I try to keep a level head about Apple products. I own several, but I also own plenty of non-Apple stuff as well (I use a PC! Can you believe it?!).
This whole tablet movement has been fascinating to watch, though, and Apple’s been navigating the minefield impressively. It’s setting up some mines along the way, which helps, but you get to do that when you’re the first one through the minefield.
In the days just before the first iPad was first announced, some wondered whether it’d run a full-blown Mac operating system or a scaled-up version of the iPhone’s operating system.
Turns out, it was the iPhone operating system. Some people scoffed, saying $500 was too expensive for a giant iPod Touch, but most regular consumers didn’t care either way because the iPad was new and cool. And little did anyone know that the $500 price point would be so hard to beat.
So Apple had set the tablet bar: starting price of $500, mobile-ish operating system and—perhaps the most important part—the ability to run thousands of apps that many smartphone owners had already purchased.
Sure, the apps were pixel-doubled and looked a little silly blown up on the iPad’s big screen but their mere existence on the iPad at the time of its launch did two things: First, the apps gave iPad owners something to do while developers worked on iPad-specific versions of apps and, second, it kept iPhone owners from getting all bent out of shape about having to purchase duplicate apps for their iPads. The brilliance was that most iPad-specific apps looked better than their iPhone counterparts, so people ended up buying the iPad versions anyway. But they didn’t have to.
At the iPad 2 unveiling, Apple made a big deal about the fact that there are more than 65,000 iPad apps available. They didn’t say how many were good apps—not that they would—but goodness is subjective, numbers are not, and so numbers win when it comes to how people think of mobile app stores.
But after a certain point, the numbers don’t matter any more. The Android platform has enough apps now that nobody would really care if Apple had a billion and Android had a million. As long as enough of the apps are good, then people will buy into whatever platform those apps are on.
The thing that tablet makers lose sight of—or that none of them seem to want to acknowledge—is that apps dictate the success of the hardware, not the other way around. This is a relatively new phenomenon for mobile products.
You used to buy a phone because it looked cool and made decent calls—maybe it had a color screen or any of a number of other hardware features. Now you buy a phone because of the apps it can run. Maybe YOU don’t, but most of the general public does. There are phones out there that can run circles around the iPhone by featuring faster processors and expansion slots and bigger screens and replaceable batteries (and the ability to make phone calls), but the iPhone has cool apps so people want it.
The same principle applies to tablets now, too.
A low starting price for a given line of tablets is only slightly less important than quality apps—only slightly. It’s still very, very important. But if Apple priced the iPad at $100 higher than comparable Android, BlackBerry or HP tablets, it’d still probably sell plenty of them because there are enough good iPad apps to lure people in.
The big (huge, gargantuan) problem for these competing tablets is that they’re all coming in priced way higher than the $499 base-level iPad, and they’re often tied to cellular carriers if there’s any chance of getting the prices down anywhere near $500.
The Motorola Xoom Android tablet is a perfect example. It costs $800 unless you lock yourself into a two-year data contract, which then only gets the price down to $600. From a hardware standpoint, like several Android phones, it could run circles around the first iPad and handily beats the iPad 2 on several fronts.
But the first iPad now costs $400 ($350 for a refurbished unit with the same warranty as a new one) and it’s got access to all those wonderful iPad apps. And the iPad 2 still only starts at $500. Ask most regular people if they care that the Xoom has a cellular connection, double the storage of the base-level iPad, expandable memory, or an HD display. It costs $800 and has no apps.
Fortunately, Motorola seems to understand that it’s going to have to compete on price. Removing apps from the equation, recent rumors of a Wi-Fi-only Xoom priced at $539 actually make it seem compelling if you consider what $40 extra (and faith that it’ll have good apps) gets you over the $499 iPad.
And then there’s Samsung’s 10.1-inch Galaxy Tab Android tablet that’s coming out soon. On paper, it had the iPad beat by being thinner (at 0.4 inches) and lighter (at 1.3 pounds). The iPad 2 now has the upper hand once again when it comes to thickness and weight, but just by a smidge.
Samsung’s pricing strategy will make or break this tablet. The company never put out a Wi-Fi only version of the 7-inch Galaxy Tab but even the 3G versions can now be had for $500 without a contract. And after seeing the iPad 2 unveiled, a Samsung VP said of his company’s tablets, “The 10-inch was to be priced higher than the 7-inch, but we will have to think that over.”
So competing tablets—hell, tablets in general—are now moving in the right direction as far as price is concerned. The non-Apple apps still need to catch up, but that’ll eventually happen. Pricing can be dealt with right now, though.
Here’s a radical idea. Someone should put out a good tablet and price it at, say, $299. It doesn’t matter if it’s an Android, BlackBerry, HP tablet. But put out a good tablet that severely undercuts the iPad’s price and use it to build up your apps ecosystem, even if you only break even or lose money on the hardware. Video game console makers do it all the time.
Google’s in the best position to do this. It has deep pockets and it’s first to market with a decent iPad competitor in the Motorola Xoom. Google should do what it does with its Nexus line of phones: Commission an awesome flagship tablet to be built, sell it for next to nothing, and watch what happens.
The things would sell like hotcakes and developers would start cranking out apps to sell on all these new Android tablets. This, in turn, begets more Android tablet owners once there are all these cool Android tablet apps.
I’d argue that a tablet’s actual hardware is a distant third place to its apps and price tag as long as it performs basic functions adequately. It’s still an important piece of the puzzle—I mean, there’s a reason nobody buys the sub-$200 Android tablets: You have to deliberately poke the screen to get anything to move, the interface is all choppy, and video playback is a joke—but Apple’s proven that a one gigahertz processor and a paltry 256 megabytes of RAM were enough for the first iPad.
And it certainly kicked things up a notch by shaving the iPad 2 down to a third of an inch—no doubt about it. People are attracted to good design, but the inner hardware isn’t important enough to justify an $800 starting price, which is what some of these competing tablet makers are trying to get away with.
Everything above baseline tablet specs (one gigahertz processor, adequate RAM, 16 gigabytes or so of storage, capacitive touchscreen) is gravy. Some of that gravy is nicer than other, lesser gravy and some of it appeals to even mildly savvy consumers—certain people know they definitely want a 1280×800 screen resolution or a 4G connection or a memory card slot—but a regular member of the general public, which is who these companies want to sell all these tablets to, says, “I want the tablet that runs the coolest apps and I realize that $500 is the least amount of money I can spend to do so.”
Easier Said Than Done?
So in lieu of trying to match Apple’s sheer number of iPad apps in a short amount of time, I’m of the mind that competing tablet makers would be wise to adopt the console model that the video game industry uses. Break even or lose money on the hardware and make it up with the apps.
This is tough sledding for companies like Motorola that just want to make hardware and have nothing to do with the rest of the equation, so they’d either have to strike deals with the individual platforms to get a cut of app sales or perhaps work out a deal where Google, for instance, subsidizes the tablet’s selling price and then reaps all the profits from selling the apps.
HP and BlackBerry are actually both in a very Apple-like position since they control their own hardware and software. But unlike Apple, HP and BlackBerry have to deal with middlemen and various retail channels. Apple has its own retail stores, which means it keeps all the profits for every iPad it sells out of one of those stores. But it knows that even though it has to give a cut to Best Buy and whichever other retail stores sell iPads, it’ll make that money back through the App Store.
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