Amazon and Google are undermining mobile pricing, and that may hurt everyone

[ceredon]

What about Honda, Toyota, and Kia? Would they not implode from operating at a loss for long periods of time?

They are just taking profits away from conglomerates, and this often forces companies to operate more efficiently, and hopefully trim margins off the top.

They would. Unless they, somewhat uniquely, have infrastructure that allows them to recoup some of those losses on the side. This is what Google and Amazon have, where they have content, media deals and infrastructure to make some of those profits on the backend. Apple and MS are probably the only other companies that could do that as well, sell at a loss and make it up later. HTC, LG, etc don't and can't. They can't become more efficient than someone willing to lose money. That's the point. They could do it, but they would lose money, which makes it a problem for the industry.

Personally, I am fine with some of them leaving the business.

[ceredon]

So if originally you tried to sell for $600 at all and it doesn't sell and you lose money, but then you realized you can sell for $350 and make $20/handset and actually make a profit, why wouldn't you? No one is selling at a loss yet.

If the $20 "profit" is enough to cover all of the costs of running the business, great. Straight profit isn't really the issue. Margins and overall profitability are. You might make a sliver of profit per device, but it needs to be enough to pay the other costs and still have some left over to invest back into product development. If they idea is to take the money and run, great. If the point is to stay in business and have new products sometime, then you need higher levels of profits to re-invest into development.

[time space]

This thread has proven to be a veritable showcase for people to demonstrate their lack of understanding of basic economics and business practices.

It's quite a show!

[Aznsilvrboy]

If the $20 "profit" is enough to cover all of the costs of running the business, great. Straight profit isn't really the issue. Margins and overall profitability are. You might make a sliver of profit per device, but it needs to be enough to pay the other costs and still have some left over to invest back into product development. If they idea is to take the money and run, great. If the point is to stay in business and have new products sometime, then you need higher levels of profits to re-invest into development.

Where's the evidence that it isn't enough? That's all pure speculation. There's no point assuming that any of this is denying their ability to thrive and survive. Instead of making $0 selling $600 devices, now they're making some straight profit, great. That's all we need to know. Most of these companies have other businesses that impact their overall profitability. There's no issue here.

[ceredon]

Where's the evidence that it isn't enough? That's all pure speculation. There's no point assuming that any of this is denying their ability to thrive and survive. Instead of making $0 selling $600 devices, now they're making some straight profit, great. That's all we need to know. Most of these companies have other businesses that impact their overall profitability. There's no issue here.

because profit per device is an almost meaningless metric. Company margin are what matters. If they are making $20 per device, then if the sell hundreds of millions of them, great. Otherwise $20 device for a few units sold is not going to be enough to cover the other costs of doing business. Like staff. And heat. And marketing. And R&D.

Making a little bit of money per unit is not enough. You need it to be enough to cover and exceed all costs. If you buy 100 units for $1 each and sell them for $2 each, that is a great margin on the product, but if it takes you 10 days to sell them all and your daily cost are $5 per day unit in shipping, sales, staff, utilities, marketing, etc, then you are going the wrong way.

[Aznsilvrboy]

because profit per device is an almost meaningless metric. Company margin are what matters. If they are making $20 per device, then if the sell hundreds of millions of them, great. Otherwise $20 device for a few units sold is not going to be enough to cover the other costs of doing business. Like staff. And heat. And marketing. And R&D.

Making a little bit of money per unit is not enough. You need it to be enough to cover and exceed all costs. If you buy 100 units for $1 each and sell them for $2 each, that is a great margin on the product, but if it takes you 10 days to sell them all and your daily cost are $5 per day unit in shipping, sales, staff, utilities, marketing, etc, then you are going the wrong way.

I'm saying there's no evidence that what they're doing right now isn't "enough" for all the purposes you listed. So what's the point of this speculation that it isn't enough? For all we know it's already enough.

[ceredon]

I'm saying there's no evidence that what they're doing right now isn't "enough" for all the purposes you listed. So what's the point of this speculation that it isn't enough? For all we know it's already enough.

I suppose it is speculation, but it is based on pretty much every analyst in the world saying that Apple and Samsung have sucked up all the mobile profits, even before Google and Amazon got into the loss leader business.

Speculation or not, if there was no money to be made before for them, how could anyone expect new profits will suddenly appear with even more price competition?

