Apple
iPad - A Device Ahead of its Time?
Why You Should Wait Before Buying any
Tablet Device
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This 'modern' tablet
actually dates back to 2002, and was based on Windows XP
Tablet PC software.
Chances are you've never seen the device or heard of the
OS. Moral of the
story - tablets are neither new nor guaranteed successes.
Part 1 of a 2 part article on
why you should wait to buy an iPad.
Part 2 here. |
Apple describes the iPad as
'their most advanced technology in a magical and revolutionary
device'. Now look up at the eight year old image above.
Other than the Apple hype, what is truly magical or
revolutionary?
Maybe - indeed, quite possibly,
Apple's hype is all it takes to guarantee the success of the
iPad. But, even so, don't rush to buy one of the first
models. You'll be getting a dead end, under featured and
over priced unit that will almost surely drop in price and
improve in features in the reasonably near future.
Plus, a plethora of soon to
appear competing devices means the truth is changing daily in
this product category, and the longer you wait to buy a unit,
the better the choices you'll have open to you.
Do You Have a Reason to Buy an
iPad Yet?
Some of us are compulsive
'must have' early adopters of all new gadgets that come out,
whether we have a need for them or not. It seems very
likely that many of the iPad sales over its launch weekend went
to such people - in particular the huge number of iPads pre-sold
to people who ordered them online before they'd ever had a
chance to see or touch or use an iPad anywhere were clearly
buying them on trust or in the hope that they could use them for
something.
Will buyer's remorse set in?
Will iPads slowly make their way to a remote and dark/dusty part
of our houses, become used less and less, and appear for sale on
Craigslist and eBay at heavily discounted prices?
Or will the now large market
of initial iPad users provide the test bed for developers to
experiment with new types of applications and uses for the iPad,
and will some new 'must have' applications for the iPad appear,
transforming it from its present rather precarious role as 'sexy
gadget' to a sounder based value proposition for 'normal' people
to buy?
Why not wait for the answers
to these questions before buying a unit yourself?
Of course, if you do have a
clear need for an iPad today, sufficient to justify its purchase
today, then of course you should buy one today.
But if you're not yet sure
about what you'd use it for, and how it would fit in with the
other computing devices you already have (laptops, netbooks,
phones, eBook readers, etc), you might be well advised to sit
back and let other people puzzle out the answer to that question
for you.
Read on to see how
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We believe the iPad and its
software is currently too expensive (and likely to drop in
price)
-
The current iPad has some
important weaknesses which the next model series will almost
surely fix
-
iPad competitors are about to
appear everywhere, probably with better price/performance
and value propositions
-
The success and ongoing
market dominance of the iPad is far from certain
For all these reasons,
unless you have a definite need that you are certain the iPad
will solve today, we recommend you wait a while before buying
one.
Is the iPad Too Expensive
If you buy an iPad today,
you'll be asked to pay $499, $599 or $699 for a Wi-Fi model with
16GB, 32GB or 64GB of memory. If you choose to add the 3G
data and GPS option, you'll pay an extra $130, making the price
per unit $629, $729 or $829.
Is this 'too expensive'?
Well, it depends on what value you would get from the iPad, and
what the cost of alternative approaches to solving your need for
an iPad type device might be.
Another way of answering
this question - and a hint about future price moves - might also
be evaluated based on the underlying product cost of making the
device incurred by Apple.
Selling price compared to cost
price
The easiest part of this
equation to answer is the underlying product cost. It
seems that Apple's actual cost to build an iPad is less than
half its selling price.
So, break even prices on the
units could be as low as $250 for an entry level 16GB unit up to
$400 for the 3G/GPS equipped top of the line 64GB unit.
Clearly Apple is getting a great return on each unit it sells,
and - if it chooses to - could drop the selling price.
Taking a very extreme view,
Apple could even sell below cost and still profit in the longer
term, because each iPad opens up a new ongoing revenue stream to
Apple in the form of software, video, music and book sales
through its iTunes stores.
iPad compared to Netbook
pricing
About the closest analogy to
an iPad might possibly be a Netbook at present. Which is
the 'better' unit, and which offers you a better solution to
whatever need you may have for some sort of extra computing
device? And what are the cost differentials?
Certainly, no Netbook can
stand close to an iPad in terms of 'sexy slick design', or small
size and light weight. Ipads even have longer battery life
than most Netbooks.
But whereas an iPad has a
9.7" 1024x768 pixel screen, Netbooks often have a larger and
higher resolution screen. And whereas iPads have up to
128GB of memory that can never be upgraded, Netbooks might have
a 250GB hard drive as standard, with the possibility of being
upgraded to even a 1TB hard drive if that is what you might
want.
