Some Apple Watch pricing math

There’s been a lot of speculation about potential pricing for the highest tiered Apple Watch, the Apple Watch Edition line. John Gruber has been writing about Edition pricing on Daring Fireball. He initially thought that $5,000 was a ceiling for the Edition entry model, then moved his target up to $10,000, even suggesting that $20,000 was not an impossible price.

Personally, I think $5,000 is the right number for the Edition model. The highest end watches tend to start at about $3000 and move up into the stratosphere. The next tier down tends to run from $1,000 up to $8,000. My instinct is that Apple Edition will fit in that latter space, more aligned with Tag Heuer than with Rolex.

There’s no traditional model to draw from, as the Apple Watch is a brand new kind of animal, but my instinct is that the cost to Apple will be between $1,000 and $2,000. Multiply those numbers by a price/cost ratio of 3.44 and you end up with a nicely marked up price of $3,400 to $6,800. Why 3.44? Here’s the math:

The consensus seems to be that the high end iPhone 6 costs about $247 to make, including parts and labor. Without a contract, that same iPhone 6 sells for $849. That’s a price/cost ratio of about 3.44 (the price of the phone is a bit more than 3 times the cost).

Apply that same model to the Apple Watch, and you get a price ranging from $3,400 to $6,800. Obviously, this depends on the actual cost of labor and materials. One estimate on the gold in the highest end Apple Watch places the price of the gold alone at about $800. I can’t imagine the cost of everything else being more than $1200.