S08E02: The Apple Episode

This week the team discuss everything Apple - new iPhones, new iOS and - possibly - a change in strategy. We reflect on Apple's late conversion to larger phone sizes, 'bend-gate' (but only briefly) and Rafe uses the phrase "price inelasticity".


Ben: Hello and welcome to the 361 Podcast, season 8, episode 2.  My name's Ben Smith from Wireless Worker.

Rafe: I'm Rafe from the All About sites.

Ewan: I'm Ewan from Mobile Industry Review.

Ben: This week, it's iPhone 6 and iOS 8 week.  We're talking all about the new devices and the new software platform. 

Rafe: We're going to talk about the devices we chose and the different sizes.

Ewan: And we're examining how Apple's device strategy is changing.

Ben: Well, hello guys, welcome back.  Good to see you.

Ewan: Hello, hello, hello.

Rafe: Excellent.

Ben: Any news?

Ewan: Yes, I have good news.  I've been using My Fitness Pal to get fit, or ripped.  Can you tell?

Rafe: Not really.

Ewan: Come on, I'm going to have to show you my muscle.

Ben: Muscle.  Good job, but this isn't a video podcast, isn't it?

Ewan: Look at my muscle.  Come on, that's good, isn't it?

Ben: All right.  Is that a bicep your flexing?

Ewan: It is a bicep.

Ben: I can't tell.

Ewan: Thanks for that.  I'm benching 35.

Ben: A piece of string that was hanging out from your t-shirt.

Ewan: No, no, no.  I didn't spray the arm either.

Ben: You see, now, I was dubious as to why you'd come less formally than you normally do for the podcast, because you normally arrive in a suit, and today you have arrived in a t-shirt.

Ewan: I wanted you to see the ripped nature.

Ben: You're showing off your fabulous figure now.

Ewan: That's it.

Rafe: I always thought there was a six-pack there.

Ewan: Not yet.  Not yet.

Ben: It's more “buy one get one free” at the moment.

Ben: It's like a one-pack. 

Ewan: Yeah.

Ben: Rafe Blandford, what's your news?

Rafe: I haven't got any particular news, but I did just run a highlight on something that happened a few weeks ago.  We've managed to kind of pass me by.  That was the Blackberry Passport, new device from Blackberry.  It kind of saddened me that it didn't really get a lot of attention.  There's a reason for it.  It is kind of a square device and Blackberry trying to do something completely different to everybody else in the industry.  Just a gentle reminder  about how much things change, and previously the release of a big new premium Blackberry device would have been a really big deal.  Rather a whimper this time around.

Ewan: Mmhmm (affirmative).

Ben: There you go.  My news-

Ewan: Yes, what's your news?

Ben: Since you asked. 

Ewan: Anything interesting?

Ben: No. 

Ewan: Okay.  Yeah, move on.

Ben: No, I'm sort of relatively pleased.  We don't talk about personal stuff on the podcast, but I'm relatively pleased to announce that Mrs Smith and I are releasing a Smith 2.0, Compact Edition sometime next year.

Ewan: Excellent.

Ben: Yes.  We're expecting.

Ewan: Congratulations. 

Ben: All of those facetious comments I made about iPads and children's apps and things.  It's-

Ewan: You're eating them right now.

Ben: I can see season 9 being very heavily orientated towards apps.  "Oh my God, how do I sleep?"  "How do I wipe that off there?" and "Should that be that colour?"

Rafe: We do have a delivery management special coming later in the series. 

Ben: We do.  We do.  We could-

Ewan: Are you going to do it in an agile manner?

Ben: Let's just say that -

Rafe: More of a waterfall.

Ben: In sprints.  Let's just say that some of my professional skills may be tested here under pressure.

Ewan: Right.

Ben: Yes-

Ewan: Congratulations.

Ben: We've no news other than it is happening.  We've got some smeary back and white pictures like everybody else has smeary black and white pictures of their offspring.

Ewan: You've got to get the 4-D one.  No, you'll probably get that soon.

Ben: 4-D?

Ewan: Yeah, yeah.

Ben: Is that not literally impossible.

