Today Apple announced 2 new iPads. The iPad with Retina display and the iPad mini. Let’s check out the effect the mini will have on the Tablet market.
Whether you love or hate Apple, you’ve got to admit that they’ve done a great job of managing their brand. In the 3 categories where Apple is strongest; that would be computers, phones and tablets, their devices are seen as premium products and generally command the highest prices. Take tablets for example. Until the announcement of the iPad mini, at $429, the iPad 2 was Apple’s cheapest tablet. Looking around, there aren’t a lot of 10” Android tablets that cost more than $429. Most of the 10” Android tablet action happens around $349.
A year ago, I was having a conversation about Android tablets and said that Apple could destroy the market for Android tablets by lowering the the price of the iPad. In order to compete Android makers have to make tablets with similar hardware yet with lower price points. The problem is that each Android tablets maker can’t sell their tablets in the same numbers of iPads so they can’t get the same economies of scale.
Of course, Apple isn’t that interested in lower end of the market. Sure, if the mini were to cost $199, it would have a good shot of being the most popular device of all time. The thing is that most of their devices all cost more than their competitors. Bringing ‘cheap’ devices to the market could be damaging to Apple’s brand. After all, while it’s easy to lower prices, it’s much harder to raise them.
Another thing to consider is that pricing the Mini too low would trigger a bloody price war which would ultimately hurt everyone who isn’t a consumer. Still, I do think that tablet prices still have a ways to go. Going forward, each generation of hardware is going to bring diminishing returns. That means you won’t have to buy a cutting edge tablet to get a good experience. My guess is that Amazon, which is currently selling the Kindle Fire HD for around cost, will lead the way. Maybe they’ll bring out a Kindle Fire HD with offers for $49 as long as promise to shop only at Amazon and name your first born “Jeff”.
So in that sense, the iPad mini is priced about right. When I think of 7” Android tablets, I’m guessing the most popular one is the Amazon Kindle Fire HD followed by maybe the Samsung Galaxy Tab 2 and then probably the Google Nexus 7. If I’m wrong about the order feel free to correct me. The Fire HD is $199 while a 16GB Nexus 7 is $279 (32GB Nexus is $299) with the Tab 2 somewhere in-between. That makes the Mini about $70-130 more this competition.
They’ve got comparable specs to the Mini. The Mini’s display is bigger but has lower resolution. Their processors’ performance are in the same ballpark, etc.
All else being equal, the biggest factor in determining the a tablets price (besides it’s brand, people will pay more for Apple and to a lesser extend Samsung) is it’s screen size. The iPad mini’s screen measures 7.9” so it’s a bit bigger than the competition. Since the iPad 2 is around 2” bigger, let’s just say each inch adds about $50 in value. That means $50 of the $70-130 difference is from the screen size. Ignoring other factors, that means the Apple logo costs $20-80 for the mini.
Assuming you’re not pro-Android, I could see a lot of people willing to pay an extra $20 for the logo. As for $80, it’s a little murkier. The 16GB Nexus and Tab 2 may need a slight price reduction but only by $20 or $30. On the other hand, the Fire HD will do just fine at $199.
The real story here is what the iPad mini will do to sales of the iPad 2 and iPad with Retina display.
A while back, I wrote about how tablets are mainly used for consuming media. However, since then I’ve changed my mind, smaller 7” class tablets are great for consuming media while larger ones can be useful for productivity.
This really helps segment the market, you pay more if you want to do more with your tablet. So, while I’m sure the mini will cannibalize some of it’s bigger brother’s sales, it probably won’t be an extremely high percentage.
It’s also what keeps it from competing with many 10” Android tablets like Galaxy Tab 2 10.1. They’re priced similarly but their screen sizes are too different.
As for upcoming ARM powered Windows Tablets it's really hard to say what effect the Mini will have on them. While I'm sure the mini will steal some sales I'm not sure what effect Windows will have on the market. Personally, I have a hard time understanding on they'll be successful but at the same time I'd love for Microsoft to prove me wrong.
When I first started writing this, I was going to talk about how the iPad mini was going to ruin the Android tablet market but as I was writing this, it made me realize that all it does it maintain the status quo. Thermonuclear war, averted.
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