Apple exec Phil Schiller defends $329 entry price of iPad mini - Page 6

Apple isn't charging a premium.  The iPad mini is allegedly one of Apple's lowest margin products.  The reality is that Google and Amazon are selling at cost or at a loss to get a user base and they make money other ways (search and content).  That isn't Apple's business model.  Apple makes good products and sells them for a fair price.  

 

Wasn't it just 2.5 years ago when everyone was hoping for Apple to release an 8-10 inch mobile device under $1000? Apple shocked the world with an entry price of $499.  Fast forward 2.5 years.... Apple delivers an almost 8 inch device at $329 and everyone is bitching?  What gives?

The pricing on the iPod isn't the reason.  Duh....its the cost to build it.  Obviously it costs more to build an 8 inch device than a 4 inch device.  There is more metal, more battery, more glass.  My guess is that there is less margin on the iPad mini than the iPod Touch (although maybe the higher res screen makes up the difference).  What do you want to bet that the margins on the iPad mini and the iPod touch are pretty close to the same.

 

No matter what people say or think, Apple has to pick some profit margin.  Why wouldn't they optimize their profit margin?  Wouldn't it be stupid not to?  Also, they are sitting on more like a $100 billion in cash equivalents, not $14 billion.  And the reason they have this kind of money is not from overcharging.  You make that kind of money by selling a product that people want at a price they can afford.  Apple's profits come from efficient manufacturing.  Apple manufactures better products more cheaply than its competitors.  Some of that value is passed on to customers (which is why they sell so many devices), but most of it is captured by Apple, which is why they have 100 billion in the bank.    

No need for that. 

Apple's intent was obviously not to compete with the Fire or Nexus 7.  I was waiting for this product to come out but as soon as I saw the price tag, I ordered my Kindle Fire.  If it grows up to replace my laptop than I might consider it over that, but I am not going to spend that much $ on a consumption device.  They could have done $249 even $299 but $329 is ridiculous. 

Well, have fun with your Kindle Fire. 

 

Though, I have to admit that I find it strange that somebody would make the effort to sign up to a forum in order to announce that they're not going to buy a certain product. But to each his own. Whatever floats your boat.

 

As for me, I'm not going to buy a Kindle Fire, it's simply too cheap, and I am offended by cheap products that don't offer what I'm looking for, but I doubt that I'm going to make the effort to sign up to some Kindle forum and state my case. 

 

Also the Nexus 7 is 1280x800 so even better.

 

The Nexus isn't a bad tablet at all but I'd much rather have the mini.

Edited by nht - 10/25/12 at 1:53am

That's a study I'm sure doesn't exist and has nothing to do with my point

Extremely likely this happened.

One can debate about the fact whether the iPad mini is really 100$ better compared to the cheapest Android tablets.

Maybe for some people it is just xx$ better in specs/build-quality, but no one can't deny it is better.

 

 

I don't get the whole fuzz about this small amount of money.

Let us put things in perspective.

 

Compare it historically:

In the 80's and 90's my father spent 3000 dollars on a MacPlus, I spent over 250$ on a a top-end Aiwa Walkman (in the 80's and 90's price!!).

People forget at what price we get our toys these days. 

 

1) If people pay it it isn't too high is kind of the way the free market goes.  I price something at X and people DON'T buy it in droves, I clearly screwed something up.  Drop the price to X-50 and look at them fly off the shelves.  Apple already has a good idea what price points people will accept thanks to all their other lines of devices and I won't be surprised at all to hear 10 or 12M iPad Minis this holiday season, provided they can maintain production.

 

2) When Phil did that he cut away menus and only showed the actual content.  How is taking away menu bars that block screen space when trying to show how much of content you can actually view in a browser not accurate?  These comparisons aren't done w/an alternate browser on the otehr device or with different settings, it's done stock.  Most people run their devices stock, something a lot of tech geeks find scary and revolting, but it's true.  A lot of folks don't know any better and if they get frustrated just end up getting rid of the device or it goes in a drawer and never emerges until a garage sale.  I don't see how that comparison was flawed at all.

I bought the Samsung Galaxy Tab 7.7" when it first came out and that cost me 500. It's all in the eye of the consumer, it's up to he/she to find value in it. I think 330 isn't bad at all for the quality you get. I do have to say I use my Nook Tablet a lot more. Not that I'm comparing iOS to the Nooks OS or Android, I just own a ton of content for the Nook, mostly O'reilly books, Magazines and Comics for my son.