Ewan: Maybe, I think ... No, there's a 4-D, I'm sure it was a 4-D now that you can get.

Ben: Rafe, is 4-D not just a 3-D movie?

Rafe: It's complicated.  It depends whether you include time with your fourth dimension.  Whether you start going into String Theory.

Ewan: You're complicating things now.  I'm pretty sure a friend of mine recently had a child, and just before they gave birth, they got a 4-D scan.  I wonder if that's what they use to justify the price tag of the-

Rafe: I think it might possibly-

Ewan: 3-D is blue or something like that.

Rafe: Might just be marketing guff, but you need to get one of them is all I was-

Ben: I can announce, though, that the maternity ward does have adequate WiFi. 

Rafe: Excellent.

Ewan: So you've checked it out?

Ben: Yeah, I've scoped it out.

Rafe: I think we have to say a big congratulations to Ben, but we can also reassure listeners that we've managed to schedule recordings such that it won't interfere with this season of 361 Podcast, so Ben's got his priorities right, I'm pleased to say.

Ewan: Absolutely.

Ben: Exactly.  Mrs Smith will be the first woman to have a sort of a 60-week pregnancy in order to fit in with the podcast schedule. 

Ewan: If she wouldn't mind.

Ben: If she wouldn't mind.  Anyway, let's move on to ... From that nonsense to the important stuff of the day.

Ewan: Come on.

Ben: This week, we are catching up on all the iPhone 6, iOS 8 news of which ... The initial hubbub has died down a little bit now that the news is out.  We've all got our devices, so first up, what have we got Mr MacLeod?

Ewan: I went for the 6.  Just a 6.  The only reason I went for the 6 as opposed to the Plus, was just because that was the one that would be delivered on-time.  I'm quite keen to have to play with a Plus, as well.  I think that might be interesting. 

Ben: Excellent.  Sound reasoning there.

Ewan: Mmhmm (affirmative).

Ben: 6 on the market, Rafe Blandford?

Rafe: I haven't actually upgraded my personal-

Ben: Get out.

Rafe: iPhone or my work phone.

Ben: Stand up now and get out.

Rafe: But, unlike Ewan, I actually had both and iPhone 6 and an iPhone 6 Plus, which I borrowed from work so that I can talk about them knowledgeably.

Ewan: Doesn't count.  Doesn't count.

Ben: Rafe Blandford has them both in front of him now.  He's a two-iPhone Blandford at the moment.  There we go.  Actually, you just hold it ... Rafe is just holding them up in the air there, which again, I need to remind you, does not work well on audio on your podcast, but holding them up reminds me of the reason that I chose the 6 over the 6 Plus.  I hedged my bets, went into the store and checked them out and decided which one I was going to get.

Ewan: You just tell the listeners what you were doing, because I think you're the most anal of iPhone purchasers.

Ben: In the UK, I don't think it's globally.

Ewan: It's a first world problem you were solving.

Ben: Definitely.  Let's check-out privilege at the door here.

Ewan: Yeah.

Ben: In the UK, and I think some other markets, but particularly in the UK, you could, a part from buying for delivery from the store, you can reserve in-store pickup.  In-store pickup was pay on collection, so I reserved one of each, went into the store, checked them out on the display on launch day, decided which one wanted and then just collected one and said, "No, thanks" to the other one and just put that back in the pool, so some poor sot who was waiting in the queue outside the Apple store for a 6 Plus and was going to be told, "No, we've run out."  One more went back on the shelves.

Ewan: That's good.  Okay. 

Ben: I made someone's day.  I like to think rather than selfishly reserving one-

Ewan: Where did you buy it?  What store?

Ben: I went to the Basingstoke store, which actually nearest to our home.

Ewan: I know that one.

Ben: And nearest to where you live, as well.

Ewan: I shop over there.

Ben: I went and used the store and I thought it would take me a long time to decide.  I was all ready to fire up the apps I cared about.  I put my finger across ... I put my thumb across the 6 Plus, couldn't reach from the left side to the right side and immediately knew that that wasn't for me, so that was done and dusted.  I am loving the larger size of the 6.

