Memo to iPad mimics: No one wants a $799 knockoff
You can't beat Apple at being Apple
Open...and Shut There's a growing list of would-be iPad killers born each month, but none yet to grok the central message that made Android beat the iPhone: cheapness.
Motorola and others may have all sorts of reasons for why their tablets are superior to Apple's iPad, but until the price tag is significantly lower, their devices are going to sit on the shelves as museum pieces. Motorola's mobility head, Sanja Jha, articulates a bevy of reasons for why the Xoom tablet is worth its $799 price, the primary one being "our ability to deliver 50Mb/s [will] justify the $799 price point."
But he's wrong. For one thing, though the Xoom comes with Verizon's lightning-fast 4G network access, "Verizon's new 4G LTE network is so fast that you can use up your entire 5GB, $50 monthly allotment in 32 minutes," as PC Mag's Sascha Segan found. So forget the cost of the device for a minute: once a consumer actually starts tapping into the power of the Xoom and its network, the consumer is going to be paying through the nose in data overage charges. Ouch.
But there's a bigger reason few consumers are going to be willing to pay the same price for a Xoom (or any other tablet) as they would for an iPad: it's not an iPad. The default brand that consumers associate with tablets is Apple. That's where the cachet is. So long as its a Motorola Xoom, a RIM PlayBook, etc., it's got to be cheaper or it's not going to sell. (The only possible exception to this is Android-based devices, because Android has a great brand all its own, but even Android is ultimately successful because it's cheaper. More on that below). There really isn't any good way around this, either.
Research in Motion's co-CEO Jim Balsillie spent his Mobile World Congress panel address talking up how great RIM's new PlayBook is for the wireless carriers. That may be true, but consumers are the ones who ultimately buy tablets. It's telling that even with its success selling Android-based smartphones for years, Verizon ultimately cut a deal with Apple to distribute the iPhone. What consumers want, the wireless companies will give. Of course, there's always the less price sensitive route of the enterprise market.
Mike Elgan argues that HP's TouchPad is doomed if it competes head-to-head with Android tablets and the iPad, because there are few apps written for WebOS, its Linux-based operating system. This is almost certainly true, and Elgan follows it up with the suggestion that HP could do an end-run around this app void (and overcome its likely price parity with the iPad) by focusing on the business user, not the consumer.
There's just one problem with this argument: the business market is the consumer market, at least for now. Consumers are bringing their iOS and Android devices to work with them, and enterprise IT is having to live with it. HP isn't going to be able to change this trend. So a price war is in the cards, but guess who can afford to win that war? Apple. With the most volume, and due to its direct-to-consumer retail model, as Jason Hiner speculates, Apple can maintain a healthy margin while setting the price of its iPad lower than other tablet rivals.
Whether it will is a different story, of course. The average selling price (ASP) of Apple's iPhone has actually increased since Android hit the market. In part this is because Apple and Google really compete in two different markets or, at least, compete very differently in the same market.
Apple is all about margin, which means maintaining a healthy price premium for its products. Google Android is all about market share, which means keeping prices low and volume high.
Can Motorola, RIM, HP, or others compete with this? Not based on what they've shown so far. In the long term, I suspect we'll see Android dominate the tablet market even as it now does the smartphone market. People are discovering that tablets really don't do many things particularly well, and hence can't justify a hefty price tag. For this majority crowd, prices will continue to fall, and Android is likely to win.
So long as RIM et al keep their prices high in the hopes of competing with Apple's iPad at the high end of the market, this is virtually guaranteed. No one beats Apple at being Apple. The best bet for the iPad also-rans, then, is to run a different race, aiming for mass market appeal….with much lower price tags.
Matt Asay is senior vice president of business development at Strobe, a startup that offers an open source framework for building mobile apps. He was formerly chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfreso's general manager for the Americas and vice president of business development, and he helped put Novell on its open-source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears twice a week on The Register.
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