We have gone on record that we don’t do rumor and innuendo here in Gear Diary. How then is it possible that we are writing a post about our opinion that Apple’s supposed upcoming miniature iPad will not cost $199? Simple, this post is not based on any of the rumors swirling about, nor is it based on any supposedly special information we heard from our second cousin’s neighbor’s dry cleaner.
No, this post is purely speculation on our part, and we are okay with that. In fact we are so okay with that, that we are going to put our money where our speculation is. Details are at the end of this post.
We’re so okay with complete speculation that, unlike others who claim to be “in the know”, we are coming clean from the start. This is important because those who claim insider information or early samples, don’t actually know anything more than we did. After all, there is every possibility that whatever information they have been leaked or whatever samples have “escaped” are nothing more than Apple’s attempt at misinformation. They MAY be spot on, but they may also be entirely wrong. None of us will know until Apple actually announces something in the fall. That’s how Apple did things under Steve Jobs, and it is how they will likely continue doing things for the foreseeable future.
All of that noted; on with the post.
A clear shot from $199 to $399 once you discard the iP0d classic
If Apple releases a mini iPad (which is still open to question but we suspect will actually be the case) it will not be priced at $199. No way, no how. Trust us, it will not be $199. If Apple releases a mini iPad, it will come in at $249 or slightly more than that. Why that price? It’s really quite simple –take a look at Apple’s current lineup and that is the price point that actually makes sense. In fact, if we are a look at Apple’s lineup, the $199 price point DOES NOT make any sense at all.
Right now, in order to access the iOS ecosystem, one needs to pay a minimum of $99 and commit to a two-year phone contract (in other words spend far more than $99), or pay a minimum of $199 for an 8 GB iPod touch. To enter into the iPad realm, one needs to spend a minimum of $399. That is a $200 spread into which Apple could add a new product in order to fill the gap, and anywhere in the spread will do.
Apple doesn’t actually need nor would they necessarily want to go down to $199 in order to make a competitive tablet. More on the reason for that in a moment.
First, let’s address the fact that Apple does not want to introduce a miniature iPad at $199; it simply doesn’t make sense. Not only would doing so cut their margins significantly, something Apple is not prone to do, but perhaps more importantly that price would undermine any argument for the 8 GB iPod touch. And even though the touch is not seeing quite the same sales numbers that it had previously, it is still selling, and it remains the least expensive way to enter the world of iOS. The iPod touch remains the iOS device “training wheels” — that is, the device you purchase for a young person, in order to give them access to the ecosystem without having to spend the money for a full tablet or an iPhone. NOT having the iPad-mini at $199 leaves that price available for the iPod touch, without Apple needing to justify the device’s existence.
This way, $199 would remain the price for entry into the iOS ecosystem, and something slightly more would be the price of entry into iPad-territory.
“But”, some will say, “anything other than a $199 iPad won’t compete on price with the Kindle Fire or the Google Nexus 7.”
That is correct, but here’s the thing — it doesn’t have to.
Apple needs to get the price of iPad entry down further than the current $399, but it doesn’t need to be the same price at the Nexus 7 or Kindle Fire. Apple products still carry enough cachet that people will spend the extra $49 (or even a bit more) to get an Apple product over something from another company. In other words, Apple doesn’t need to cut the margins as close as Google did with the Nexus 7 in order to get a product that will sell like hot cakes. Because of that fact, they can easily sell a mini-iPad for $249 or more and still undermine anything that Amazon or Google is trying to do. They could either maintain their impressive margins, or produce something that cuts fewer corners than the other mini-tabs, or Apple could do both.
Don’t believe us? Take a look at laptop prices. Ultrabooks have finally found the sweet spot at about $699. That makes them a good $300 less than the least expensive Apple laptop, and yet Apple is doing just fine in the laptop department. Why? Because it’s Apple and their products sell themselves! And whether or not you actually think their products are better than competitors offerings, people believe they are, and they are willing to pay for them.
In short, Apple can sell a miniature tablet for $249 or $279, and anyone looking to buy a Kindle Fire or a Google tablet at the bargain basement price of $199 will be far more likely to at least consider stretching to spend a bit more to get one of Apple’s offerings. Where budget shoppers are immediately lost to Apple now, they would now be able and willing to go iOS in, we suspect, huge numbers.
So here’s what this pricing does for Apple does. An iPod Touch at $199 gets you into the iOS ecosystem. It may be the same iPod Touch we have seen for the last two years or it may see some upgraded specs. It doesn’t matter, $199 is the price of entry. If, however, someone wants a tablet running iOS one needs to spend a few more dollars and get one. And if, at some point, someone wants a full iPad with all of its functionality one needs to step up to $399 and purchased the iPad 2. So here’s how it spreads out:
iPod touch - $199
Mini iPad - $249-$$279
iPad 2 – $399
Current iPad hardware - $499
It’s logical, it’s appropriate, and we are going to put our money where our post is. If Apple releases an iPad mini at $199, we’ll give one to one of the readers who leaves their thoughts on this post.
(Fine print: The product will have to be called something related to iPad, AND it will need to have a minimum price of $199. If that is the case, then we will award an Apple gift certificates for $199 to one of the commenters in this post in that week’s newsletter. The winner will have one week to contact us to claim their prize.)