A quick remark on the Apple Watch Edition (the $10K+ one)

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A lot has been said about the Apple Watch Edition which costs more than $10,000. I initially thought it wouldn’t be priced like that as it would be out of character for Apple whose identity was more mass market — with technology being widely available. To be sure, Apple products were never cheap but they weren’t ludicrously expensive either.

There was always something different about the positioning of Apple versus the positioning of Rolex and the like. A great share of the population can afford Apple products while instead Rolex is exclusive. Indeed, it is so exclusive that Rolex take out billboard ads. Why? Not to sell to commuters but to sell the idea to commuters so that when they encounter someone with a Rolex they know they are encountering someone who is friggin’ rich. Put simply, if you wear a Rolex and no one knows it costs a ridiculous amount of money, there goes your value proposition. What are you going to do with a $20,000 watch? Tell the time? Give me a break.

Robert Frank in Vox wrote that the Apple Watch Edition should be celebrated by the rest of us because it spreads fixed costs around. That price discrimination story is great when we come to think of things like business class travel but it does not hold up for the Apple Watch. Why? Because to make sense, it must be that the presence of the Apple Watch Edition actually lowers the price of other Apple Watches. But I just don’t believe that is the case. Instead, while it likely has not impact on their pricing, if it does have an impact it is to raise the stature of all Apple Watches and, for that reason, raise their prices. In other words, it is more Veblen than Varian.

So how should we look at the Apple Watch Edition? First, I don’t think it exists to make money and, therefore, does not exist to help defray the costs of developing the Apple Watch. Second, given this, I do not think that it is there to impact at all on Apple’s image as having accessible technology. Put these two things together and we see a plan. The Apple Watch Edition is most likely there for Jonny Ive so that he can play in the major fashion designer leagues. I know that he seems like such an affable guy and a man of the people but he has a Bently and a Knighthood. So it is a very British sort of person made good. You want to keep him interested, you have to throw him a bone and that bone is the Apple Watch Edition. This is why on the Apple site they talk about $10K plus and put that out to the press when, in reality, if anyone buys one of these they will be paying twice as much to get the ‘good red one.’ After all, the $10K comes with a sport band. A sport band! No one is going to get that. No one.

But the other clue we have that this is the case is that the Apple Watch Edition is precisely the same as the Apple Watch Sport. There are the same two sizes with the larger one costing more (in the case of Edition, $2000 more but still). But the technology is the same. The insides are the same. The rich person with the Edition will not be able to do one thing more than someone with a sport. Not one thing. This is unprecedented in price discrimination. Whenever different versions arise they can do more. This time around, you don’t even get extra storage. It would have been so simple for Apple to have differentiated on some feature. Yet they chose to do none of them. Why? They were going to err on the side of not compromising their identity.

In summary, the Apple Watch Edition is possibly the most commercially irrelevant product ever launched (certainly by Apple) and should be viewed as an expense on the human resource management ledger.

Skoll Chair in Innovation & Entrepreneurship at the Rotman School of Management, University of Toronto. joshuagans.com and digitopoly.org

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