IPad's Rivals Can't Beat It on Price(nytimes.com)
nytimes.com
IPad's Rivals Can't Beat It on Price
http://www.nytimes.com/2011/03/07/technology/07tablet.html?hp
35 comments
It's the track record that is really a huge barrier to entry now - cost/price be damned.
Scenario 1 - Upstart company A which is new to the market comes up with a new great hardware/software combo tablet or mobile PDA which kicks some serious ass. Few people may trust that they'll be 'able to make a go of it' because they're so small. Self-fulfilling prophecy, and that company may indeed have a hard go of it. They're unknown - why should anyone trust them.
Scenario B - the Androids and MS and other 'established' players. They've had a couple years to establish track records, and they stink. Unknown upgrade paths from various vendors - mobile phone companies selling 1.6 Android devices in mid 2010 with no plan to even attempt upgrades, but locking people in to 2 year contracts, for example. MS' Zune being dropped after a couple years, and the "PlaysForSure" debacle a couple years before that. Why trust any of these vendors with your data/apps/music/money when Apple has a much stronger track record of being around and offering decent backwards compatibility (compared to the competition)?
I honestly think people would really be willing to pay even more than Apple prices for devices if there was any hope of the company staying the course with their decisions and not dropping products lines 18 months in the future. People were lining up in droves to pay $699 for the original iPhone - no carrier subsidy - because of the track record Apple has at delivering a good experience. Honestly, really, I don't see anyone else in the CE/mobile space with that sort of loyalty any more. I also do remember people camping out at stores to get Windows 95 - MS did have that sort of cred at one point, but they've lost it and it'll take a lot of work to get it back.
Scenario 1 - Upstart company A which is new to the market comes up with a new great hardware/software combo tablet or mobile PDA which kicks some serious ass. Few people may trust that they'll be 'able to make a go of it' because they're so small. Self-fulfilling prophecy, and that company may indeed have a hard go of it. They're unknown - why should anyone trust them.
Scenario B - the Androids and MS and other 'established' players. They've had a couple years to establish track records, and they stink. Unknown upgrade paths from various vendors - mobile phone companies selling 1.6 Android devices in mid 2010 with no plan to even attempt upgrades, but locking people in to 2 year contracts, for example. MS' Zune being dropped after a couple years, and the "PlaysForSure" debacle a couple years before that. Why trust any of these vendors with your data/apps/music/money when Apple has a much stronger track record of being around and offering decent backwards compatibility (compared to the competition)?
I honestly think people would really be willing to pay even more than Apple prices for devices if there was any hope of the company staying the course with their decisions and not dropping products lines 18 months in the future. People were lining up in droves to pay $699 for the original iPhone - no carrier subsidy - because of the track record Apple has at delivering a good experience. Honestly, really, I don't see anyone else in the CE/mobile space with that sort of loyalty any more. I also do remember people camping out at stores to get Windows 95 - MS did have that sort of cred at one point, but they've lost it and it'll take a lot of work to get it back.
> You have Android devices that may or may not get firmware updates
All Android tablets that have been announced (including the Xoom) ship with stock Android. So they'll get their updates on time.
All Android tablets that have been announced (including the Xoom) ship with stock Android. So they'll get their updates on time.
>iPad's Rivals Can't Beat it on Price
The title of this article causes me anguish. It should read "IPad's Rivals Can't Beat it on Cost." Businesses compete on value and on cost. Value is the benefit to the customer (value proposition) and cost is the fixed and variable expenses to the firm for producing that value (cost structure). Value and cost are strategic, and price is a tactical choice that follows from your value-cost position and the competition. If a business offers more value at a given price, relative to a competitor, it will gain market share. If a business has a lower cost at a given price, relative to a competitor, it will have higher margins.
Confusing price and cost has caused the downfall of established companies. For instance, in 2003, Delta launched its Song subsidiary to compete with Southwest Airlines and Jet Blue. Delta conceptualized Song as a "low-price airline," while Southwest and Jet Blue are low-cost airlines. What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
The title of this article causes me anguish. It should read "IPad's Rivals Can't Beat it on Cost." Businesses compete on value and on cost. Value is the benefit to the customer (value proposition) and cost is the fixed and variable expenses to the firm for producing that value (cost structure). Value and cost are strategic, and price is a tactical choice that follows from your value-cost position and the competition. If a business offers more value at a given price, relative to a competitor, it will gain market share. If a business has a lower cost at a given price, relative to a competitor, it will have higher margins.
