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Prediction: Apple Watch Will Be Upgradeable

2015-02-27 18:20

Soon (March 9 2015), Apple will have an event to disclose more details about Apple Watch. Most people expect they will announce detailed configurations, availabilty and pricing.

Of particular interest are the Apple Watch Edition models, which will feature solid 18k gold cases. The Apple Watch is big, as watches go, as big as a luxury Swiss watch like a Rolex. Such watches are very expensive, and it's nearly impossible to get one for less than US $10,000. And that's if you get a leather band. Gold link bracelets will increase that price by a factor three or more.

It seems that many people don't have a clue about this, so it's likely that a lot of people are going to, um, totally lose their shit when Apple announces pricing of $5,000 or $10,000 or maybe more.

Here's the thing. When you buy a Rolex or a Patek Philippe for $20,000 or $30,000, you are doing pretty well. You are a rich guy or gal, or you love watches so much that you prioritize them: maybe you don't go on vacation every year, instead you save up and buy that Swiss watch. In any case, the are are a quite a few companies that make watches in this price range. They've been around a long time. This is a real, addressable market.

So, if a company like Apple made a computerized watch that was pretty and gold and actually more useful than a mechanical watch, why wouldn't people in this market buy it?

The only big reason I can think of is this: computers have a useful life measured in single-digit years. Probably 3 or less. Mechanical watches have a useful life measured in decades, and possibly centuries. If you drop $80,000 on a Jaeger-LeCoulture today, you can be pretty sure in 10 or 20 or 50 years, it will still be worth approximately that, even adjusting for inflation. Maybe more. Your kids and grandchildren will be able to enjoy it, or sell it to pay for college.

For this reason, I believe Apple Watch will be upgradeable.

Apple made a big deal about the S1 package that contains most of the brains of Apple Watch. It's even sealed in plastic. It sure looks like something that can be popped out of the case and replaced. As long as the electronics don't get bigger in future versions, they can maintain an Apple Watch (2015) form factor. You can go down to the Apple Watch jeweler, and they can pop in a new motherboard for $200. Or maybe they also have to replace the screen and sapphire, so it will cost you $1000.

Anybody who has had their Swiss mechanical watch factory serviced will tell you this is a bargain price. Plus, when you get your mechanical watch serviced, it is then as good as it was new. If you get a new S2 chip in your Apple watch, it will now be a lot better.

Here are Apple's options regarding the obsolesence problem of a computerized watch:

  1. They can do nothing. You paid $10,000 for your Apple Watch (2015)? It's 2017 and the newest model has 20% more battery life and is 4X faster? Tough crap, buy a new one. What to do with the old one? Ever hear of Cash4Gold?

  2. They can have a trade-in program. You give them your $10,000 2015 Apple watch, plus $1,000, and they'll give you a 2016 Apple Watch. Just like getting a new iPhone.

  3. They make them upgradeable. The chip, maybe the screen, definitely the battery are replaced for $200, $300, $500. Whatever. The price doesn't matter as long as it's on the order of magnitude of servicing your BMW, or a bottle of 1996 Krug.

Clearly, I think #3 is what they'll go with. But let's look at the other options and think through them.

Some people are writing that Apple will just do nothing. People who are rich won't care: in fact, the idea that they are essentially disposable luxury items will make them more desirable. I'm sorry, but that is ludicrous. Most people who have a lot of money to spend on luxury goods like their money. While there certainly are people in the world with so much money they can wear disposable diamond underwear, the market of the rational affluent is much larger.

The second option preserves the financial investment of the Apple Watch customer. However, with the watch, Apple is entering the jewelry industry. Jewelry has sentimental and emotional value that often is a bigger component of the purchase than the financial part.

Imagine that your wife gives you nice watch to commerate the birth of your son. Maybe it's engraved with something. That becomes a treasure, whether it costs $200 or $20,000. If that's an Apple Watch, are you going to want to trade it in for a new model in two years? No, there's no way you're giving that token of love and memories up, even for a better version. That specific watch is yours, and no other can replace it.

This is ultimately why Apple Watch must be upgradeable. As Apple themselves have said: it's their most personal device yet. It's beyond utility, beyond fashion. It's a something to be treasured.