Samsung Galaxy S6 and Galaxy S6 Edge. Source: Flickr user Kārlis Dambrāns.
When it comes to high-end smartphone sales, it seems Apple (AAPL 0.21%) and Samsung (NASDAQOTH: SSNLF) are on two different trajectories. Apple's recent iPhone 6 and iPhone 6 Plus iterations smashed company records for first-fiscal-quarter sales, as smartphone shoppers enthusiastically snapped up the new larger form factors.
For Samsung, the past year has been one the South Korean company's management would like to forget. After receiving an enthusiastic response for the company's Galaxy S4 in 2013, Samsung was unable to recreate that reception for last year's Galaxy S5. As a result, the company substantially underperformed in its last two fiscal quarters, with operating profit registering year-over-year drops of 60% in its fiscal third quarter, and 27% in its fiscal fourth quarter.
Samsung could really use a high-end win in its beleaguered mobile division. And its newest offerings, the Galaxy S6 and Galaxy S6 Edge, could be the ticket to reverse its fortunes. The phone goes on preorder for T-Mobile and AT&T soon. For potential T-Mobile customers, the Galaxy S6 and S6 Edge preorder offer comes with something the iPhone 6 and iPhone 6 Plus doesn't come with: a year of Netflix for free.
Does this really make sense for T-Mobile or Samsung
These special deals have been done before, but one questions their effectiveness. For T-Mobile, a company whose business model is based upon not providing device subsidies, this is akin to a poorly conceived subsidy. For perspective, at $7.99/month, a full year of Netflix amounts to a credit of $95.98 -- or roughly 14% of the cost of the base Galaxy S6 price ($679.92).
Fictitious president Frank Underwood from "House of Cards" could receive more viewers, courtesy of T-Mobile. Image source: Netflix.
While we don't know the actual cost to T-Mobile -- the terms of payment between Netflix and T-Mobile were undisclosed -- it might be more prudent to give that back to the end consumer in the form of a lower-device cost. As far as Samsung is concerned, it might be better to provide a cheaper-priced unit than Apple's starting iPhone 6 ($649.00).
Even though Samsung's new unit provides more storage at the entry level -- 32GB vs. Apple's 16GB -- and the high-end market still relies more on differentiation than simply cost, prices are still a part of the value proposition. A lower price point could help Samsung move units.
Perhaps it's a better deal for Netflix
For Netflix, although the terms of the deal are undisclosed, the company will probably receive some type of third-party payment during the one-year period, and will convert a percentage of users after the 12-month period ends. Essentially, this amounts to the company providing an extended trial period -- paid for by a third party -- to potentially millions of new users. The company gets a year to get new users addicted to Orange Is The New Black, Unbreakable Kimmy Schmidt, and President Frank Underwood from House of Cards.
In the end, it appears T-Mobile's new deal is sort of a gimmick, but it does have value. If you are looking into buying the newest Samsung Galaxy S6 or Galaxy S6 Edge units, you must preorder before April 12 to get the free year of Netflix. If you're already on board for the new unit, take the deal, but I wouldn't recommend changing your buying behavior for this offer.