Confusing price and cost has caused the downfall of established companies. For instance, in 2003, Delta launched its Song subsidiary to compete with Southwest Airlines and Jet Blue. Delta conceptualized Song as a "low-price airline," while Southwest and Jet Blue are low-cost airlines. What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
> What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.
Actually, Qantas in Australia did pretty with Jetstar. They avoided cannibalization of existing customers by running from non-mainstream airports, being a lot stricter with check-in times (trading time for money), having cheaper flight staff, and doing most of their businesses online.
Actually, Qantas in Australia did pretty with Jetstar. They avoided cannibalization of existing customers by running from non-mainstream airports, being a lot stricter with check-in times (trading time for money), having cheaper flight staff, and doing most of their businesses online.
United tried to do the same thing with it's Ted (http://en.wikipedia.org/wiki/Ted_(airline)) subsidiary.
I think all this bragging about price and also about the number of apps is just premature. We are obviously at the beginning of the Android response. It took Google a year to release their response to the iPad and Xoom is the first product based on it. It was just released a couple weeks ago. You can argue that the competition has been slow to respond but this is not the full response yet, there is no way the iPad will own >90% of this market by the end of the year.
By the end of this year there will be tons of android tablets and tons of apps. As with the phones, the hardware will be all over the place in terms of price and quality, but just as with the phones the onslaught of announcements and features and price points will be too much and they will slowly but surely become more and more compelling.
It's been said that 2011 will be the year of the tablet. Apple is once again the king of the hill with a huge headstart. But the droids are coming. As Anonymous says, expect them.
By the end of this year there will be tons of android tablets and tons of apps. As with the phones, the hardware will be all over the place in terms of price and quality, but just as with the phones the onslaught of announcements and features and price points will be too much and they will slowly but surely become more and more compelling.
It's been said that 2011 will be the year of the tablet. Apple is once again the king of the hill with a huge headstart. But the droids are coming. As Anonymous says, expect them.
One thing I both do and don't understand is all this fidgeting around with the form factor. I think the Xoom is the closest to an iPad in form factor, but the rest are all over the map.
While I do understand the desire to test out different sizes/weights/features etc. to see if Apple was close but not quite spot on with their first shot out of the gate (who knows? an 8" $1000 tablet could wipe the floor with everybody), it overlooks the simple fact that in the mind of consumers the iPad represents what a tablet looks and feels like.
If you are going to make a tablet then, you must fit the consumer's expectations, not try and carve a niche somewhere else.
Make a tablet, the exact shape and size and weight of an iPad, make it $50-100 cheaper all around, toss in a regular 'ol USB slot and an SD card and you'll probably have a hit. none of the present, weirdly shaped and overly priced Android tablets have any appeal to me whatsoever.
Better to credibly compete in the market, then when you own some part of it, fiddle around with the form factor and see what else sells.
While I do understand the desire to test out different sizes/weights/features etc. to see if Apple was close but not quite spot on with their first shot out of the gate (who knows? an 8" $1000 tablet could wipe the floor with everybody), it overlooks the simple fact that in the mind of consumers the iPad represents what a tablet looks and feels like.
If you are going to make a tablet then, you must fit the consumer's expectations, not try and carve a niche somewhere else.
Make a tablet, the exact shape and size and weight of an iPad, make it $50-100 cheaper all around, toss in a regular 'ol USB slot and an SD card and you'll probably have a hit. none of the present, weirdly shaped and overly priced Android tablets have any appeal to me whatsoever.
Better to credibly compete in the market, then when you own some part of it, fiddle around with the form factor and see what else sells.
"Make a tablet, the exact shape and size and weight of an iPad, make it $50-100 cheaper all around, toss in a regular 'ol USB slot and an SD card and you'll probably have a hit. none of the present, weirdly shaped and overly priced Android tablets have any appeal to me whatsoever."
If it were that simple, somebody would have already done it.
I think this article is pretty spot on—Apple has made it almost impossible to compete at the prices they've set at the level of quality the iPad represents. Maybe you can get to the iPad pricing, but you'll have to cut corners and it just won't feel like that solid slab of aluminum.
If it were that simple, somebody would have already done it.