Ewan: Yes.  Excellent.

Ben: Anyway, our preferences probably don't matter that much.  What do we think that the major ... Having had a bit of time now to think about it, what are the major differences in the devices that actually matter?  Because, there's a lot of technical detail, but what really matters?

Ewan: I was having this conversation on a day with a colleague, Darrell.  Hello there, Darrell.  That's Darrell at Nationwide, I should point out, by the way.

Ben: Is that Darrell at Nationwide who probably has something huge to do with you (a) being hired, and (b) being paid?

Ewan: I think he has everything to do with it, but we're having a conversation about it and he was pretty particularly direct, as was I.  I don't see any difference, really.  It's bigger.  It's slimmer.  Battery, I think is slightly better.  It's just nicer.  It's my view.  On the face, I can't point to anything that I feel is amazing.  Of course, Apple Pay doesn't work yet, the HealthKit stuff doesn't work for me yet, blah, blah, blah.  It's just a bigger, slimmer iPhone, thanks very much.  I'm pleased with it, but I'm not over-the-moon.  It's just great.  Thanks.

Ben: So Blandford, the word that's being bantered around in some circles is defensive in terms of a play from Apple this time around.  Is that fair?

Rafe: I think it is.  There's two reasons for that-both on the software side, which we can maybe touch on later.  It's really, a lot of people have said it's getting features that Android already has.  That's true, but I think that's perhaps less fair because it's delivered in the way that Apple does things with a bit of poise, thinking about how they're doing it rather than necessarily being cutting-edge.  There's some innovation in there as well, with HomeKit and HealthKit and Apple Pay to come.  In particularly on the screen size, given what Steve Jobs said in the past about people wanting a bigger screen size on their iPhone, it is essentially back-tracking from Apple and they've been forced into that by their competition who have released bigger screen phones.  Samsung being the obvious example of that.  I think particularly with the 6 Plus, which is the tablet device, I don't think you should see that as a bad thing.  Apple is never always going to be right and really responding to what-

Ewan: Jobs didn't actually say that. 

Rafe: He-

Ewan: He didn't.  It might be written down.  You might even have a video of it, but he didn't actually say that actually.

Rafe: That's right.  History is written by the victors.

Ewan: Let me distort your reality, because you are wrong, apparently.

Rafe: For me-

Ben: Apple do have form on changing their mind, though.  They also said they wouldn't make an iPad mini because you wouldn't need a device that size.  Within Steve Jobs lifetime, they did change their mind.  Whether or not he was convinced or the commercial realities bear, I don't know, but I wonder sometimes whether they say what they have to say to create and shape the market in the way they want it to be when they start and then they're forever creating a context to see their devices in.  Sometimes they have to be absolute about things that really are grey in the real world.

Rafe: And the original iPhone and apps is the perfect example of that.  However, I think on this particular occasion, they've actually had to move in response to the market.  That's why it's his defence.  Really, it's about making sure their able to capture as much of the high-end of the market as possible, because there were people making decisions on which phone to buy on the basis of screen size and people going, "I won't have an iPhone because the screen isn't big enough."

Ewan: Too small, yeah.

Rafe: Actually, now, you see the iPhone 6 and compare it to some of the other devices on the market.  It really does feel like the 5s and the 5c had a too small of screen.  There are going to be people who prefer that, but I think the minimum expectation for what a screen size should be has moved in the smart phone.  It is now between kind of 4.7 and the 5-inches, feels to me like the sweet spot.  There is this additional tablet sector, which is 5.7 to 6 and a half inches. 

Ben: I think there's a risk of sounding like a fan-boy, but I was wondering whether or not the right size for a phone has changed.  It's not a case that there has always been a right size, and you know, we've been under it or over it before.  Actually, as smart phone operating systems and apps and things have got more complicated, people have got more familiar with them and their aspirations and expectations have changed.  The number had increased and Apple might be ahead or behind the curve of other people picking up on it.  I mean, Samsung arguably are always there because they've always got so many different devices out on the market, but last year's right number and this year's right number are very different.

