around the release of the Ice Cream Sandwich version this fall, the competition is not going to get any easier for RIM.