More likely, models below the current Sport will be introduced as production constraints ease. Consider the iPhone 5C two years ago: resin body (think Casio watches), many colors, perhaps different styling, a notch lower price, maybe an acrylic crystal (don't laugh, some very dear Omegas use those. Extremely hard to break-way more impact-resistant than sapphire or mineral glass-and scratches can be buffed out). That would be a sensible strategy, but only when production smooths out. Otherwise, why waste capacity on lower-end models while they can sell every Watch they can make?

Given the pace of things, this might be something to look forward to for this coming Holiday season. Such a 'Watch C' wouldn't be vastly cheaper, since just the case and maybe the crystal and band would have savings. But then, the 5C wasn't vastly cheaper either, and it sold well and helped higher-end models enjoy component economies of scale. But consider your premise. 'Studies' have shown Watch sales have dropped? There's precisely one 'study' with any data, and it merely showed that online sales dropped coincident with availability in the Apple Stores. The pundit-o-sphere took that one claim and metastasized it all over the web.

Apple Phone Price Drop

Meanwhile Tim Cook just stated that June was the best month for Watch sales. And I rather doubt he'd risk charges of material falsehood (a serious securities-fraud charge) by stating that if it were untrue. And then there's the price-drops of the Moto360 etc that you mention. Those price drops were pretty obviously a consequence of the Watch sucking all the air out of the smartwatch room. The market pressures on Apple to cut prices may be less than you think.

If and when demand softens or inventory starts to pile up, that's the only economically sensible time to cut prices on existing models. If and when component production capability begins to significantly exceed sales of current models, that's the time to introduce something below the current Watch. And there might be another twist Apple could consider. Instead of cutting prices on the Watch outright, they could offer an attractive bundle with purchase of a new iPhone. 'Choose a Watch when you upgrade to the fabulous new iPhone 6S+. It's about time.'

Considering competitors like the Moto 360 have dropped their prices considerably and studies suggest AW sales have fallen significantly since launch, do you think Apple could drop the price of the AW in time for the holiday season? It would seem to me that the sweet spot price range for products like this to sell well and consistently is perhaps closer to $200-250. Even to myself as a major Apple fan and early adopter, the asking price right now just seems pretty hard to justify, and I'm earning quite a bit above average. Probably you're right, I expect they think that holiday spending will increase sales without a price drop.

But presumably there will be long periods of pretty rock bottom sales if between now and xmas, and xmas and next September if that's the case. Can't help but feel they should make the thing more affordable to maintain some of the enthusiasm for the product before it tapers out and loses it's cool factor. Sometimes you just have to bite the bullet and accept that you've mispriced, I can't help but think that this is the case with the AW. It goes beyond that normal Apple tax into 'I just can't justify spending x hundreds of dollars on something that does y'.

Click to expand.I'd reword that slightly to next generation, with the caveat that a watch generation will be a lot longer than a year. Two, three or even four years possibly? We all have to un-learn the yearly improvements iPhone has conditioned us to expect. Annual upgrades will come for the watch, but they will be in software, not hardware.

All watch owners will get them and it will help Apple reinforce the value and longevity perceptions of the watch. Both are classic 'watch/jewelry' qualities that Apple must demonstrate for this product to justify its premium pricing and, in the long run, kill the competition. If Apple slashes prices, the watch is dead. I don't think a price drop is imminent. It's just not something Apple would do so shortly after a product launch. Dropping the prices already is synonymous to we failed to live up to the customers' expectations. Which they don't, frankly.

The Apple Watch is the best selling product in its category. Also take into account that there are still many countries where the Watch isn't even being sold yet. Nobody wants to poke early adopters in the eyes for buying it too early when they plan on introducing a price drop.