The only thing that still really bothers me about the iPad is the lack of MiniSD and a filemanager.

I just played with a Nexus 7 a couple of days ago, not to shabby for 250. I was expecting something on the cheap side but it's well built, feel's solid and very responsive. I personally wouldn't want one but Google is defiantly doing things right with their hardware. Their new Chromebook ARM for instance at 250 is quite the deal, even the Nexus phone at 350.

I love the size of the iPad Mini, it hit's that sweet spot for me.

 

We see this argument a lot, and it has a certain appeal and plausibility, it even seems a model of rationality. However it's not only flawed, but is completely at odds with the way people perceive and react to these costs. First of all, it's not at all necessarily the case that someone who is able to afford a smartphone and contract can also afford "$300 for an iPad for their kid." Secondly, people perceive these costs entirely differently when they are incurred over time vs. when they have to be paid all at once. The overall cost is not nearly as important as the immediate cost when cash flow is an issue. Lastly, a smartphone with contract is easily rationalized as a necessity, whereas an iPad for their kid is not.

 

The size difference will alter the experience. What's left to determine is whether it does so in a significant way.

 

But the point was that argument by analogy requires a valid analogy, examples of things with similar relationships to each other. In other words, comparing apples and oranges does not a good analogy make.

Can I ask which specific apps you were looking for. I currently own a iPad 3 and a Samsung 7.7", I really haven't seen any app that I wanted that wasn't available on both platforms. Now there are apps that run better, I like using Photoshop, watching movies, hearing music for instance on the Samsung because it has an SD card and a filemanager. It makes it easier to transfer media, especially photos from my camera. The iPad is great for music recording, mixing and editing and I love, love the acessories like the Alesis iO Dock.

The Xoom 2 is defiantly a well built tablet, my sister has one. Her 5 year old son threw it in the pool and after an overnight stay in a bag of rice it was up and running, it is a little on the expensive side though. I think my biggest problem with Android tablets is the rate at which they release updates for them, horrible.
Edited by Relic - 10/25/12 at 7:14am

 

Your latter part certainly answers some of the apps not available on both platforms.  Here are a few examples just in music creation:

Moog Animoog and Filtatron

Korg iMS-20, iElectribe, iKaossilator

Sunrizer

Peavey AmpKit

Amplitube iRig

Phaedra

DM-1

 

That is only a very small list.  Android still has terrible latency for music production and until that is resolved, you will continue to see nearly all advances in mobile music production ocur on iOS. 

 

 

Also, if you want a file manager on iOS, just jailbreak it.  The Camera connection kit is so hard to pick up to get things from an SD card onto your iPad?

 

PS I'm very curious if we will have a new I/O Dock come out that uses Lightning and packs in upgrades over the original.  I have an iPad 3 and they never released the shim they talekd about for the iPad 3 to fit properly in the I/O Dock, which is the only reason I don't own one yet.  I love the concept and appreciate the capabilities.  Lord know I won't buy the Behringer competition.  Behringer has a bad name when it comes to quality

I for one think the price is too high and am quite disappointed.  I'm sure Apple knows what it's doing and will sell a ton of them, but for me personally?  It's probably going to prevent me from making the decision to buy one.  I was actually looking forward to it, but it doesn't make sense at that price point.  I'll do better to wait and buy a used (current) iPad when the "thinner, lighter" models come out.  Or, if I needed one today, I can get a gently used iPad 2 for the same price.  

 

I would have felt differently if the price was $299.  I still would have liked a WI-FI only version at $249 or $279.  $299 would cause me to think twice, but I still would have pulled the trigger.  But $329 for a tablet that has half the memory of my new iPhone 5?  I don't think so.   I would really be using it as an e-reader and for light browsing.   And for that kind of cheddar, I'll just use my phone, which actually has LTE.  

You are comparing a $329 device to a device that costs $749. 

 

$749 is how much an iPhone 5 32GB costs off contract. You may have paid $299 if you are on contract and get the phone subsidized, but by the time your 2 year contract is up, you'll end up paying for it in the end anyhow.

