Print 87 comment(s) - last by fteoath64.. on Oct 26 at 1:48 AM

Don't hate the playa, hate the game

Reaction to the introduction of the iPad mini yesterday was decidedly mixed. On the one hand, many Apple faithful praised the launch of the new tablet, which is half the weight of the third and fourth generation iPads, and can be palmed with one hand. On the other hand, many complained that it was simply a shrunken down iPad 2 with the same lackluster screen resolution. It also didn't help that many people felt that the 16GB iPad mini was overpriced at $329.
For example, Amazon's 7" Kindle Fire HD is priced at "only" $199, while a 32GB Google Nexus 7 will cost you $249. Even Barnes and Noble is hanging around in the budget realm with the 7" Nook HD, which is priced at $229. All of the aforementioned tablets have a higher screen resolution than the iPad mini.
With all the criticism of the iPad mini's pricing and specs, Apple' Phil Schiller has come to the rescue to defend Apple's newest tablet entry.

"The iPad is far and away the most successful product in its category. The most affordable product we've made so far was $399 and people were choosing that over those devices," said Schiller in an interview with Reuters.
"And now you can get a device that's even more affordable at $329 in this great new form, and I think a lot of customers are going to be very excited about that.”
Schiller believes that the $130 price premium over some competing tablets is worth it, and that the iPad mini will sell on its merits alone, not needing to compete on price. Apple points to the fact that the iPad mini is lighter, thinner, and has better built quality than the plastic-clad competition. And of course, Apple also points to 275,000 tablet-specific apps for the iPad platform versus a plethora of "stretched phone apps" for Android devices.
So, will customers buy into Apple's strategy?

Source: Reuters

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RE: No reasonable justification
By Insurgence on 10/24/2012 3:53:57 PM , Rating: 5
The companies releasing the tablets for different marketing reasons. Amazon does it exlusively to sell their content. Same thing with B&N. Microsoft does it to make money off of their OS. Google does it for data collection, that and provide a benchmark for the Android Platform. Apple sells things to milk customers of as much money as they can for everything they sell.

so the best comparison would be comparable tablets from a company like Motorola or Samsung who are not trying to make a profit off of something else, but rather make a profit off of the product as it is sold.

RE: No reasonable justification
By augiem on 10/24/2012 4:15:45 PM , Rating: 2
Spot on. But nobody seems to / wants to see it like this. They think $199-$250 is the new standard price for entry level tablets and that no tablet with similar specs should be priced any higher or its a rip off. Ultimately, to the consumer that may be the case, but the reality is that this loss leader scheme of selling tablets is still an experiment only being done by 2 companies out of dozens.

RE: No reasonable justification
By MadMan007 on 10/24/2012 4:48:19 PM , Rating: 5
The point is not invalid, but it also requires details that ultimately don't matter to the consumer. You can get a 7" tablet for ~$200. Full stop. 'Why' doesn't matter, but speaking of it, Apple could in theory do this as well, after all Apple devices are quite locked down and locked into iTunes. It would just kill their margins.

RE: No reasonable justification
By Mint on 10/25/2012 7:02:45 AM , Rating: 2
Well said.

However, you can't dupe customers forever. Apple's margins will fall now that there are better products at lower prices and things like OS and ecosystem have approached parity. They earned hundreds of billions with their first mover advantage on a few killer products, but now it's time for price reductions for the consumer.

RE: No reasonable justification
By augiem on 10/24/2012 4:17:17 PM , Rating: 3
It's akin to everyone looking at all the free "fremium" games out there and thinking that $0 is the new price for video games and that anyone charging more is ripping people off, even when those other games aren't built around the in-app-purchase scheme. Shallow thinking.

RE: No reasonable justification
By Bubbacub on 10/24/2012 6:13:39 PM , Rating: 2
but freemium games are crap compared to proper ones

however, the nexus 7 is better than 90% of the competition that is also higher priced.

it doesnt matter why - if you going to make a tablet then you have to compete against the nexus 7 price tag.

if a company cant compete and make money then they should get out of the tablet business

RE: No reasonable justification
By GulWestfale on 10/24/2012 10:10:14 PM , Rating: 2
so this thing essentially packs the same specs as a $150 playbook, but with a slightly larger screen? how dumb does apple think we are?

RE: No reasonable justification
By ritualm on 10/25/2012 3:50:51 AM , Rating: 3
Apple is betting on you buying it, all the while complaining how worthless it is versus the competition. In other words, dumber than you think you can possibly be.

