We’ve seen some impressive price drops on tablets this year. I’m not just talking about the explosive launch of Amazon’s Kindle Fire, $300 cheaper than the industry-leading iPad. Some of the biggest splashes have been made by tablets that foolishly set their retail prices in iPad territory, when they didn’t have the hardware, software, or supporting ecosystem to compete. The RIM’s Blackberry Playbook (with similar hardware to the Kindle Fire) started at $49, and dropped to $199 in time for Black Friday. And who could forget the plummeting price of the HP TouchPad, dropping a full $400 less than two months after launch. That rock-bottom price sparked a feeding frenzy that launched the TouchPad to the number two tablet slot behind the iPad, despite having been discontinued.
These are amazing deals for consumers, no question. But what we didn’t hear much about at the time was just how much these discounts end up costing the manufacturers. The PlayBook cost RIM some $485 million last quarter, as the struggling smartphone maker tries to build buzz around its first tablet. Success could mean a stronger future for the Canadian company’s handsets as well, so there’s a lot at stake here. So much so that RIM is continuing to push the device, even as the prices and sales fall.
Compared to HP, though, RIM got off light this year. Selling all those TouchPads for bargain-basement prices only cost the company $200 million, but where RIM’s other mobile products kept the company profitable, HP’s WebOS division cost the company a further $3.1 billion this year. Throw in the $1.2 billion HP spent to purchase Palm, the creator of WebOS, and it’s no wonder CEO Meg Whitman can’t seem to make a decision about the future of the company’s mobile OS.
Consumer tablets are a new market. This was the first year we saw any significant attempts at competition to the iPad. And there were some success stories to go with the failures. The Kindle Fire launched with a bang. The Asus Eee Pad Transformer did well enough despite its high price. It started at $399, plus an extra $150 for the keyboard dock, putting it $50 over the cheapest iPad if you wanted that signature accessory. And its even pricier successor ($499 before the keyboard), the Transformer Prime, sold out in pre-orders. But one thing is certain. If you want to compete in this space, consumers demand one of two things. Be great without being more expensive than the iPad or be cheap while still being good enough. Fail to meet either standard, and you are doomed to a future of firesales.
Here, here, says that guy with an iPad2, an iPad, a 6-year-old MacBook, and an iPhone 3GS…