[usethis]

It is a matter of staying ahead of the curve and not let your competitors catch up. Whether that means in terms of marketing, or product quality doesn't matter. So far plenty consumers are convinced that Apple's prices are justifiable and don't have a reason to switch an ecosystem they have invested in.

You are right that Apple faces a crisis if their sales drop, so does every other company. The worst reaction though, would be to start competing on prices, and thus quality. This inevitably leads to a race to the bottom, where they're unable to compete against companies that are based in cheap labor countries. Much in the same way as Philips, or Sony couldn't compete against companies like Samsung once they lost their competitive edge in their product categories.

[kenjackson]

I think you missed my point. They face a crisis even if their sales do NOT drop. They face a crisis if Verizon says to them, "We are no longer willing to give you a subsidy premium. You will get the same subsidy rates as the Samsung Galaxy Sx." Apple will continue to sell at the same rate, but their revenue will drop substantially.

On top of that is the fear of their sales actually dropping if carriers stop doing subsidies altogether (which is the direction they are going).

[gress]

Carriers still get much higher ARPU from iPhone users. While that is true, the subsidy will remain.