How Much Should a Tablet Cost?

How much, or how little, should a Tablet cost?

Cheap Tablet

Cheap, Cheaper, Cheapest?

I remember early 2010 before the iPad turned into something more than a longstanding rumor. A lot of people were interested to see what Apple could do to jumpstart a tablet PC industry that to date had only drawn interest from a handful of tech enthusiasts. Sleek design, intuitive features and mass market appeal went a long way, but what blew away a lot of people was the $499 starting price point –and maximum $849 USD. Even the highest price point existed, on par with the projected sale price of the new Motorola Xoom, if you asked someone how much an iPad costs most would say “$500”.

What about the New Guys?

With that in mind, can new devices compete in the consumer market when their starting price points are so much higher than Apple’s? A lot of the excitement surrounding the Xoom was tempered when media found out it would ship at $799, with a WiFi only model available for $600. Ultimately the higher price may not be entirely their fault; it even shows that they’re trying as the Galaxy Tab only manages to get under that magic $500 price point with a contract through a mobile carrier. At that math I often wonder if Nicholas Negroponte, and his “delayed” $75 Tablet will ever get to market. Although it’s an unfair comparison, as One Laptop Per Child (OLPC) has very different intentions in life, but will they not succumb to the same “cost of build” issues?

And it’s not as if Apple takes a hit on profits. I believe Apple likely makes the same amount of profit as Motorola, Samsung, RIM, HP and LG are likely to make with their new tablets. The difference is in the economics of scale, i.e. the identical processor, RAM and screens they use (just to name a few components) will cost Apple less than other manufacturers due to the sheer volume Apple guarantees/commands. Apple have a worldwide brand they can mobilize to sell those products and now that Apple has taken such a commanding lead in the early tablet market they can afford to keep their price points low going forward.

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The cost of components often means that unless a manufacturer plans well in advance, and secure stockpiles of key components, they may struggle to be competitive on price. Apple’s moves in January to invest $3.9 billion in long term contracts for certain components show what a company with so much cash and an existing market so large can afford to do in shoring up its competitive advantage.

Remaining Profitable

The cost of components is always shifting and so too will profit margins for these companies. I haven’t even touched on variable overheads, currency conversion and many other factors. Ultimately I’m hopeful that pricing will not harm companies that aim for innovation in the tablet market. Companies like Motorola and Samsung need to make a profit to stay in business. They cannot afford to cut their margins too thin just to compete with lower priced devices.

As consumers, we need to remain supportive of advanced/alternative technologies, especially if we ever want their prices to drop. Unless those technologies also develop a strong following, other companies will never have the leverage needed to make the same investments as Apple. Granted, the device needs to be justifiable at whatever price – I’d never recommend overspending, and since the global financial crisis not many have that luxury anymore. I do however want a conversation around pricing in the hope of discovering at what price point do certain features seem fair, or unfair.

So how much should a new tablet cost?

I feel that functionality dictates a lot of the cost. An entertainment focused device like the iPad or Galaxy Tab should cost what a reasonable consumer can afford to pay – $500 seems to be the magic number. But, larger, more powerful tablets can and should be able to sell for slightly higher price points. What that number ends up being remains to be seen, but as long as consumer interest is there, hopefully it will remain low enough to be affordable. I’ve never been a supporter of demanding more for less as it often comes with hurried quality control, reduced functionality, poorer distribution and worst of all often compromised after-sales support.

I find it ironic that a Tablet is now promoted with “pen features” as a top-of-the-range device and with a top-of-the-range price tag and yet a Tablet was born out of the desire to replace pen and paper. So it isn’t the demand to reduce functionality which has caused us to see less of what we desire, but the desire to reduce price which has caused us to lose sight of what’s important. It’s a behavior we often suffer for as larger global enterprises are empowered by users buying this way, and smaller perhaps as innovative companies are less heard.

  

Comments

  1. Tshu says

    Interesting points about threats to tablet innovation. One quibble: the appeal of the tablet for me was always that it *digitized* pen and paper (not that it eliminated pen and paper). Keyboard and mouse became optional.

  2. Hugo Ortega @MrMobilePC says

    eliminated, empowered, digitized – I think it all comes back to preferred usage. My goal has always been to empower myself through technology with the goal of being more productive. Your version of digitizing is one very clear wa of achieving this and I hate that price is playing a role in taking that away. If consumers only focus on price we may see these forms of technology become less and less available.

    Thanks for the comment Tshu. Excellent!