First, I signed up for this forum on an old email I no longer use. Not that that is really relevant; but to calm your fears - no I am not a shill for Amazon.  I have owned a Macbook white (2008), and iPod Classic (Before it was called that) and iPad 2 (which I gave to my GF) and currently own an iPhone 4, an iMac (2010) which is having HD issues and a Macbook Air which is having issues with the volume and brightness buttons.  I love Apple's products but honestly I was disappointed with the iPhone 5 - it's lighter and a bit faster but other than that it's nothing I would give up my 4 to get, but it's a great product if you are moving from the 3.  However, I was extremely disappointed with the price of the mini; I wanted to purchase one for myself and my niece for whom the regular iPad is still a bit too big.  I also saw the build price and the only thing one can point to for the exorbitant cost is Apple's GREED.  They could have easily sold it for $249, $259 but opted to side with GREED.  For a product that is essentially a consumptive device, that is too much.  And the Fire is a fine product.  I am not a fanboy nor do I possess a Napoleonic complex to have to have the most expensive items and I am sure the iPad mini is a great product; but it's just not worth $329 to me.  The Fire does enough and Amazon has enough of an eco-system for my needs.  

Rather simplistic analysis

 

The media's not big on complicated answers.

That's fair enough, if you truly believe that the price of $329 is not worth it you, then I can understand that. If your main usage for a tablet will be to view some movies, maybe read a book and do some surfing, then the Amazon Kindle will probably work out ok for you. Keep in mind that it is more sluggish than the iPad and you are more limited in what you will be able to do with it, and if you can live with that, then all is good.

 

I disagree that Apple is greedy though. Amazon and Apple have two very different business plans, and I don't believe that it is smart to sell items at cost or at a loss. Regardless of which tablet you buy, good luck with it!

I'm wasn't so disappointed with the $329 price tag as I was the $100 up charge for only 16 more gigs of ram. Apple is charging $6.25 a gig for storage for these devices and with the price of solid state drives now down to $1 per gig paying six times that is tough to swallow. I realize that flash memory can cost more based on quality but it's nowhere near $6 a gig.

 

I suppose the margins aren't good enough for the hardware so they're making up the cost in storage especially when you figure that that at the prices Apple is charging 1/3 of the cost of the mini is storage. I don't believe that but that's how the math works out.

Off subject a bit but does anyone know what time (PST) they will be available to preorder? I think I am just going with the 16 GB with cellular.

Would like to know too. :)

From several months ago. Costs are likely even lower now:

 

 

"The early verdict, shared exclusively withAllThingsD, is that the low-end eight gigabyte model of the Nexus 7, which sells for $199, costs $151.75 to build.

The higher-end 16GB model, which sells for $249, costs $159.25, the difference being the cost of the memory chips inside.

Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model (Note: which Google themselves generally stated) and will turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

http://allthingsd.com/20120711/googles-nexus-7-costs-152-to-make-ihs-isuppli-teardown-finds/

Someone even earlier did a build estimate that showed Google's costs to be 20% higher than that, showing they were losing money on it, but they didn't actually tear down a Nexus7.  Instead they guessed what hardware was used, unlike iSuppli which used a shipping device. 

 

 

 

This goes right along with my post above except Apple is making double the amount on memory than Google. This is the biggest disappointment for me as a 16 gig model doesn't have the storage I need. Paying a $100 premium for an upgrade that cost Apple less than $10 (approx.) is disheartening and a big turn-off.

 

Honestly, if there were other options out there that had the build quality of the ipad I would spend my money there but Apple knows they have that market segment and are stiffing their customers by charging a premium for a minor upgrade. These are the things that Apple haters love to point out.

 

Apple's stock has dropped consistently since the announcement on Tuesday and it's down today. I agree with a lot of people (and obviously a lot of investors) that if they would have hit a $299 price point they would have been in a better position to make more money just in the market alone.

I think that the majority interested in this market segment would agree with you.  And I'm one of those that is starting to doubt Apple's pricing strategy.  I'm a fairly long time user, purchaser and investor.  $299 for 16 GB and $399 for 32 GB would keep out competition better while still keeping profit margins healthy (especially for sales of the 32 GB model).  But I think that Apple's problem is that they can't make them fast enough, so why sell it for cheaper?  If they could solve the supply chain (and QA/QC) issues, then they may have offered it at $299.  Just my 2 cents, as I'm not on the board or a rocket surgeon.

 

 

There has been some flack about Schiller stating the 7.9 screen is really 8. Visually, you cannot realistically tell apart 7.9 from 8. But you sure can from 7.9 to 7.

 

Me personally, it's all about quality. The Chromebooks are really well built for the price, not only at that but the OS is very responsive and battery is good. I guess it all comes down to taste, most Netbook's though I find to be mostly junk.

Even the latest Chromebook is reported to be a bit laggy under load, tho a significant improvement over the first efforts. IMHO I think it's a great idea and worth pursuing, but just not wrapped in the right package yet.