Today Apple posted the terms for qualifying and obtaining the $100 Apple Store credit promised to early buyers of the iPhone miffed over the unexpectedly quick $200 price drop. For the most part, it's just what you'd expect: instructions on how to confirm your eligibility and get the $100 credited to your Apple Store account.
Not everyone is eligible for the credit. For example, anyone who bought after Aug. 22 falls in the 14-day window covered by product price reductions and thus qualifies for a full $200 rebate. Also excluded are iPhones provided to Apple employees, logical since every one of Apple's nearly18,000 employees received their iPhone free.
The curious part comes in the last paragraph of the "terms and conditions" section. In addition to such expected rules as forbidding redemption of the credit for cash, you can't redeem the credit at any iTunes Store. Nor can you use it to purchase iTunes Store gift certificates. Nor can you use it to give iTunes Store content as gifts. Just to cover all their bases, Apple also forbids using the credit to purchase Apple Gift Cards, which you might think of using at the iTunes Store.
Let's see. Why would Apple prevent aggrieved iPhone owners from spending their $100 credit on music from the iTunes Store? Since the iPhone is part iPod, you'd assume that many iPhone owners would want to use at least some of their credit on music or video purchases.
The only answer that makes sense is that Apple's margins on digital content purchased from the iTunes Store are miniscule compared to almost everything else it sells. True, the company is trying to buy back customer goodwill, but each $100 credit claimed by a customer is $100 in lost profits. Allowing customers to use the credit at the iTunes Store would result in a near-total loss of that $100. Forcing them to use it on other products in the Apple Store, which carry an average profit margin of more than 30 percent, will allow Apple to retain much more of each $100 claimed and used by a disgruntled iPhone early adopter.
While this may be smart business, it's lousy public relations. Steve Jobs apologizes and promises to "do right" by his customers and then pulls a cheesy, transparent maneuver like this? That's not the Apple that has won the hearts and minds of millions of loyal customers.
Apple has almost $14 billion in cash and $0 in debt. It could have afforded to give its early iPhone customers a true credit they could have spent on any Apple product. I wouldn't be surprised if this touches off another wave of discontent among iPhone owners. We'll see what happens in the forums over the next few days, but it would be a shame if Apple has bungled what should have been a commendable gesture to some of its best customers.
UPDATE: A story appeared onBloomberg News this evening that contradicts the document on Apple's Web site. Apple spokeswoman Natalie Kerris told Bloomberg the information on the site is wrong and that the iPhone credit will indeed be applicable to iTunes Store purchases. That's one heckuva typo. As of 1:30 a.m. EDT Saturday, the original document remains unchanged on Apple's Web site. What's going on in Cupertino, anyway?