Steve Jobs’ $599 Gamble That Killed The Keyboard

Quick answer: Steve Jobs unveiled the first-generation iPhone on January 9, 2007, and it went on sale in the US on June 29, 2007, for $499 (4GB) or $599 (8GB) on a two-year AT&T contract. It combined a phone, an iPod and an internet device behind one multi-touch screen, with no physical keyboard. Apple said it sold 270,000 in 30 hours.

The first gen iPhone was Apple’s original iPhone, unveiled by Steve Jobs on January 9, 2007, and sold in the US from June 29, 2007, for $499 (4GB) or $599 (8GB) on a two-year AT&T contract. It combined a phone, an iPod and an internet device behind one multi-touch screen, with no physical keyboard. That bet reshaped every phone that followed.

It was also far less finished than it looked. On the day Jobs showed it, only about a hundred prototypes existed, the software crashed if you used it in the wrong order, and the signal bars on stage were hard-coded to show full strength. Here is how the gamble was made, what it cost buyers, and why it worked.

▶ Prefer to watch? See the full documentary, Steve Jobs’ $599 Gamble That Killed The Keyboard. Free on YouTube.

What Was the First iPhone?

The first iPhone, often called the iPhone 2G or first gen iPhone, was a touch-screen phone that Apple described as three products in one: “a revolutionary mobile phone, a widescreen iPod with touch controls, and a breakthrough Internet communications device,” in its January 9, 2007 announcement. It ran a version of Apple’s Mac software and was controlled by fingers, not a stylus or buttons.

Jobs pitched the screen as the whole idea. “We are all born with the ultimate pointing device, our fingers,” he said in Apple’s release, calling it “literally five years ahead of any other mobile phone.” The device had visual voicemail, a full web browser, Google Maps and a touch keyboard that predicted and corrected typing mistakes.

First gen iPhone specs at a glance

Feature	First iPhone (2007)
Screen	3.5-inch multi-touch display
Storage and price	4GB for $499, 8GB for $599 (US, with two-year contract)
Camera	2 megapixels, no video recording
Network	Quad-band GSM, EDGE data, Wi-Fi; no 3G
Carrier	Cingular, renamed AT&T, exclusive in the US
Keyboard	On-screen only, with predictive correction
Third-party apps	None at launch; the App Store opened in July 2008

The World Before: Keyboards, Styluses and Carriers

In 2006 a “smartphone” usually meant a BlackBerry with a tiny physical keyboard or a Palm Treo with a stylus. Research in Motion’s BlackBerry was “fast locking up” the business market, Fred Vogelstein wrote in The New York Times Magazine. Touch screens of the day mostly responded to pressure, and it was not obvious to Apple’s own executives that on-screen keyboards were something buyers wanted.

The other wall was the carriers. Phone networks expected to control the phones sold on them, from the software to the branding. Jobs, Vogelstein reported, could not imagine doing their bidding. Apple even looked at buying Motorola in 2003 and considered running its own network by reselling capacity, before signing with Cingular in 2006 after more than a year of talks.

Why Did the First iPhone Have No Keyboard?

Apple dropped the physical keyboard so the whole front of the phone could be a screen that changed with each task. A fixed keyboard takes up half the face of a phone even when you are watching a video or reading a map. A software keyboard appears only when needed and can change language, layout and size. That was the gamble at the center of the first gen iPhone.

It was a gamble because the technology was hard and expensive. Building a multi-touch screen into glass, smart enough to run a keyboard with autocorrect, “made it hugely expensive even to produce a working prototype,” Vogelstein wrote, and few factories had made such screens. Apple built three different early versions of the phone in 2005 and 2006. One senior executive told him more than $150 million was spent creating the first iPhone. Early Apple prototypes had shown a keyboard rising from the bottom of a touch screen, the design that eventually shipped.

The Keynote That Almost Failed

When Jobs walked on stage at Macworld on January 9, 2007, the iPhone was not ready. Only about a hundred units existed, some with gaps around the screen. The phone could not reliably play a whole song or video without crashing, and doing tasks in the wrong order could freeze it, according to Vogelstein’s reporting. Engineers worked out what they called “the golden path,” a set order of actions that made the phone look as if it worked.

The workarounds went further. AT&T brought in a portable cell tower. With Jobs’s approval, the team programmed the demo phones to always show five bars of signal, whatever the real strength. “If the radio crashed and restarted, as we suspected it might, we didn’t want people in the audience to see that,” said Andy Grignon, the senior manager in charge of the iPhone’s radios. Jobs kept several phones on stage and switched between them when one ran low on memory. The phones had just 128 megabytes.

It worked. Grignon and a handful of colleagues in the audience took a shot of Scotch after each segment of the demo, and drained the flask when the finale ran clean. “It was the best demo any of us had ever seen,” he told the Times. Apple had no backup plan: the iPhone was the only big new product it had. “It was Apple TV or the iPhone,” Grignon said.