Rafe: I think that's fair, but at the same time, I think you have to say Apple somewhat unusually hasn't been setting the kind of market context.  This is a clear case of where it's followed and it reflects the changing market landscape where the iPhone is now one of a number of high-end devices, all of which are quite competitive with each other.  There has been some discussion about ... To these new iPhones, meaning you should not buy a high-end Android or a high-end Windows device.  I think that's not the case, but I do think with these devices, Apple will be able to catch a larger portion of that high end of the market.

Ewan: Let me ask you this.  When was the last time you think that Apple set the tone for the market?  Or set the agenda?  Was it the retina screen?

Rafe: I think you could look at the retina screen, but even in the latest stuff, things like HealthKit, back at WWDC, the idea of health being integrated in an aggregator of data, that's something that Apple set the agenda for.

Ewan: Right.

Rafe: There's now ... We've had Google Fit and definitely Microsoft, we're doing health beforehand.  But that's suddenly come to the attention of the market and something similar will happen with Apple Pay. 

Ben: Yes, actually I want to pick up on Apple Pay because the wrong person's answers to that is, "Oh, Google Wallet has been around for blah, blah, blah."  Yes, technically, there was Google Wallet and NFC payments on Android phones, but Apple announced that they were launching with tens and tens of thousands of retail locations all tolled up, ready to go.  So they did a proper launch of the full payment system.  I think they are still leading, but it's no spoil that both those answers are not around hardware innovation in this case, because Rafe said in previous podcasts, there comes a point where you run out of areas to innovate into, of gaps to make up.  They're actually screens, battery, construction techniques, cameras.  We really are now squeezing out small, incremental improvements.

Rafe: If you look at the new iPhone 6, it's quite clear, the biggest changes are actually in the software--actually more significantly there.  In the enablers that lets you do things.

Ewan: Yes.

Rafe: Your referred to HealthKit, not doing anything yet.  That's absolutely right.  Where I think there is a big difference quite early on is the extensions and the idea that you're able to address other apps from within other apps.  It's kind of breaking the traditional apps-side that's been very strong, particularly on iOS.  Less so on some of the other platforms.  I think it's a big deal, for example, that you can click to Evernote from pretty much any content source now.

Ewan: I didn't know that.

Rafe: The browser has become extensible, and yes, finally because it's been available on other platforms-

Ewan: It's very annoying, yeah.

Rafe: That's going to change the way apps interact with each other.  I think potentially, at least, quite a lot of different user experiences.  You can start to imagine how payments get integrated into apps in different ways.  The idea that you come back out to the app launcher and then go into another app will start to be just one way, because the other way will be your go from app to app through deep linking and through extensions.

Ben: I think the keyboard-

Rafe: It's a great example.

Ben: The custom keyboards are a case of Apple being a late follower.  Also, in the area where I wonder if late-followed into the same minefield that Android has.  A lot of conversations I've been seeing recently around the privacy issues of third party having access to your keyboard, or more importantly, having access to what you type, in some cases needing to send that into an internet-based service, and of course, Apple review keyboard code like they do apps, so of all the app stores, it's got the best checking mechanism, but it's certainly not infallible.  I wonder if as they follow ... As they get pushed into areas that they maybe wouldn't have naturally moved into themselves, they begin to have some of the same problems as the rest of the market.  Can they meaningfully differentiate against Android, Rafe?

Rafe: I don't think they can in that software, since a lot of the time Google is going to typically be more nimble in the development.  Where it's moving with Android, it's the nature of the platform.  Where I think Apple continues to differentiate itself from Google, is that, both in the business model where it extracts value from its ecosystem and the general approach it has.  I can't claim credit for this particular insight, I think it was Benedict Evans and a few of the other online analysts talk about the way that Google puts a lot of value into the cloud.  That's where it expects to sort data.  Apple puts more into the device.  Kind of ironic, given the recent scandals with celebrity photos.

Ben: I want to move on, because there are some big picture topics that we really want to move on to talk about, but we have to give no more than a minute and a bit to bendy iPhones because-

Ewan: Why?  Why?

Ben: I think we have to address it, even if only to dismiss it.

