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The good and bad of iPad pricing

by Mel Martin Feb 1st 2010 at 8:00PM

I think all of us were surprised at the entry level cost of the new iPad at just US$499.00. In a recent article at ars technica it's stated that the pricing "confirms what a major shift in strategy the iPad is for Apple's business." My colleague Sang Tang also says the evidence is persuasive that the price of the iPad makes it disruptive for competitors.

Could be. I've talked to more than a few people who weren't considering the iPad until they heard that relatively low price point. Of course Apple has stripped the iPad pretty bare: there's no USB, no camera, no SD card, and so on. Certainly some of the Windows 7-based tablet computers will cost more, and they will have more features, but it's still rare that Apple finds itself in a position like this to compete on price.



There's one place where I think Apple has slipped up, and that is the premium charge for 3G access. They're charging 130 bucks for what can't be more than a 20 dollar chip, and from a tactics perspective, I think that's a major mistake. I might be drawn to the cheapest iPad, but if I am traveling for one week and want 3G access, my iPad is just a paperweight. I think it would have been better to have just three different iPad models, starting at $499 and ending at $699.

At that price, people might opt in and out of 3G service, especially since AT&T has allowed you to buy in one month no contract increments. Without the chip built in, people don't have the easy choice.

It appears that the 3G iPad also gives you GPS, but that's hardly an expensive option -- one firm is offering to add GPS to a Bluetooth chip for less than a dollar. Recently it was estimated that the 3G, power management, and GPS chips cost about $16.00 for the iPhone 3GS, so the cost can't be that much more significant for Apple. And of course, iPad owners who have built-in 3G capability would be tempted more than once to get 3G service. I know I would be.

But even with 3G, the iPad is a bargain, at least compared to what it could have cost. It has shaken up the consumer electronics industry, and I'm sure more than one company is looking at price adjustments. We're looking at you, Amazon and Barnes and Noble.

$130 for 3G is a lot to ask, and it would have been nice for Jobs to aim for consolidating a product line, rather than introducing it with six separate models at once. But even with those extra charges, it certainly seems like the iPad's price will definitely shake up the tablet market, and the eReader industry may not be far behind.

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I think all of us were surprised at the entry level cost of the new iPad at just US$499.00. In a recent article at ars technica it's stated...
 

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Jeff

Its greed on Apples part the same way they charge $100 for upgrading from 16gb to 32gb for the flash memory. This actually costs Apple only $25.50 more. And the 64gb flash memory? It's only $76.50 more than the 16gb chip.

http://www.tuaw.com/2010/02/03/that-499-ipad-only-costs-apple-270-wall-street-analyst-is-ela/

February 03 2010 at 11:14 AM Report abuse rate up rate down Reply
Chris

Considering that it is only estimated to cost a wireless provider $1 per 100MB of used 3G network bandwidth, most of these so-called "deals" are huge ripoffs. The $30 for unlimited iPhone bandwidth is more of a gamble for AT&T (they should be losing money for use exceeding 3GB per month). It seems less wise to make the same gamble with a device designed primarily for full-fledged internet use. For all we know, maybe Apple tried to reach a similar deal with Verizon, but had no such luck. It just is a pretty raw deal for a wireless provider to merrily swallow.

February 02 2010 at 11:34 PM Report abuse rate up rate down Reply
blackbird

I had this same reaction to the extra price for teh 3G, until I compared it to the cost of adding 3G to my laptop. Going by what AT&T charges for a USB 3G modem with no contract ($250), this $130 premium for the 3G sounds right. And the data plans are half the cost of a laptop data plan; $35 for 200MB and $60 for unlimited.

February 02 2010 at 8:15 PM Report abuse rate up rate down Reply
A

iPhone w/ netshare +iPhone battery case (very important detail)+ iPad = 3g iPad :-)

February 02 2010 at 12:18 PM Report abuse rate up rate down Reply
frequncydip

The 3G pricing needs work, I already have a AT&T plan with my iPhone, I should be able to add a iPad to that plan for less than $30 for unlimited. Also there needs to be support for multiple iPads what it I want 2 iPads one for home and one for the office, they should be able to use the same plan with a low cost for each additional device. I would love a iPad but with the lack of Camera, USB, SD slot, and multitasking compounded with the complex subscription model I'll wait till version 2.

February 02 2010 at 11:06 AM Report abuse rate up rate down Reply
1 reply to frequncydip's comment
A

If you're waiting for USB and SD you'll be waiting a really long time.

February 02 2010 at 12:20 PM Report abuse rate up rate down Reply
mel martin (TUAW)

My post was about the cost of the 3G add on to what I considered the reasonably priced base iPad. As one can easily find unlocked 3G phones for under 200 dollars, it seems to me that $130 to add the chip is a might high. Since AT&T is the only option now in the U.S., they get the revenue from customers opting for 3G. While the rate is reasonable, it is not much different from their existing data rates for 3G phones. My point is that an extra $130 dollars seems a high price to pay to give AT&T more money, and that more people would be able to give AT&T revenue if all the iPads included the option. Why some of our commenters use inflammatory words like 'stupid' is beyond me, but that's the price of free speech.

Mel
TUAW

February 02 2010 at 10:58 AM Report abuse rate up rate down Reply
Damien

Someone said it perfect in another article.

We were all expecting a higher price point for a more capable device.

What makes this cost more than your 200$ iPod touch? A bigger screen and battery.

February 02 2010 at 9:53 AM Report abuse rate up rate down Reply
1 reply to Damien's comment
aardivark

Why do you think that the bill of materials (i.e. component costs) are the only costs that are incurred in designing, prototyping and building a device like the iPad?

February 02 2010 at 10:23 AM Report abuse rate up rate down Reply
Andrew Conlan

What about tethering your iPad to your iPhone over bluetooth and using it's 3G connection. I know apple probably won't let us do this, though I did put in a feature request :D but I'm sure the hacking community can whip something up

February 02 2010 at 8:07 AM Report abuse rate up rate down Reply
2 replies to Andrew Conlan's comment
A

If you got netshare before it was yanked you're all set!

February 02 2010 at 12:22 PM Report abuse rate up rate down Reply
senecalouck

I don't understand how anyone thinks that Apple and AT&T will allow us to tether our iPhone to a laptop or netbook (like the rest of world has been doing since last summer) but not to this device? Steve wants to get this device out to the masses and AT&T shouldn't care what's connected on the other end of the tether.

February 02 2010 at 6:15 PM Report abuse rate up rate down Reply
Sury

Perhaps the 3G version has a large battery, see the difference or weight of both models in the Apple website (the 3g version has a plastic strip that I think that weight less than aluminum).

February 02 2010 at 4:49 AM Report abuse rate up rate down Reply
Macaholic

Apple has an accesory for an SD card and one for USB and they're about $20 so that's taken care of.
About the "built in chip" you can't have that because a SIM has a serial number and an encrypted hidden serial, these are registered with service providers they belong too. Orange or O2 in the UK won't have access to Rogers or AT&T registrations.

February 02 2010 at 4:31 AM Report abuse rate up rate down Reply
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