The Apple 8 Reviews Are In …

The iPhone 8 has (almost) arrived, and the reviews are in.

They’ve been a bit … well, cool would be putting it mildly. Putting it sharply might entail the words “read at risk of getting frostbite”.

“The default phone,”  “the status quo upgrade,” “crippled” and “fine” were common descriptors, though the list goes on and on (and on). The consensus wasn’t that Apple made a bad phone; most reviewers agreed that they like the iPhone 8 just fine.

Now whether the iPhone X release lives up to the hype – well, maybe put a pin in that for a second.

Whether you think the iPhone X is all show and no go, or you agree with Tim Cook that “it is the biggest leap forward since the original iPhone” – it is almost impossible to argue that it didn’t almost completely overshadow the iPhone 8. At about 10 minutes old, the iPhone 8 managed to look old fashioned, with an LCD (instead of OLED) screen and a design similar to the iPhone 6 and 7.

It’s not that people hated the newish iPhone – but standing next to the shiny new iPhone, the ecosystem’s collective response has been a yawn. Good enough … but when does the real iPhone get here?

But while many people are kind of shrugging off the iPhone 8, questions remain about the X. Will it ship, will it work and will customers want to fork over $1,000 for the revolutionary iPhone when it arrives? And does the much-overlooked iPhone 8 have surprises in store?

Gene Munster Says Enterprise Will Want The Eight

For all the lukewarm iPhone X reviews, Apple analyst and guru Gene Munster doesn’t think the X will actually be where Apple sees the bulk of its sales in the next upgrade cycle. Although the $1,000 phone may get more attention, he surmised that cost-conscious and corporate buyers will be less concerned with having the shiniest, newest phone on the market, and instead will simply be responding to the fact that they are now at a point in the upgrade cycle where new phones are optimal.

Given that the iPhone 8 is a solidly reviewed phone, Munster suspects it will actually be where Apple sees the bulk of its upgrades.

“We think there will be far less adoption of the most advanced version,” Munster said. “Typically, corporate also under-indexes to consumers, because they’re usually a little bit tighter on their budget and they want a phone that’s been around for a little bit.”

Munster predicts that the flagship X will only account for about 20 percent of sales, with the iPhone 8 making up 25 percent. He believes the remainder of sales will come from older models.

The good news, he noted, is that Apple is due for a very active upgrade cycle, as there are a lot of Apple users looking for new phones, some of whom may have been waiting for this mega-cycle.

“Our estimates are that the number of active iPhones that are three years old or older is now entering about 300 million units,” Munster told CNBC’s “Fast Money” on Tuesday. “And most of the Street thinks that this next cycle is going to be about 250 million units. And so, at the point of three years, it’s less about the features and some of the reviews, and more about, ‘I need my phone to survive and it’s just not holding up.’ It’s not very glamorous – in a baseball term, I’d say it’s ‘manufacturing runs’ – but enough to yield the demand to get this to be a nice improvement over the last cycle.”

So, great news?

Well…

Those 250-300 million users are already Apple users, which means they are kind of table stakes for Apple. Sure, they are a lot of stakes on that table, but if Apple can’t convert its installed user base, then they have a much bigger problem, given that the iPhone drives a big chunk of Apple’s sales (nearly 70 percent in Q1 2017).

The more important number t to watch is another “i” factor – incremental users.

And for that, we have a unique opportunity to look inside one of the biggest consumer product A/B tests going: the iPhone 8 versus the iPhone X.

A Very Public A/B Test

The world is full of Steve Jobs stories, but among the favorites is the one about the day the original iPhone was announced. Legend has it that Jobs thought introducing the world to this revolutionary new product was the perfect way to kick it off – that people would have to see it in action to believe it – and that no one was expecting anything this remarkable.

The engineering team thought this was a bad idea, since the first iPhone was not quite as smooth as it needed to be – glitches abounded and late-night sessions were a norm. The PR team thought it was a bad idea to risk an unforced error in front of the world.  Despite the opposition, Steve decided that Apple would launch the first-ever iPhone in front of the world, and the teams were going to have to work it out.

Which, miraculously, they did – though they were so unsure this would happen that the various teams behind the iPhone spent much of that first presentation getting drunk.

“And so there we were in the fifth row or something – engineers, managers, all of us – doing shots of Scotch after every segment of the demo. There were about five or six of us, and after each piece of the demo, the person who was responsible for that portion did a shot. When the finale came and it worked along with everything before it, we all just drained the flask. It was the best demo any of us had ever seen. We just spent the entire rest of the day drinking in the city. It was just a mess, but it was great,” one of the founding engineers told the New York Times some years later.

Steve Jobs notoriously had an “iPhone or bust” mentality – it was going to be ambitious, different and unlike anything they had ever done before. And it was going to be perfect on the first go, live in front of the world.

That’s a crazy command, but it was one that Apple’s team took so seriously that they got drunk in the middle of the most important day of their careers on the off chance they had accidentally failed to produce an impossibly glorious outcome.

But they did, and today we live in a different world because of it.

Steve Jobs wasn’t an A/B test kind of guy – after all, he was famous for saying that consumers didn’t know what they wanted until they saw it … and that they’d love the iPhone so much that they’d forget how annoying it was not to have a keyboard on a phone because of all the other cool things the device did for them.

The simultaneous launch of the iPhone 8 and iPhone X doesn’t feel like that bold step – the “Hey, all you consumers out there, look at this magnificent iPhone X – it’s awesome! Sure, it doesn’t have Touch ID or a home button, but you’ll forget about that in an instant because of all the other cool features that no one else even comes close to doing.”

Cautious? Or a calculated risk to take the consumer’s temperature?

The first risk is also the main complaint about the iPhone 8: that the evolutionary step is boring. Customers who buy a phone because it is “fine” or “cheaper” or “the one my boss gave me” as opposed to because it’s “cool,” “fun,” or “life-changing” are customers whose brand loyalty has essentially dissolved, and who are held on by the power of inertia alone (or what their company gave them). Apple’s customer base has historically been people willing to sleep outside of Apple stores for their product – not people who upgrade just because it’s easy … especially when the competition has amped up its game.

The second is that it turns up the pressure on the iPhone X all the way up to XX – because now, that revolutionary step needs to live up to its branding and be the change consumers want.

Apple has some challenges there: the OLED screen is not new, as Android phones embraced them years ago. The all-screen design is not new – Samsung’s Galaxy 8 features that, and some people have said the Samsung version is superior. Face ID also isn’t new, as Samsung’s Galaxy 8 has that, too. But it whiffed in the public demo (that engineer didn’t get his whiskey shot, it seems) and it remains to be seen if consumers will take the leap. After all, they have the iPhone 8 to play it safe.

Could the iPhone X have crushed it if the iPhone 8 wasn’t its safety net, and consumers had to take the leap to a new way of interacting with their phone?

Would that have been enough?

Perhaps Apple wasn’t so sure, or couldn’t risk that it wouldn’t right away. When the iPhone first came out in 2007, it was truly unique – but it would still take several years for it to gain critical mass. At launch, it was 2G, it was a lousy phone for making calls and the battery life was horrible. But it was so different that consumers traded that off for access to apps and the internet and knowing that it would get better over time.

Waiting a couple of years today is very different, with a much more fiercely competitive playing field and a position as the company’s cash cow.

So, for now, we’ll have to wait to see how the A/B test comes out – and what’s really next for the iPhone.