Ewan: Yeah.

Ben: Certainly, we haven't talked about this before we started recording, but I ... This story probably would develop between when we record and when we publish this because we've got a little bit of a lead time on this episode.  My sense is that this is something that will blow over, that ... I was on the radio today talking about it on a radio station and the guy was saying, "Oh yeah, it's in all the papers, and you know, and should I not buy an iPhone 6 Plus because it will just bend?"  Thinking, well actually, it's probably not the toughest phone out there, but it's tough enough for a luxury piece of consumer electronics. 

Rafe: There's been some great jokes around this, but honestly the ones that are truly bending in your pocket as opposed to being force-bent represent outliers. I think there is a case to be made that Apple has lowered the threshold a little bit too much in terms of its tolerances in the testing of things like that.  It's kind of an inevitable function of making the device thinner because you have the cross sectional areas, obviously, a bigger instance.  Yeah, try to fold a notebook verses a single piece of paper.  I think this tends to get overblown and not helped by Apple not responding.  At the same time, I think there's a lot of people ... Manufacturers would like to be in Apple's position, getting so much noise around an issue like this because it's such a sign that Apple and the new launch is part of the mainstream news cycle.  It's not just a technology thing anymore.

Ewan: I think it will blow over, but I think all the other publications out there that cover are anti-Apple, or actually, you don't have to be anti-Apple, you just have to be up for more traffic to your website.  We'll keep this alive for a little while.

Ben: So, launch weekend, they shifted ten million units globally.

Ewan: Amazing.

Ben: Unless thousands and thousands of people are being affected by this, it's not a meaningful number.  The fact that you can force the phone to bend exerting deliberate pressure is simply irrelevant.

Ewan: Can you not do that to any phone?

Rafe: You could do it to any phone.  Some of them are more susceptible and different manufacturers make different decisions on tolerant levels.  For example, Nokia... And it's got a reputation it actually deserved, generally-

Ben: Okay.  18 minutes in and a Nokia reference.

Rafe: Must nastier to your phone-

Ewan: Is that money to you, or-

Ben: I thought it was a pound a minute.  18 quid.

Ewan: 18.  Fine.

Rafe: You look at other devices that use plastic, so there's also Apple using aluminium, glass, and that has more flex in it, so I don't think they deserve some of the criticism they're getting.  What they've maybe deserved criticism for having is kind of being a bit ostrich-like, as they tend to be when something goes to a negative story in the media and not responding to it.  At the same time, you admire their fortitude in sticking to their strategy.  Actually, it works for them.  It's been proved to be so in the past when you think about antennae gating or any of those previous incidents. 

Ben: Okay, let's move on to something I want us to talk about a bit more, which was ... What do we think the 6 and 6 Plus does to iPhone range?  Because right now, as we're talking, we've got three different sizes of iPhone.  You've got the 5c and the 5s, which is the traditional size, as it were.  You've got the 6 and you've got the 6 Plus.  I was wondering, are we going to end up now with a cheap iPhone that has a lower spec screen than the others?  Are we going to end up with the 5c or the plastic model going up to a 6 size so that you just end up with two sizes and different types of hardware?  Or are we actually missing ... Is there an iPhone 5s-

Ewan: Plus.

Ben: Kind of a 6 Minus, with the same internals inside-

Ewan: 5 and a half.

Ben: But the 6 would become the standard.  Yeah, the 6 Mini, because I'm beginning to wonder ... Two devices is difficult to manage from a fragmentation point of view relative to Apple's ecosystem.  Even the Android world, that would be great, great news, but Apple derives a lot of stability from only having a small number of devices.  One more makes a big difference, so where are we going on this one?  Rafe?

Rafe: You're still going to have the 5s on the market and being sold.  There are effectively three devices already, but I agree with you, it is a fragmentation issue.  If you're, say, doing responsive websites, there's actually now three break points you need to consider to cover all the iPhone devices.  That's up from just one before.  That applies in app design as well because of the different resolutions.  I tend to think that the smaller size will disappear in time.  I think that will upset some people who said I'm not buying a new iPhone because I want the smaller screen one.  I tend to think that Apple will just stick with having two in the future and just as the 4s devices, all of that had dropped off.  I think the 5s and that smaller size will disappear in time.