Launch Day: June 29, 2007

The iPhone went on sale at 6:00 p.m. local time on Friday, June 29, 2007, and all 164 Apple stores in the US stayed open until midnight, with a limit of two phones per customer, Apple said. Outside the Fifth Avenue store in New York, some people had camped out for days. Greg Packer had been first in line all week, The New York Times reported.

Apple later said it sold 270,000 iPhones in the first 30 hours, through the end of June 30. AT&T had reported 146,000 activations over the first two days, a gap Macworld linked largely to activation delays that Apple said had been fixed. In its July 25, 2007 results, Apple said it hoped to sell its one millionth iPhone by the end of the first full quarter, according to the company.

The Doubters

Not everyone was impressed. In April 2007, two months before launch, Microsoft chief executive Steve Ballmer told USA Today: “There’s no chance that the iPhone is going to get any significant market share. No chance.” He argued a $500 phone would reach only a small slice of the market, Ars Technica reported.

The price was the doubters’ strongest point. $599 on top of a two-year contract was a lot for a phone in 2007, and the first model lacked features rivals already had: 3G data, video recording, picture messaging and third-party apps. The first gen iPhone was a bet that a better screen and software would outweigh a shorter spec sheet.

The $200 Price Cut and the $100 Apology

On September 5, 2007, only ten weeks after launch, Apple cut the 8GB iPhone from $599 to $399 and dropped the 4GB model. Early buyers who had queued for days were furious, The New York Times reported. The next day Jobs posted an open letter defending the cut as the right move, but apologising to early customers and offering each of them a $100 Apple store credit.

The cut worked commercially. Apple announced its one millionth iPhone sale on September 10, 2007, saying the milestone was reached the day before, after 74 days. “It took almost two years to achieve this milestone with iPod,” Jobs said, in Apple’s release. The episode taught a lesson Apple has used ever since: launch high for the early fans, then widen the market fast.

Date	Milestone
January 9, 2007	iPhone unveiled at Macworld San Francisco
April 2007	Ballmer says the iPhone has “no chance” of significant market share
June 29, 2007	On sale in the US at $499 and $599
June 30, 2007	270,000 sold in the first 30 hours, per Apple
September 5, 2007	8GB price cut from $599 to $399
September 9, 2007	One millionth iPhone sold, after 74 days
November 2007	TIME names the iPhone Invention of the Year
March 6, 2008	Apple releases the iPhone SDK and announces the App Store
July 10 to 11, 2008	App Store opens with more than 500 apps; iPhone 3G goes on sale
July 14, 2008	App Store passes 10 million downloads in its first weekend

From Phone to Platform: The App Store

The first iPhone shipped with no third-party apps, and Jobs was initially against opening it to outside developers, his biographer Walter Isaacson wrote in Steve Jobs (2011). Apple changed course. On March 6, 2008, it released a free software development kit and announced the App Store, with Jobs saying he wanted “a vibrant third party developer community,” Apple said.

The App Store opened alongside the iPhone 3G in July 2008 with more than 500 apps, according to Apple, and passed 10 million downloads in three days. Jobs called it “a grand slam,” in Apple’s release. Original iPhone owners could join in with a software update. That shift, from a closed device to a platform, is what made the touch screen without a keyboard so powerful: the screen could become any tool a developer imagined.

Did the iPhone Kill the Keyboard Phone?

Not overnight, but the direction was set in 2007. Within a few years almost every major phone maker had moved to large touch screens. The clearest sign came from BlackBerry, the company most associated with physical keyboards, which announced on September 28, 2016, that it would stop designing its own phones and hand hardware to partners, BBC News reported. The “killed the keyboard” in our title is that long arc, not a single day.

The story is the reverse of most files on Magnatefall. Theranos also staged demos of an unfinished product, but its technology never did what was claimed and Elizabeth Holmes was convicted of defrauding investors. Apple’s carefully managed keynote hid a phone that was real and nearly ready, and it shipped five months later. The Builder.ai scandal is a reminder of what can happen when a pitch runs far ahead of the product.

Lessons From the First Gen iPhone

• Bet on the core idea, not the spec sheet. The first iPhone lacked 3G and apps, but its screen and software were years ahead.
• Control matters. Apple insisted on owning the software and the experience, even with a powerful carrier as partner.
• Early adopters pay a premium. The $200 cut ten weeks in, and the $100 credit, are a reminder that launch prices rarely last.
• A demo is not a product. The difference between Apple and the failures in our documentary files is that Apple shipped what it showed.

First Gen iPhone: FAQ

The Verdict

The first gen iPhone was a $599 bet that people would give up buttons for glass, sold by a company that had never made a phone and shown on stage with its signal bars fixed. Early buyers overpaid, rivals scoffed, and the first model lacked basics. Within a year it was a platform, and within a decade the keyboard phone was a niche. Few business gambles have paid off so completely.

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