BlackBerry Bold-ly gambles with high-cost handsets

Written on:August 17, 2011
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Research In Motion’s new flagship phone, the BlackBerry Bold 9900, is commanding a flagship price in stores: Subsidized costs range from $ 249 to $ 299 with a two-year contract and after all applicable rebates. The smartphone is earning good reviews, but few who have used the phone suggest it over one running iOS or Android, aside from those who are current BlackBerry users. At these prices, is RIM trying to boost its average selling price (ASP) per handset until the next generation of BlackBerrys arrives?

All four major U.S. carriers will have relatively high prices for the Bold: Verizon, Sprint and AT&T plan to charge $ 249, while on Wednesday T-Mobile announced the Bold 9900 and told me it expects to sell the phone for $ 299. That figure is actually after a $ 50 mail-in rebate, so T-Mobile customers will need $ 350 up front for the new handset. I don’t expect RIM to win many new customers with this pricing, although existing BlackBerry owners happy with the platform may have good reason to upgrade.

That same $ 299 price buys an iPhone 4 with 32 GB of memory; the new Bold only comes with 8 GB of storage, although it is upgradable through a microSD card slot. High-end Android handsets usually top out at $ 199, although Verizon’s LTE handsets often cost $ 249 as a premium for the faster 4G network.

The 9900 may be the best BlackBerry yet, but in some ways it’s still behind a year or more in terms of the application ecosystem and user experience. The latter should change when RIM debuts smartphones with its newer QNX operating system, but for now, BlackBerry is still playing a game of catch-up, even as it arrives with premium prices.

While the bulk of a smartphone’s cost over its lifetime is in the monthly plan pricing, the Bold 9900′s up-front cost could still seriously affect the product’s success or failure in terms of sales. Price it too high and customers may opt for a cheaper but as-capable handset. Price it too low and the company has to hope it can make up for the difference through volume. The ASP on RIM handsets, which is the full sales price paid by a consumer and a carrier, has been flat to declining over the past few years, as noted by this Business Insider chart:

As of nearly a year ago, RIM stopped providing the ASP of its handsets on investor calls, leaving analysts to estimate the figure based on total handset sales and the revenues they generate. RIM’s sales are actually growing, although they’re not keeping pace with the overall market: The company’s 10.7 percent year-over-year handset growth beat out only Nokia’s  in the most recent quarter. On the revenue side then, boosting the full retail price of handsets could then raise the ASP and in turn, profits for the company.

I’m not suggesting that RIM should race to the bottom of the market and take losses on its hardware. But until the company brings QNX to phones and shows that it can offer more value and a better experience than competing handsets on alternative platforms, a $ 299 BlackBerry is a tough sale to all but devoutly loyal customers. And those aren’t the customers that will grow the user base, since they’re already a part of it.

Thumbnail image courtesy of Flickr user americanistadechiapas

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