I think this article is pretty spot on—Apple has made it almost impossible to compete at the prices they've set at the level of quality the iPad represents. Maybe you can get to the iPad pricing, but you'll have to cut corners and it just won't feel like that solid slab of aluminum.
Apple has made it almost impossible to compete at the prices they've set at the level of quality the iPad represents.
I totally agree, nobody can lock down all of the supply of a given part in some absolutely necessary, but short supplied, channel better than Apple. It's really one of their most amazing business strategies.
I totally agree, nobody can lock down all of the supply of a given part in some absolutely necessary, but short supplied, channel better than Apple. It's really one of their most amazing business strategies.
"Make a tablet, the exact shape and size and weight of an iPad, make it $50-100 cheaper all around, toss in a regular 'ol USB slot and an SD card and you'll probably have a hit. none of the present, weirdly shaped and overly priced Android tablets have any appeal to me whatsoever"
Spot on. The touchPad has the potential to come closest to this (no SD card but I think it's got a micro USB slot). If this was priced at, say, $349, or even better, $299 - wifi only - there'd be a small stampede. Make it developer friendly - easy to install custom apps on - this would be a massive hit. Sadly, this will likely never happen.
Spot on. The touchPad has the potential to come closest to this (no SD card but I think it's got a micro USB slot). If this was priced at, say, $349, or even better, $299 - wifi only - there'd be a small stampede. Make it developer friendly - easy to install custom apps on - this would be a massive hit. Sadly, this will likely never happen.
At this point, I bet even hitting $400 would be great, cheaper than the competition, and could still yield a handsome profit if the parts ran $250-300.
I frankly just don't understand the weird form factor bit (or the right form factor and no marketplace, or some other bizarre combination of factors that are just "not quite right")
I frankly just don't understand the weird form factor bit (or the right form factor and no marketplace, or some other bizarre combination of factors that are just "not quite right")
Yup, the Archos 101 is exactly that. The killer is the lack of formal support for Google Market and the relatively low internal RAM.
Is there any evidence that samsung or motorola are trying to beat apple on price? The high end smartphones from both manufacturers seem to happily sit around the same price point as apple's phone.
Give it another six months or so and I'm sure you'll see some decidedly cheaper dual core 3.0 tablets from the 2nd tier oems like huwai as mentioned, archos, viewsonic, etc. Now, they want to compete on price. Whether tablets are commodity items or status symbols remains to be seen though. So far it seems mostly like the latter.
Give it another six months or so and I'm sure you'll see some decidedly cheaper dual core 3.0 tablets from the 2nd tier oems like huwai as mentioned, archos, viewsonic, etc. Now, they want to compete on price. Whether tablets are commodity items or status symbols remains to be seen though. So far it seems mostly like the latter.
If history is anything to go by they will probably start out as status symbols, and become commodities as they spread into the market. Mobile phones are a good example.
The App store is only one of the ways that Apple builds out its network advantage.
Facetime; developer ecosystem; having complementary products like computers, ipod, Mobile.Me means that every customer Apple captures has a higher lifetime value than a Xoom customer to Motorola.
Facetime; developer ecosystem; having complementary products like computers, ipod, Mobile.Me means that every customer Apple captures has a higher lifetime value than a Xoom customer to Motorola.
There's another thing that its competitors can't match. Steve Jobs's willingness to ruthlessly "knife the baby" if necessary, even if the "baby" is a product that is a large source of revenue. The iPod Mini was EOL'ed with the introduction of the iPod Nano.
Yet another advantage is Apple’s wide net of its own global retail shops and online stores; for customers, this means they can avoid a markup from a third party like Best Buy.
This is only partially correct. Apple's retail stores are expensive to run, and that cost is Apple's.
This is only partially correct. Apple's retail stores are expensive to run, and that cost is Apple's.
You're right that there is a cost associated with having the stores but those are largely fixed costs and the amount of product Apple sells through the stores is so massive that the markup is pretty small compared to the markup associated with selling at Best Buy, et al.
Apple stores are among the most profitable retail venues in the world.
Apple stores are among the most profitable retail venues in the world.
That fixed cost still has to be spread across all sales. Also, while the Apple stores are highly successful they are also a potential financial liability if things go sour since they only stock one productline.
The fact that they sell primarily Apple products is an advantage even if things went sour.
