Yesterday Verizon and Motorola announced two new Droid smartphones; the Droid Turbo 2 with an “indestructible” screen, and the Droid Maxx 2. On paper, the Turbo 2 is the real story; the screen, 48 hours of battery life, and tons of customizations. The Maxx 2 has a lot of that, minus the indestructible screen. Oh, and it costs only $384.
Yes, you read that right. You can walk into a Verizon Wireless store tomorrow and buy a phone direct from Verizon for only $384. A phone with a 5.5in screen, 48 hours of battery life, a 21 megapixel camera, and customizable shells to change the style. It’s not quite as powerful as the Turbo 2, and it only comes with 16GB of internal storage (though it does have a microSD slot). Still, for a carrier to sell a phone for under $400 off-contract (or $16/month if you choose to pay over time) is a huge game changer in the world of smartphones.
Before you start yelling about the Moto X Pure, or the Nexus 5X, or the One Plus One Plus Two (plus three plus four plus five-there are no more bullets left in that gun!), remember that we’re not talking about customers who already know about these phones. I’m talking about the average customer who comes into the Verizon store every two years, picks out a smartphone for $99-$199, and keeps it for two years, and then replaces it. These are the people who are coming off subsidized accounts, and suddenly the $99 special isn’t around any longer. They’re not likely to order a phone sight unseen off Amazon, and they’re not likely to go from spending $99 every two years to spending $400 on a Nexus; it’s just not on the average person’s radar the way a phone in an official carrier store can be. Once they hit the carrier store, they’re not likely to turn around and buy from outside that product line. If they are already somewhat cost-sensitive, it’s going to be very hard to sell them on spending $25-$30+ per month on top of their existing plans. Yes, if they’re on one of the old plans there are some savings to even things out, but it’s still an additional line item expense. Meanwhile, there’s the new Droid Maxx 2, promising a respectably large screen and huge battery life, and it will cost them far less per month.
In addition, someone coming off a 2-year contract has a phone to trade in. It may not command much, but it’s likely Verizon will give them something for their old phone. Let’s say it’s a Galaxy S4; Gazelle will give you between $45-$55 for one, so let’s assume Verizon will give you $50 for your old phone. Now that Droid Maxx 2 is only $334, or ~$13.90 per month. If Verizon is being especially generous, or they have a phone in truly excellent condition, let’s say they get the cost of the Droid Maxx 2 down to $300. That’s only $12.50 per month! Again, this is for a brand new phone with mid-range competitive specs, and not a “we need to clear out last year’s model on a fire sale” phone.
There’s plenty of people who are going to shop for an affordable phone, and the Droid Maxx 2 is going to fit the bill. There’s going to be people who are knowledgeable about phones, and recognize that it’s a very affordable deal. And there’s going to be people buying their first smartphone, or buying their teenager their first smartphone, and they’re not going to want to spend a lot. In the short-term, this has the potential to be a nightmare for Samsung, LG, and HTC. When there’s a “good enough” choice for close to $300 LESS than other phones, the “good enough” choice looks pretty amazing. I would not be surprised if Motorola and Verizon’s aggressive pricing ends up being a turning point in smartphones similar to netbooks; netbooks weren’t as powerful as bigger, more expensive laptops, but they were more than capable for 90% of people’s needs at under 50% of the cost of the competition. If HTC, LG, and Samsung don’t respond, they risk losing ground to Motorola on pricing alone. This might hurt Apple somewhat, but I think that’s a tougher road, with the exception of the “first smartphone” crowd. I wouldn’t buy a teenager a $700 iPhone, but I wouldn’t worry as much about being on the hook for a $300 phone.
What’s your take on the new Droid Maxx 2? Do you think this is a game changer for carrier and phone pricing, or a blip on the radar?
