Why Apple's Dropping its Pants With New iPad Price

Rich Tehrani : Communications and Technology Blog - Tehrani.com
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Why Apple's Dropping its Pants With New iPad Price

This new device is a dramatic departure for the company... Here's why

apple-ipad.png

If you look at the innovations of the iPad over the years, the device has gotten significantly more powerful as well as lighter with each iteration. The company pioneered a Smart Cover and a Smart Keyboard and even launched a pencil - although, they didn't pioneer that... In fact it was avoiding the use of a stylus that got the company to where it is today... Ironically.

Prices too increased with better processors and more functionality. The first iPad with 16 GB cost $499 or $548 in 2016 dollars. The largest iPad Pro at 12.9 inches starts at $799.

The question you might be asking is why is Apple now dramatically lowering its price on its new iPad to $329? This is the same price it used to charge for the iPad Mini and $70 less than the iPad Air 2 which it replaces. For less money, you get a better processor, the A9, also contained in the iPhone 7.

Here are the reasons:

  1. Phones are getting bigger, making a tablet less important to have. Many people just can't justify having an expensive iPad when a large phone is just about big enough for their full-time computing use.
  2. Chromebooks are taking the coveted spot in the education market and entry-level PCs aren't doing to poorly either as they start around the same price of about $200. the iPad has been overpriced - especially when compared to Android tablets. It's tougher for schools to justify the extra cost.
  3. Service Revenue continues to increase and growing the size of the ecosystem means more money over time. Yes, Apple is finally realizing it can discount the razor and make money from the blades.
  4. Nothing to lose - really, the company sees so few relative dollars (see below chart from Business Insider) from the iPad - why not try lowering the price to gain share?
ipad-share-of-apple-revenue.png

As Ars Technica points out, this device is not only cheaper, in many ways it is inferior to the device it replaces. The LCD is no longer laminated to the front glass, as it is in all iPad Pros, the Air 2, and the Mini 4. Some repair advocates will like this, but the air gap between the glass and screen can noticeably affect contrast and color. The tablet also lacks the anti-glare coating that the Air 2, the Mini 4, and both iPad Pros have. This tablet is definitely an offshoot of the original iPad Air design, while the 9.7-inch iPad Pro has more in common with the Air 2. Oh, and it's heavier, something we aren't used to coming from Cupertino.

apple-ipad-2.png

This new, lower cost device with inferior features shows Apple has decided that being the super-premium brand means less than market share. It's a continuation of the company's strategy to go downmarket with the iPhone SE. Both devices will allow faster growth in developing countries as well as low income customers everywhere. But the new iPad is the same size as the device it replaces, with a superior processor, at a lower cost, which is a big deal.

We are happy with the move - we think Apple did the right thing and we argued in 2012, Apple simply cannot afford to be absent from any sectors of the market which consumers want. At the time we were talking about Apple making larger phones but now that they have - competing across the spectrum of consumer electronics makes more and more sense... Especially when you consider the value of services to the future of Apple's profitability.


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