The Apple store gives Apple promotional and marketing support, it is a support venue. The customer walks in to an environment designed to promote Apple products not dishwashers, Xooms and Xbox 360s.
Things might go sour at some point, but Apple is sitting on $50 billion in cash and liquid assets, even if everything went south sales-wise, the advantages of exclusively promoting their products is probably worth it to them.
Their retail partners have been fair-weather friends and more likely to be a negative factor if things went sour than any fixed costs of running the stores.
The Apple store gives Apple promotional and marketing support, it is a support venue. The customer walks in to an environment designed to promote Apple products not dishwashers, Xooms and Xbox 360s.
Things might go sour at some point, but Apple is sitting on $50 billion in cash and liquid assets, even if everything went south sales-wise, the advantages of exclusively promoting their products is probably worth it to them.
Their retail partners have been fair-weather friends and more likely to be a negative factor if things went sour than any fixed costs of running the stores.
This was exactly the reasoning of the high-end hi-fi retailer B&O - they opened flagship stores around the world, and it didn't turn out well.
The problem is that B&O doesn't sell anything that young people are interested in. So they don't have the same amount of traffic (of people buying stuff) in their stores.
They have 2 major product lines:
1) Why pay 3-5 times as much for a simply rebranded Sony tv? In old days B&O made their own electronics, but todays B&O tv is just a standard display wrapped in a B&O plastic frame and is no better than a standard Sony TV.
2) hifi sets (cd-players, tape recorders, vinyl players, etc) are obsolete because young people have all their music on their iPod/computer.
B&O is a company that sells quality horse wagons in a time when young people have switched to cars.
They have 2 major product lines:
1) Why pay 3-5 times as much for a simply rebranded Sony tv? In old days B&O made their own electronics, but todays B&O tv is just a standard display wrapped in a B&O plastic frame and is no better than a standard Sony TV.
2) hifi sets (cd-players, tape recorders, vinyl players, etc) are obsolete because young people have all their music on their iPod/computer.
B&O is a company that sells quality horse wagons in a time when young people have switched to cars.
"So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever."
Looks like all the dots are connecting perfects for Jobs and Apple more and more.
Looks like all the dots are connecting perfects for Jobs and Apple more and more.
The magnificent speech in question
http://youtu.be/UF8uR6Z6KLc
http://youtu.be/UF8uR6Z6KLc
The nook color is on sale for $200 and runs honeycomb. Same basic specs as the galaxy tab. Obviously not something the NYT could recommend, but any HN reader should find it easy to set up.
AlwaysInnovating's touchbook beats the iPad on price, last I checked.
http://alwaysinnovating.com/
http://alwaysinnovating.com/
Isn't this funny? Usually Apple products are ridiculously expensive. Have they ever held the but-it's-cheap card before?
All of Apple's 'post-PC' products have been competitively priced. And the one exception, the Mac, is hard to compare because almost no PC manufacturers build to a comparably high standard of industrial design. The few that try (eg. Dell Adamo) end up asking similar prices. Plus they aren't singlehandedly funding development of an operating system.
The Mac Mini is cheap.
At various times the iPod was about as 'cheaper than the competition' as the iPad is now.
The iPod touch has been cheap relative to comparable products. The Nintendo 3D hand held is launching at $350 here.
At various times the iPod was about as 'cheaper than the competition' as the iPad is now.
The iPod touch has been cheap relative to comparable products. The Nintendo 3D hand held is launching at $350 here.
The Mac Mini is cheap compared to other Macs. Not compared to comprable computers, IIRC, so long as we are considering performance an important metric.
I don't know if the 3D handheld is a good comparison. It's expensive because it has 3D for goodness sake.
I don't know if the 3D handheld is a good comparison. It's expensive because it has 3D for goodness sake.
The Mac Mini is a great deal compared to everything that's not at least 3 times larger, especially if you consider performance, because everything else the size of the Mac Mini has an Intel Atom at best.
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Not trying to flame here, but Apple has a track record of shipping solid, complete devices, at a great price point, with a known track record of updates. They also have some seriously polished apps - software differentiation is becoming more and more apparent.
The competition, not so much. You have Android devices that may or may not get firmware updates, and "to be released" devices from HP and RIM.
I'd love to see some serious competition, but until the rest of the market can drive prices down on hardware at the wholesale level, it's going to be rough for everyone who isn't Apple.