Apple thinks ditching the headphone jack will make you want the new iPhone

While Apple says the design choices are about "courage," the real story is that iPhone sales have been slipping.

by Noah Kulwin
Sep 7 2016, 7:55pm

Imagen vía Apple Inc.

Why is Apple taking away your headphone jack? Launching $160 wireless "AirPod" earbuds? Making its latest iPhone waterproof?


That was the word Apple SVP of Worldwide Marketing Phill Schiller used to describe the design choices around the iPhone 7, introduced among a host of other Apple products and updates, including a new Apple Watch, at an event in San Francisco on Wednesday.

The iPhone 7 has a lot of new features — it's water resistant, it has stereo speakers and a redesigned home button. But the two biggest new things, or rather, its most "courageous" new elements, are the phone's high-powered twin camera system, and the removal of the 3.5mm headphone jack."It makes no sense to tether ourselves to cables to these mobile devices," Schiller said.

The iPhone 7 starts at $649, and the iPhone 7 Plus clocks in at $769, the same as the iPhone 6s. You can buy storage in 32 gigabyte, 128 GB and 256 GB increments. Pre-orders start on September 9, and the phone goes on sale and starts shipping on September 16 in 28 countries. The new Apple AirPods will cost $159 and go on sale in October. For people who don't want to abandon the 3.5mm jack, Apple will include Lightning-to-analog dongles with the iPhone 7, as well as Lightning cable headphones.

While Schiller may say emphasizing wireless is about "courage," the real story is that iPhone sales are slipping. After booking the most profitable quarter of any public company at the end of 2015, driven largely by the iPhone, sales began slipping in early 2016 — snapping a 13-year growth streak.

There were three major factors: the iPhone 6s wasn't interesting or new enough to get people to upgrade; mobile carriers started ending phone subsidies in the US, forcing customers to pay the full price; and the rise of Chinese smartphone makers that produce high-quality phones at about half the price of an entry-level iPhone.

For Apple, a fancy camera and a big gamble on high-quality wireless audio are an attempt at recapturing some of the magic of the most profitable consumer product of all time. Apple analyst Jan Dawson, in an interview last week, said that the company had "to tell a pretty compelling story about why it's replacing the jack with whatever it is."

But they'll have to do that in a tougher environment than ever before. Researchers at IDC expect 2016 smartphone market growth to finish the year at an anemic 1.6 percent; last year that figure was 10.4 percent. And furthermore, Chinese competitors like Huawei and Xiaomi are churning out high-quality Android phones that cost half what an iPhone does, and have saturated the global smartphone market.

Another major hurdle for Apple is one that's affecting all high-end smartphone makers, which is that people are no longer on the two-year phone upgrade cycle. Cell carriers are no longer subsidizing phones with new contracts, which means that consumers have to shell out the full $649 for a new iPhone. And as customers hold onto their iPhones for longer, it means that every new lineup of iPhones has to do more than just be a little bit thinner or a faster than the previous generation in order to get people to upgrade.

Analysts don't expect the iPhone 7 to be a smash hit, and that's why the company's share price is basically where it was a year ago.

Onstage, Phil Schiller chalked up Apple's move to wireless and Lightning-port audio as a demonstration of "courage," and also as a move of prudence; the longer the jack stays in the phone, the harder it is to fit new features in.

"We want stereo speakers, we want Taptic engines [in our phones]," Schiller said. "It doesn't make sense to keep the jack, because that space is at a premium.

"Up until now, no one has taken on the challenge to deliver the audio experience wirelessly between mobile devices and headphones that takes advantage of opportunities to do something new," he said.

As the smartphone market has gotten more and more crowded, heavyweights like Apple and Samsung have focused on differentiating features to stand out. Today's iPhone 7 has two big "differentiated" features: The missing headphone jack, and a big, fat fancy 12 megapixel dual camera.

There's a strong case that while the headphone drama will inevitably get all of the attention, the camera is really the marquee feature of the iPhone 7. "Depth of Field [enabled by the iPhone 7's two cameras instead of one] is one of the last features needed to complete the full migration from handheld camera to camera phone," Shutterstock founder Jon Oringer wrote in a blog post earlier this week.

Now that Apple's big reveal is out of the way, the company will lean as hard as it can into selling the new phones, and with some luck it already has a promising head start. The iPhone 7 and 7 Plus's closest competitor — the Samsung Galaxy Note 7 — was recalled worldwide last week after dozens of Note 7s started exploding.

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