RE: No reasonable justification
By augiem on 10/25/2012 3:36:22 AM , Rating: 2
it doesnt matter why - if you going to make a tablet then you have to compete against the nexus 7 price tag.

It's just not the case. Apple has never competed with the low-ball price tags of desktops, laptops, phones, or tablets. They just don't have to. Not everyone buys the cheapest thing out there, it's just that simple. Losing money on the initial sale only to make it up later in secondary purchases has been tried countless times before in many industries and rarely does it stick because the companies taking the losses can't do so forever.

Apple's sales certainly aren't being crushed by Amazon/Google. Apple doesn't have to cut its price until that happens, if ever. That's the free market. An item is worth as much as people are willing to pay for it, and at this time, that price is of Apple's choosing.

RE: No reasonable justification
By augiem on 10/25/2012 4:23:58 AM , Rating: 2
The most obvious successful story of this model (besides the razor blades) would be the game consoles. But consoles were dealing with licensing fees and royalties on ~$60 games. At an average of $1 for an app, making significant revenue with this scheme is going to be a lot harder. So far Amazon's doing okay. I haven't heard any reports on the Nexus 7's sell through rate on media though.

RE: No reasonable justification
By Freakie on 10/25/2012 12:47:36 AM , Rating: 2
Ermm... No. Apple makes a device and it makes all the services around it. From iTunes, to iCloud, to iBooks and the AppStore, everything about an iDevice is about Apple selling their services on top of their hardware. Apple could lower their profit margin a LOT on their devices and still profit off of every device because just like the Kindle, every iDevice is built around you buying more Apple products and products that Apple gets a cut of.

RE: No reasonable justification
By augiem on 10/25/2012 3:31:15 AM , Rating: 2
Take a look at Apple's annual report. Last I looked, they made about $1.4 billion in revenue from iTunes and all app sales. Their hardware sales made up almost the entire revenue and profit for the company. Apple is not going to cut their bread and butter just to fight Kindle and Nexus 7 when they're not doing much damage to its sales.

RE: No reasonable justification
By Insurgence on 10/25/2012 12:54:56 PM , Rating: 2
Actually Freakie, yes, Apple could do that, but they choose not to. So because of the way they choose to market their product, it is better compared to companies such as Motorola and Samsung. That does not mean that your opinion of the iPad Mini has to change. Personally I hate the specs for the premium price they are charging, but I still compare it to Motorola and Samsungs products, not Googles or Amazons.

But Like Augiem said, Apples Revenue is hardware based. Their hardware Q2 of 2012, Apple Generated $1.9 Billion in revenue from Itunes while total Q2 Revenue was $35 Billion. If I had a big gap like that between to products, I would aim to make money off of the more profitable one, not sell it at cost.

So with Apples primary products being hardware, it is still a better comparison to compare it to Samsung or Motorola, because once again, they are trying to make a profit off of the hardware they produce, not another product whose use is encouraged by the hardware. Google is making money off of their Data Collection, largely through the linked google services that are default to the devices, or through the selling or digital products through the play platform. Amazon and B&N are selling their products to sell their digital distribution platforms, although B&N has to sell more cost effective hardware or Amazon will smite them.

RE: No reasonable justification
By augiem on 10/25/2012 1:18:26 PM , Rating: 2
Their hardware Q2 of 2012, Apple Generated $1.9 Billion in revenue from Itunes

Wow, it has gone up a lot if that's just Q2. But I'm sure their hardware revenue has gone up a lot too.

I think in the long, long term hardware will become irrelevant as the cloud takes over more and more. At the point you can access your online world from anything like a tablet, kiosk, mirror, car dash, etc. hardware will start losing its value, especially as more and more things do actual processing on the server side as bandwidth increases. Hardware will become a dumb terminal for the cloud. That's Google's long-term plan -- to get you locked into their online eco system for entertainment, business, banking, communication, etc. But that future is still at least 10 years off.

RE: No reasonable justification
By Insurgence on 10/25/2012 1:38:44 PM , Rating: 2
Just to be clear since I screwed up that sentence. They generated 1.9 Billion in Q2 of 2012 from iTunes, while it was 35 Billion Net Revenue for the same quarter. I really should have reread what I typed.

But yeah, that is still a hefty chunk of change and a pretty decent growth.

"Death Is Very Likely The Single Best Invention Of Life" -- Steve Jobs

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