Why does the iPad 2 cost $100 less than the first iPad?
webilemind.posterous.com
An opinion article about the peculiar action by Apple to sell the iPad 2 for $100 less than the first one.
webilemind.posterous.com
While I have an issue with the walled-garden that is the iOS ecosystem, I don't see any compelling reasons to spend more to get less polish and functionality. I don't plan on buying a tablet, but if I was, I'd get the iPad 2.
Unless the competition can provide a similar quality product a lower price than the iPad, I just don't see it being worth my money.
From 2004-2008 the Digital Audio Player market was synonymous with iPod. Apple had and still has ~80% market share. Even now can you name one credible Android device that competes in that market?
Android has made excellent inroads in the mobile phone space because it is free, carriers need a strategic answer to iPhone, and have subsidy power to shift market share.
It seems to me that in the tablet market, where consumers bear the full price of the device, that the dynamic will be more like that of the iPod than iPhone. I wouldn't be surprised to see Apple have 70-80% of the market long term.
I can only speak for myself, but any device that runs Spotify meets my needs perfectly. This includes all contemporary Android devices (and probably all contemporary iOS devices as well).
So, while the Android devices I'm speaking of don't directly compete against the iPod, for me iPod and iPod-like devices are uninteresting.
I know that until quite recently, in the U.S. Apple had an exclusive deal with AT&T for the iPhone. Apple was not similarly locked down in other markets.
Does Android have similar success in the UK and France where the iPhone is available on multiple carriers?
I think Android will be strong on tablets, but they are not today.
If Apple builds the iPad brand with premium apps that people buy, users will have the same inertia on the iPad that windows users have with Windows: I don't want to re-buy all my apps just to get the "also-ran" model from <insert tablet maker here>.
I believe that's the reason why Apple is touting Garageband and iMovie on the iPad. Apple is hoping that people stick around because of the software.
Imagine if your broadband provider forced you to spend at least $600 dollars on a laptop every two years. You could spend a bit more and so get a $1000 dollar laptop for "only" $400 dollars, or you could get a $600 laptop for "free", and laptops below $600 dollars simply wouldn't make sense, and neither would sticking with your current device (note you're only allowed to connect one device at time, two devices need two broadband connections). You'd be throwing away money in that scenario since they'd still charge you the $600 dollars over your contract term and it would make complete sense for you as an individual to upgrade each time to another high-end machine (even though Europeans would be completely baffled by your collective behaviour and your insistence that mid-range Acer and Asus machines are "free" and therefore "worthless" since they buy their computers and broadband connections separately, or at least if bundled they get an appropriate discount for buying less expensive machines).
In that kind of distorted market I can imagine Apple doing quite well, since their competitors would be forced to compete on their mid-to-high-end terms, on their home turf, in a market quite unlike that of other nations.
So Apple understood the market conditions and adapted to them ? More power to them.
But that wasn't my point.
My point was that people within the U.S. bubble seem to recognize on some level that they've got a weird market dynamic for smartphones. But they seem to think that this has only helped Android ("because it's free"), and hindered Apple.
Which seems a bit odd to me, as outlined in my first post. I think people who are outside the bubble can understand this better since a) Android is doing well outside the bubble too, so we don't need to look for crazy excuses to explain this "anomaly" b) we have a better grasp on the distortions that those in the bubble experience because we have an outside perspective (e.g. Android phones are not actually "free", nor do iPhones cost $200).
From a pure economics perspective, what is called today 'open' and what was called 'IBM compatible' in the 80's, would always win a greater market share in the long term. It's a simple matter of supply & demand.
While the claim that the new iPad is cheaper than its predecessor aims to highlight Apple's pricing strategy, it is not a premise. Even if the iPad 2 was more expensive than the original iPad, it could still be cheap in relation to competitive offerings. It could be sold at a price allowing only for small profit margins without economies of scale. His premise is that it is.
This is a premise and it's also incorrect.
The iPad is being sold at the same price as the previous offering. They haven't adjusted their pricing strategy.