An iPad is a 'closed' design
computer - both literally (you can't get inside it, even to
replace the battery), physically (you can't directly access its
storage and load/unload your choices of data files), and
virtually (the only software it runs is that sold through
Apple's iTunes store, and Apple mercilessly restricts what can
be sold, in particular refusing any software to be made
available that competes with Apple's own core software
products). Most Netbooks are open by all three of these
measures.
You can't even connect any
USB devices or SD cards to an iPad, other than through a special
and very restricted Apple interface (and an extra $29 for the
hardware to do so). The USB/SD connectivity is limited to
only transferring still images (not video) from a camera to the
iPad.
A Netbook of course suffers
from none of these limitations. It might also have video
inputs and outputs, digital inputs and outputs, a built in
webcam, and of course a 'real' keyboard. Maybe it also
accepts Ethernet internet connections, and who knows what other
goodies.
As for pricing, Netbook
prices start around $300 and go up from there. If you
choose to get one with some sort of wireless data service, the
downside is you might need to sign a contract with a wireless
provider, but the upside is this might in turn get you a
subsidized purchase price.
There's very little if any
functional advantage of an iPad over a Netbook - possibly even
the reserve; and in terms of cost, an iPad costs 50% to 100%
more than a vaguely similar Netbook. When you take out the
hype and dispassionately consider these issues, it is hard to
justify an iPad for most usual purposes.
Will iPad Prices Drop?
Ipad pricing will surely
drop; the only thing we're not sure about is how soon and by how
much.
It might be instructive to
see what happened with the iPhone pricing. In 2007 when
Apple first started selling its iPhone the price was set at a
ridiculously high $599. Two months later, the price
dropped to $399. the price of the original iPhone dropped
again to $199 a year after its launch.
Nowadays, not quite three
years after the initial phone was released, its successor phone
(the iPhone 3G) is available for a mere $99, and the
latest/greatest and vastly superior iPhone 3GS is priced
starting from $199.
Clearly, early adopters paid
a huge price premium, and for an inferior product, in the case
of the iPhone.
It is possible Apple is
adopting a similar pricing model here. It is also possible
that if the iPad sells very well, Apple will get further
reductions in the cost of making the iPad due to economies of
scale kicking in, making it financially acceptable for Apple to
drop the price and still earn a generous profit on every unit
sold.
Additional pricing pressure
will come from competing tablet devices. Today the iPad is
the first of the newest generation of tablet devices, and so has
the market almost to itself. But this situation will be
short lived. Other major manufacturers are very close to
releasing their own competing tablet devices (eg HP with what
they are referring to as a Slate, based on Windows 7 and thought
to possibly be released in June), as well as many smaller
manufacturers with less market presence and clout.
The company that largely
created the Netbook concept - Asus - is also expected to release
two tablet devices in June - one based on either Google's
Android or Chrome OS, and the other using MS Windows 7.
Some commentators are
predicting over 50 different tablet type devices will be on sale
in time for this year's Christmas season.
In particular, we expect to
see tablet devices powered not only by other 'full sized'
operating systems, ie Windows 7 and Unix, but also by mini-OSes,
analogous to the way that the iPad OS is 99% identical to the
iPhone/iPod Touch OS - the two main competitors here being
Windows Phone 7 and Android.
While Apple has always been
comfortable setting its prices at the high end of the market,
there is a difference between a $50 - $100 premium for an Apple
iPod compared to some other MP3 player (with all features and
related issues being either the same or tilted in Apple's
favor), and a $250+ premium for an iPad compared to some other
type of tablet that might well have better hardware specs as
well as a lower price.
In addition to these factors
above, it seems inevitable and certain that as Apple releases
new versions of the iPad (either on an annual basis or perhaps
more frequently for its first update) that newer iPads will have
better features and the same or lower pricing.
So, yes, iPad pricing will
definitely come down, due to all the reasons mentioned above.
When Will iPad Prices
Drop?
UPDATE Oct 2010 : We
have been surprised by two things. First, the
extraordinary success of the iPad - for almost all the time
until now, there has been a backlog of orders for iPads, and
Apple has been selling them faster than they can make them.
Second, the slowness of other companies to get iPad competitors
to market.
And so Apple would be crazy
to drop the price of a product that it can sell more of than it
can manufacture, and it has held the pricing steady at the
currently inflated levels.
So we're now focusing on
next year - 2011 - as a time when we might see iPad pricing
drop, perhaps when the new model iPads come out, complete with
extra features (ie cameras), and by that time, more of the 23+
other companies that have announced plans to release iPad/tablet
style devices will actually have their products in the
marketplace.
If you can't wait for iPad
and tablet pricing in general to drop, you need to first read
our multi-part series 'A
Buying Guide to iPad and Tablet Devices' that walks you
through all the things you need to know about how to compare and
choose the best of the growing profusion of such devices for
yourself.
For more reasons why you should
wait to buy an iPad, please click on to the second part of
this article.
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Originally published
9 Apr 2010, last update
21 Jul 2020
You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.
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