Ben: Yeah.

Rafe: I'm absolutely prepared to be proved wrong.  Apple might surprise us all and announce a 6 mini in February or something like that.

Ben: Generally now, Ewan, pricing with the 6 models has gone up commensurate with the size, hasn't it?

Ewan: Oh yeah.

Ben: If they do abandon the 5c and the 5s size when they reach their end of life--and I know Rafe said they're around for a bit--How have Apple actually reposition themselves even higher in the market because if they did that, what was the point to having the 5c?  I thought the 5c was about setting the bottom of what an iPhone could cost and they would have to cover everything from the 5c upwards, so it seems like they have gone in one direction one year and then substantially another direction the next. 

Ewan: I don't know if even Apple could give you a proper reason or explanation for the 5c other than, "Well, it's a bit cheaper.  We thought we'd see how it performs, and thanks very much."  I think it is time to move on.  I reckon Apple have said, "Okay, we need more money from these people.  We need to carve our nation."  We always know that Apple are very expensive anyway, but they've settled at less.  I think what they said is, "We will take the premium market."  The Apple fan-boys, the idiots out there who will just ... And I am one of them ... Will happily pay the-

Ben: You saved me jumping in there.

Ewan: Right, there you go.  Will happily pay more money.  Just to give you ... I was looking at some tear-down research recently.  It costs and extra $15 for the 6 Plus, but they charge an extra $100.  It's just really, really smart.  But that's pricing imposition.

Ben: That's always been the way, though, with RAM as well, which is the increment of, "Okay, we're jumping 16, 64, 128 now, but back in the days when there was just a 16 to 32 gap, there was often ... Was it a $100 difference?  Rafe?  Yeah, it was $100 difference for what was single-digit dollars of RAM in some cases.

Ewan: Can they really genuinely compete with the rest of the marketplace sub 400 pounds?

Rafe: I think that's the interesting thing-

Ewan: Do they want to-

Rafe: The 5c was held up as the cheap iPhone.  It wasn't at all.  Actually, the 4s was really the entry level point for the iPhone.  I think the 5c probably didn't do as well as expected, especially early on.  Subsequently it perhaps did a little better.  Let's not forget the 6 in time, and the 6 Plus will be replaced by something like the 6s Plus ... Names are going to be a bit tongue-twisters.

Ewan: Mmhmm (affirmative).

Rafe: They'll become the entry-level.  I think Apple's strategy has been through focus, as I sort of suggested earlier, on trying to own more of the higher end of the market rather then trying to go after a bit of the lower end of the market.  Essentially because it sees that the margins are better there and the people who are then willing to do incremental revenue around apps--music, movie purchase, and everything else-

Ewan: Go for the higher market, yeah.

Rafe: That's a more valuable customer to own, so they concentrated on that and I'd expect that to continue going forward. 

Ben: I don't dispute for a moment that the arrival of the 6 Plus shows that Apple have gone upper-step to the top of the market.  It's bigger, it's more expensive, etcetera, etcetera.  I wonder what the bottom of the ... Whether the bottom of the market has moved.  Have they shifted everything up, or are they just trying to go for a wider spread because they realize they were missing out some stuff on the top?  Do you think that the 5c price point ... Do you think the 5 price point, because you are exactly right, Rafe, that the 5c wasn't that much cheaper than the 5s.

Ewan: Was it £50 cheaper?

Ben: In the UK it was something like that.  Do we think that they abandon that price point, and actually the average cost of all Apple devices will rise?  Or are they just going to spread across a broader range?

Ewan: I don't think they'll abandon it.  I think, not in the short term.  I think eventually, they will probably abandon it.  Yeah. 

Rafe: I think it's going to be a case of "we'll see" just as before.  You'll have the N Minus One or the N Minus Two model will be the entry-level for the iPhone range.  The price range will remain similar, but what we have seen is an extension of $100 upwards as a result of the 6 Plus.  That's something I expect to see continue because it's really about the price elasticity, relatively speaking.  People buying, especially the iPhone 6 Plus and this larger memory variance insensitive to prices.  It's not that they don't care at all, but they're willing to pay it.  Apple's in a very happy place at the moment that it can charge a premium for its product. 