[Aznsilvrboy]

I suppose it is speculation, but it is based on pretty much every analyst in the world saying that Apple and Samsung have sucked up all the mobile profits, even before Google and Amazon got into the loss leader business.

Speculation or not, if there was no money to be made before for them, how could anyone expect new profits will suddenly appear with even more price competition?

So apparently there's profit to be made, it's just currently Samsung and Apple has cannibalized most of it. Who is to say that those two will forever be the top dogs? Those two got there by making a couple of good phones and selling lots of them. So all anyone else has to do is make good phones and sell a lot. The pie is only this big, some will have bigger slice and others the smaller slice. It's bound to be like that. There's no situation in which player could be profiting like Apple or Samsung. If they do, that means Apple and Samsung are not making as much as before.

[ceredon]

So apparently there's profit to be made, it's just currently Samsung and Apple has cannibalized most of it. Who is to say that those two will forever be the top dogs? Those two got there by making a couple of good phones and selling lots of them. So all anyone else has to do is make good phones and sell a lot. The pie is only this big, some will have bigger slice and others the smaller slice. It's bound to be like that. There's no situation in which player could be profiting like Apple or Samsung. If they do, that means Apple and Samsung are not making as much as before.

Very much agreed. And as long as Apple and Samsung can protect their position, then they others will be in an even worse position than before. If they weren't making money before, they will make less now (with less than nothing being a loss). Apple and Samsung are making money, so they can sink that back into R&D. It also allows them a cushion to lower their prices, if necessary, and still protect the revenues in volume. The smaller volume players don't have that luxury.

Do you think Samsung and Apple's positions are exceptionally precarious right now? I think it will take a lot to knock them off the top.

[Aznsilvrboy]

Very much agreed. And as long as Apple and Samsung can protect their position, then they others will be in an even worse position than before. If they weren't making money before, they will make less now (with less than nothing being a loss). Apple and Samsung are making money, so they can sink that back into R&D. It also allows them a cushion to lower their prices, if necessary, and still protect the revenues in volume. The smaller volume players don't have that luxury.

Do you think Samsung and Apple's positions are exceptionally precarious right now? I think it will take a lot to knock them off the top.

To be honest, I do not think Apple or Samsung phones were that exceptional over the competition, but they sure have great marketing. The high end phones from each vendor are all comparable. There is no reason why it has to be a race between Apple and Samsung. I think other companies like HTC, LG and even Sony just needs to step up the marketing and perhaps address a few consumer complains like regular updates and battery life and what not and they'll be fine.

[FormerSlacker]

It's funny you mention Sony, because I remember reading that their mobile division was one of their few bright spots in the last Q.

http://www.zdnet.com/sony-cuts-q2-lo...it-7000006743/

[ceredon]

It's funny you mention Sony, because I remember reading that their mobile division was one of their few bright spots in the last Q.

http://www.zdnet.com/sony-cuts-q2-lo...it-7000006743/

Good to hear. They had to hack and cut an awful lot to get there.

[Hairball]

To be honest, I do not think Apple or Samsung phones were that exceptional over the competition, but they sure have great marketing. The high end phones from each vendor are all comparable. There is no reason why it has to be a race between Apple and Samsung. I think other companies like HTC, LG and even Sony just needs to step up the marketing and perhaps address a few consumer complains like regular updates and battery life and what not and they'll be fine.

I just got a new Sony Xperia U, it's pretty decent. The only bad thing is they seem to be the slowest to bring out Android updates.

[shaolinmonk]

Apple and Samsung are delivering the best products.... sony slow out the gate and dated. Lg First out the gate weak marketing and poor software
HTC...just seem confused even though they tried to stream line their products..
Motorola lost cause since Google doesn't direct them

Apple killer marketing, very complete product

Samsung puts in the features every android user wants, lots if models to differentiate ..solid fanbase, solid marketing the closest to "apple" in android land IMO

[Heero01]

I don't get how people think Google is dumping to kill competiotion... google makes its money off licensing its apps, the last thing it would want to do is kill competitors.

Personally - I am sure google consulted with manufacturing firms before making a move such as this. Most likely it is a test to see if it is possible for Manufactures to cut carriers out of the equation. If so - there are even greater profits to be made.