Flagship Killers Now Cost as Much as the Flagships They Tried to Slay Share
In 2010 Google released the Nexus One, a phone that started a line of budget priced phones from the company that became more and more positioned as “affordable” options compared to the flagships out there. In 2014 a new startup called OnePlus launched the One phone that was supposed to be a “flagship killer.” In 2018 we know that the flagship phones from companies like Apple and Samsung are doing quite well and these lines of phones from Google and OnePlus have remained relatively niche devices.
What I find very interesting about these lines is that they have been positioned as having nearly flagship specs with far less cost, they have been inching up over time. The graph at the top of this post shows the prices of the last 7 phones released by Apple, Google, and OnePlus.
These are all for the lowest end phone in the lineup1. It gets a little funky for the iPhone and Nexus/Pixel lines because cell phone contracts were changing and the advertised price shifted from the subsidized price to the real price. All these numbers are based on assuming you were going to buy the phone straight up with no contract.
But despite that funkiness, the trend is very clear. Apple has been selling the iPhone at a very consistent price for years. The iPhone 8 finally saw them boost the price a bit, but that’s all the movement we’ve seen. The Nexus (now Pixel) line went from premium back down to affordable and has been on the rise ever since. Today, the Pixel 2 is basically just as expensive as its iPhone peers. OnePlus is on an almost linear trend, launching at $299 and jumping an average of $38 per phone.
While the OnePlus One and Nexus 4 were $299 and were a shot across the bow of $600+ flagship phones, today both Google and OnePlus are playing the flagship game just like everyone else who wants to be a big player in this space.
Presumably smartphone prices will indeed drop, just like PC prices dropped over time. The original Macintosh in 1984 was $2,495 ($6,016 in 2018 dollars) when it was new. Today Apple’s entry level computer is $3292. But that time is now now. Even as these brands inch up to where the iPhone has been for years, the average price of an iPhone is now being raised by the Plus models and the supremely popular iPhone X. Phones are not getting cheaper, they’re getting more expensive.
A quick note on pricing: we thought that the change in how carriers sold phones would make people lean more towards these budget phones. The idea was if people saw the real price of a phone that they would be more conscious about how much they were spending. It turns out that the magic of this was that carriers made sure you knew the monthly price of those phones. So while the Pixel 2 is $649 and the OnePlus is $529, people don’t always see the $120 in savings they’d get by buying the less expensive phone, they see the $27.04 and $22.04 per month these would cost them, and “what’s $5 every month?” so people just spend the extra to get a better phone.
With these sorts of mentalities at play, it’s hard for price differences to make as much of a difference as they did in the past. When a $200 difference between two phones essentially amounts to a large frapachino per month, people are happy to spend that to get the best.