Ben: Rafe, sorry.  Let me just interrupt for a moment, because although I am comfortable with a whole range of economic terms and indeed, I sort of regularly converse on macro-economic policy over the breakfast table, just for normal people who don't understand all this nonsense about inelasticity and elasticity -- what does that mean, practically?  That's a big word to bandy around.

Rafe: I think-

Ewan: I just got that. 

Rafe: I did too.  I'm slow today.

Ewan: I've actually given up on the laugh.  I was just going to straight-face it through and pretend I hadn't meant it, but Okay, go on.

Rafe: I think the easiest way to think about this ... And I could talk about various economic grasps, but I can't actually remember them off the top of my head anyway--fortunately or unfortunately.

Ben: Just specifically because elasticity is an important point here.  How can people identify elasticity in everyday life?

Rafe: It's essentially the willingness to pay versus the demand and you will find when you're pricing something that as the price goes up, fewer people are willing to pay that price.  When you've got an elastic price, it basically means you got more people willing to pay more.  For most products, you're in a situation where you'll increase the price and the demand will drop right off.  For the iPhone, that isn't so much the case.  You compare it to something like a pint of milk.  Everyone will be happy to pay the standard price, but if you doubled it, no one is going to pay that.

Ben: That's the key thing here.  We're saying that actually iPhone purchases tend to be less price sensitive- 

Rafe: Absolutely.

Ben: Than the rest of the market.

Ewan: It is more expensive to buy a MacBook ... Sorry, it's more expensive to buy the 6 Plus 128 gig version than the MacBook Air.

Ben: Yeah, but rightly so.  When you look at the-

Ewan: They've both got the same amount of space, but

Ben: It's a lot harder to fit all of that inside such a small, small case.  Actually, it's relatively easy now to craft a laptop. 

Ewan: Fair point.

Ben: We talked a bit about the 5c and the 5s, and Rafe, you're right.  Today's models will be the cheap models of the future.  Perhaps by definition then, we will lose that smaller form factor because Apple, with the exception of the 5c, has never introduced new, low-end models to fill that space.  They've always allowed things to flow down.  What does that mean for the iPad Mini in the top-end of the market?  Because, of course, now as you had hinted at, the 6 Plus and the iPad Mini--Most, they are significantly ... There's a significant size difference.  Perhaps the way people use them are sufficiently similar that they might be competitive.

Rafe: It's interesting.  I think it's inevitable that the 6 Plus is going to cannibalize sales of the iPad Mini, in particular, because I think people are buying the iPhone 6 Plus thinking, "I want to get a smart phone, but I want it to be a little bit tablet-like."  Honestly, I think that's what's driving sales of phablets more than anything else.  Partly, it is about having a bigger screen, but more than anything else, it's, "I want both a smart phone and a tablet.  I can't have both because I can't afford it."  Or for some other reason.  I'm going to have, essentially, the compromise device in-between the two.  I would expect ... The iPhone 6 Plus actually has two bigger facts for Apple. It actually increases the average selling price for the iPhone as a whole because it is a more expensive model.

Ben: It's not a hole, it's a phone.

Rafe: Thank you.

Ewan: Boom, boom.

Rafe: It will mean that fewer iPad Minis are sold.  I do wonder whether Apple has got an iPad refresh lined up that may defend against that.  I don't think they'll actually care because they are looking at overall sales.  I do expect there to be further commentary around depressed iPad sales as a consequence of the iPhone 6 Plus.  I think what we'll probably see is a defence against that is actually an extension of the iPad range the other way, and so we'll have the iPad Pro or the iPad Plus, which might be a bigger screen or we'll get closer into laptop territory.  We talked about transformer devices like the Microsoft Surface.  I think Apple will move in that direction.  Almost everything is pushing up a little bit, if you will.

