Nearly two-thirds of U.S. smartphone buyers paid less than $200 for their devices during the third quarter, according to a recent study published by consumer-electronics researcher NPD. And much of that was driven by sales of the iPhone 4 and iPhone 3GS, which outsold competing phones from HTC, Motorola (NYSE: MMI), and Samsung despite their advanced age.
The sweet spot for smartphone pricing has been $200 ever since Apple (NSDQ: AAPL) agreed to embrace the traditional subsidized phone/contract pricing model in 2008 with the launch of the iPhone 3G. But the average selling price has gotten lower and lower amid sales of low-cost Android phones and Apple’s own willingness to sell older versions of the iPhone at cut-rate prices. During the third quarter, the average U.S. smartphone buyer paid $135 for their device (although that price almost certainly included a two-year wireless contract).
Most of the buying activity in the third quarter took place before Apple introduced the iPhone 4S, which bumped the price of the iPhone 4 down to $99 and made the iPhone 3GS available for free. But even before those lower price points emerged, the iPhone 4 and the iPhone 3GS were the top two selling phones in the U.S., besting the HTC Evo 4G, the Motorola Droid 3, and the Samsung Intensity II.
One conclusion NPD drew from that data was that mobile phone makers have to be thinking about accessories in order to make up for lower phone prices. But a few others can be reached:
–Smartphone buyers are increasingly price-sensitive as the devices reach mainstream use in the U.S.
–People are finding it easy to get away with lower storage capacity on their phones, which suggests that many of them aren’t putting their entire music library on those devices, watching lots of videos, or downloading hundreds of apps.
–Android vendors may have to get more aggressive on pricing if so many people were willing to pay full price for the iPhone 4 18 months after its debut, especially considering that it now costs $99. That could dent their profit margins right at the same time that royalty payments to Microsoft (NSDQ: MSFT) start to kick in.