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Can RIM Still Sell $300 BlackBerrys?

Research In Motion's new BlackBerrys reach store shelves in the coming days, but they cost 50% more than most other smartphones.
Research In Motion is in a tough spot. The company has watched its smartphone sales tank as business and consumer uses alike flock to Android smartphones or the iPhone. It spent the first two quarters of the year focusing on its PlayBook tablet product rather than its core smartphone business and is paying a price in declining marketshare.

The company announced new smartphones (for the first time this year!) running a new operating system, BlackBerry 7. The handsets go on sale through various U.S. network operators as soon as August 21. With some exciting new features, such as 1.2-GHz processors, touch screens, and 5-megapixel cameras, RIM should be confident of the devices' success, right?

One problem: They cost too much.

On Monday, Verizon Wireless made the BlackBerry Bold Touch 9930 available for sale via its website. It costs $249.99 with a new two-year contract.

Sprint quickly followed Verizon's lead and announced that it will release both the BlackBerry Bold Touch 9930 and the BlackBerry Torch 9850 starting Sunday, August 21. The 9930 will cost $249.99 with a new two-year contract, and the 9850 will cost $149.99 with a new two-year contract after a $50 rebate. Initial out-of-pocket cost will be $199.99.

AT&T followed up that announcement with its own via Facebook. It will offer the BlackBerry Torch 9810 beginning August 21 for $49.95 after rebates with new agreement. It'll cost $99.99 at the register.

On Wednesday, T-Mobile announced that it will offer the BlackBerry Bold 9900 starting on August 31. It will cost $299.99 after rebates with a new contract. Customers will pay $349.99 at the cash register.

Did RIM spend a lot of time and money to engineer these devices? Yes. Does RIM deserve to recoup those costs? Sure. Should RIM still sell BlackBerrys for $300 when competing platforms offer better smartphones for $100? No, they probably shouldn't.

To be fair, wireless network operators in the U.S. subsidize the cost of handsets. A handset's price usually reflects a discount from the operator. For example, the full retail price of the BlackBerry 9930 Bold is $509. Verizon Wireless is only charging $249.99, defraying the cost of the smartphone by a generous $259. (Verizon will recoup that subsidy by charging you for voice/data services every month for two years.)

By way of comparison, Verizon Wireless offers the HTC Thunderbolt--an LTE 4G Android smartphone--for $249.99 even though its full retail price is a whopping $569.99. Most of the smartphones sold by Verizon go for $199.99, though I counted at least a half dozen that sell for $99.99 or less. The 16-GB iPhone 4? It sells for $199.99, even though full retail is a stunning $649.99.

The same type of subsidies applies to smartphones sold by AT&T, Sprint, and T-Mobile.

The bulk of smartphones sell for $199.99, which is $50 to $100 less than what the carriers are looking for with these new BlackBerries. Many of these less-expensive smartphones offer superior hardware, faster network access (the new BlackBerries don't have 4G), and touch interfaces. Between the four major network operators, there are plenty of good devices at $99. For example, RadioShack recently had a promotion whereby it sold the Motorola Photon 4G--one of the best phones of the year--for $99.

With less expensive and more exciting handsets sitting on shelves next to the new crop of BlackBerrys from RIM, that extra $50 to $100 is going to give many potential buyers pause.

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