Why Walmart won't ruin the iPhone

Remember how Oprah once threatened to ruin the life of novelist Jonathan Franzen by selecting his book for her club and thereby making him lots and lots of money? Walmart might do the same to Apple's iPhone!

Except it won't, really. Because Apple CEO Steve Jobs, unlike Franzen, occasionally acts like a grownup — and always acts like a businessman.

Walmart is planning to start selling two iPhone models around Christmas, according to store employees interviewed by Bloomberg. This is surely the end of the iPhone's upscale brand image, argues scary-smart economist Stephen Dubner in his Freakonomics blog.

There are two problems with that. One, Dubner bases his argument on the rumor that Walmart will sell iPhones for $99, less than half the cheapest price they go for today. Yes, dumping the iPhone at a cheap price will piss off customers who spent a hundred dollars extra at an Apple Store.

But it's not going to happen. Apple is notoriously controlling about prices. And there's no way Jobs is going to put his pricey retail palaces at a disadvantage. Sure, Wal-Mart demands discounts when it can play one supplier against another. But Apple, not Wal-Mart has the advantage here. In the past, when Wal-Mart started selling iPods, it didn't get any special discounts. Bloomberg asked a Walmart employee how much the iPhones would cost. The answer: $199 to $299, just like they do today.

Lots of analysts believe that Apple will eventually sell iPhones for $99. Hardware gets cheaper over time, and AT&T actually pays most of the bill, hoping to make up the subsidy with wireless subscriptions. So sure, Apple might drop the price — but it will drop the price everywhere at once rather than cut Wal-Mart a special deal.

But the Walmart-will-ruin-everything line is a great theory, and one that plays especially well in places like San Francisco and Manhattan, which have many Apple Stores but no Walmarts, and dislike Oprah as much as they love their iPhones. Points to Dubner for combining so many cultural touchstones in a single post. Wish we'd thought of it first!

(Photos via nayrb7 and ILoveMyPiccolo via Freakonomics)