Ben: Certainly, that increase in selling price is ... Apple had gone the wrong way with the iPad, because introducing the Mini cannibalized standard iPad prices and actually, it calls down average selling price of iPads to crash.  That doesn't mean very  much to a consumer, particularly because they get the device they want, but what it meant for Apple was they were selling the same number of iPads, making this money.  I see what you mean from a high-end point there.  As we struggled with the iPhone 6 Plus, reaching the maximum usable size, these things aren't just numbers on a spreadsheet.  They're devices that people have to pick up and feel a connection to that they want to use.  I wonder with the iPad, can it get larger or more powerful, more complex in a way that would justify putting that premium price on there?

Rafe: It does feel to me like there's ... I talk about a continuum of devices, and you can think about that in terms of power, pricing, screen size.  It did feel like there was a gap between the iPhone and the iPad Mini.  I would say there's still a gap between the iPad and the MacBook, MacBook Air, or MacBook Pro.  I think that's the space that Apple will look to fill next.  What we'll see is almost a continuation thing from the iPhone, right up to MacBook Air.  That will start being reflected in the software as well.  That's not something Apple really got into much continuity with iOS 8 and with Yosemite it's starting to go that way.  That's when I talk about that extension, I think it's there.  It does come back to this discussion about, "Will Apple do cheaper devices?"  Honestly, I think that isn't the way it's going.  That doesn't seem to be the direction that Apple is heading in.

Ewan: If they ever get desperate, I think we'll know Apple is really desperate when the iPhone Mini, 129 pounds, comes out.  It's almost something the operators were really, really afraid of.

Ben: One last question before we wrap up, then.  Do you think that the slight hardware differences between the 6 and the 6 Plus, so the battery, the increase in screen's resolution, the optical image stabilization that's in the camera--are they meaningful differences?  Will we see the 6 and the 6 Plus be differentiated on more than just screen size in the future?

Ewan: I think it's only size.  There is no shop that you and I--I'm looking at all of you, or both of you--could walk into at the moment with a consumer it in and no phone shop that has a consumer going, "Oh, I want the 6 Plus because it's got an image stabilizer."  That's just something they've added in.  They just want it for the size.

Ben: From a consumer point of view, you're saying that-

Ewan: It's just size.

Ben: Consumers won't prioritize anything else other than screen size.

Ewan: I don't think the updates are good enough to warrant any interest.

Ben: Rafe, could Ewan be persuaded to differentiate on something else if they put enough bells and whistles onto a 6 Plus? 

Rafe: I think possibly.  I don't think they will.  I think where we may see differentiation emerge is in the software.  It's being relatively quiet, but the 6 Plus actually does have some differences in the stock software, in that there are a few apps that have the two-column layout in landscape mode.  If that's picked up and run with by third party developers and we see something significant emerge here, there could be a differentiation as the 6 Plus becomes more iPad-like.  I honestly think that there isn't going to be that much that needs to begin with.  Really, the breakdown will be by geographic regions with the 6 Plus selling better in Asia, mirroring this of the general smart phone market.

Ben: Okay.  We should leave it there.  Thanks very much guys.

Ewan: Thank you. 

Ben: Fascinating stuff.  Very Apple-centric, even when they're following, they're still sort of leading in some respects in terms of the way that they seem to dominate the conversation about things that we thought were old hat a few months ago, given what the likes of Apple and what the likes of Samsung and HTC had done. 

Rafe: We should probably reassure our Android listeners that there is going to be an equally Android-centric episode once we can talk about Android L and some of the new flagships and features coming out in that area. 

Ben: We can also reassure people that there definitely won't be a Windows phone episode, so don't worry about that.

Rafe: I'll persuade them.

Ben: Okay.  Look, thanks for your time very much, guys. 

Ewan: Thank you.

Ben: Go to 361podcast.com.  Let us know what you think.  Let us know what you chose and why.  As ever, there will be questions and comments there.  We'd love to get your feedback.  Of course, today's episode was directly based on feedback from last season, so-

Ewan: Thank you.

Ben: Please let us know what you'd like to hear about, because we are listening.  Thank you very much guys.  We'll see you next week.