  3. Dave_in_MI says

    I’d be willing to pay (later in the year when I actually have the money) in the $700-1100 range for a slate or convertible Win7 (or Linux) tabletPC with a dual core 1.5ghz or better CPU, 2-4GB ram, 64GB SSD (or 500GB HDD in convertible), 10-12″ multi-touch screen w/ pen digitizer, a good set of ports (SD, USB, HMDI, and audio in/out, at least), wifi, 6-10 hour battery (hot-swappable, if possible), and a decent docking station (for the slate). As a writer, webdesigner, and graphic artist, I want a mobile platform that’ll give me the tools to do the bulk of my work not tethered to a desktop.

    As for play, $500 is the most I’d pay for a slate-form media appliance. For half that price, you can get an 7-8″ single-touchscreen (no pen) slate that’ll view pictures & video, play MP3s, read books, surf the web, send email, and let you Skype with your friends.

  4. Hugo Ortega @MrMobilePC says

    Thanks for the comment Dave,

    Do you think HP had it right all those years ago with the TC1100? It sounds like you described a TC1100 – and to me it’s still an amazingly good design. I don’t know what will happen with price but the Win7 version of what youre describing looks like it will be north of that price range. I think you’re being very fair in your feedback though.

    • Dave_in_MI says

      I’m still new to TabletWorld, so the TC1100 is before my time, but as much as people still talk about it, HP must’ve done something right.

  5. Yogh says

    I’m always curious when people talk about Apple’s economies of scale allowing them to have a low price for the iPad. The iPad is still the first version and the price is still the same as when it launched and took the tech world by storm. Did they expect to have economies of scale when they entered a previously niche market? It wouldn’t surprise me if Apple thought their device was so awesome that it would do well enough to support the price, but it would still have been a gamble. Going forward I can definitely see that economies of scale can help Apple with the pricing of the next iPad, but I think more things probably need to be taken into consideration when discussing the introductory prices of the iPad and the price expectations for consumer slates.

    As for what a tablet should cost, as the owner of a top of the line iPad I’ve found that I do use the 3G and 64GBs of storage so I’d be willing to pay the premium for a future top of the line device. Also, as the rumours of the next iPad don’t look like they’ll introduce anything spectacularly new I don’t expect to buy a new one after just a year. Because of this the prices don’t need to be set low enough for me rationalise buying a new device every year, I won’t regardless. I would rather see awesome features than a race for the bottom.

  6. Hugo Ortega @MrMobilePC says

    Thanks VuLN!

    @Yogh: Great commentary mate! About Apple, I can see your standing in reference to my article but more specifically I think the economies of scale relate to Apple as a whole. By the time iPad came around they were already on a winner with iMac, iPods and MacBooks – so with the iPad launch they leveraged the “gamble” off of current profits, but more importantly, I could almost certainly bet they made manufacturers of key components share in the risk and exposure. My take on it is that Apple negotiated the sort of economies of scale base pricing which would relate to the sort of volume they ended up doing; with a penalty clause should they not have hit those targets, and therefore sharing the risk with the whole market. They’re too clever to have taken a gamble on their own; even if they can afford to do so.

    About your comment on the Tablets scene I really like the feedback. It shows perhaps that price is not the only deciding factor, and ultimately I think that’s a strategy many should adopt. I too share the point of view and don’t update due to price, but rather due to feature enhancements. It’s all relative to timing and final cost, but ultimately I don’t think price is as big of a concern as people think. I just hate it when a device as nice as a the Xoom gets announced DOA due to price, and yet Apple might of announced the same unit/price and been applauded.
    Stop the insanity people!!! (This sentence has nothing to do with you Yogh – I’m just venting) LOL!

  7. Brucewilsonpa says

    Amen! (to Hugo’s venting) I find it hard to pick a “price point” because my tastes and desires for these devices have been so skewed by the success of the ipad. Before the ipad I looked at the Thinkpad tablet as “exactly” what I thought I needed — just couldn’t afford the $2k+ for what would have been a 2nd pc. Initially among the anti-ipad crowd (as a longtime anti-Apple geek) I remember watching Steve Jobs when he introduced the ipad (I followed it on a streaming feed) — when he talked about the ipad as a “new experience” and emphasized that no mouse, no stylus, no keyboard was (in his opinion) the goal, I was intrigued — didn’t agree but was intrigued. And I recall a lot of flaming over the announced ipad pricing at that time. Now most of us have smartphones that (w/o the subsidy) cost as much as an ipad (and close to the Xoom), so is $800 for the Xoom really that outrageous — I don’t think so, although I do recognize that it’s pushing (or beyond) the limits for many people in these economically difficult times.

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