

Why does the iPad 2 cost $100 less than the first iPad? - rogerwilco78
http://webilemind.posterous.com/
An opinion article about the peculiar action by Apple to sell the iPad 2 for $100 less than the first one.
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pieter
Wait, what? The iPad 2 costs the same as the original iPad. It differs a bit
in different countries, but that's mostly due to exchange rate differences,
and Apple has always 'corrected' those when releasing product updates.

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Osiris
Surprisingly absent from the entire article is the actual prices for the iPad
and iPad 2 that he's comparing. When I read it I thought the only price
difference could be accounted for with inflation, but I'm fairly sure we
didn't see 20% inflation last year in the electronics market.

~~~
astrodust
He might be Australian and seeing a 20% decrease in price because of exchange
fluctuation.

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Osiris
I've been shocked by the pricing of the iPad competitors that have been
released. The only good ones are more expensive than the iPad unless you buy a
subsidized model that ends up costing a thousand dollars more over a two-year
contract.

While I have an issue with the walled-garden that is the iOS ecosystem, I
don't see any compelling reasons to spend more to get less polish and
functionality. I don't plan on buying a tablet, but if I was, I'd get the iPad
2.

Unless the competition can provide a similar quality product a lower price
than the iPad, I just don't see it being worth my money.

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replicatorblog
I would challenge the notion that Android in aggregate will outsell Apple in
any product category due to its "open" nature.

From 2004-2008 the Digital Audio Player market was synonymous with iPod. Apple
had and still has ~80% market share. Even now can you name one credible
Android device that competes in that market?

Android has made excellent inroads in the mobile phone space because it is
free, carriers need a strategic answer to iPhone, and have subsidy power to
shift market share.

It seems to me that in the tablet market, where consumers bear the full price
of the device, that the dynamic will be more like that of the iPod than
iPhone. I wouldn't be surprised to see Apple have 70-80% of the market long
term.

~~~
ZeroGravitas
It's strange that I've never once heard anyone claim that the weird US phone
networks have given Apple an advantage.

Imagine if your broadband provider forced you to spend at least $600 dollars
on a laptop every two years. You could spend a bit more and so get a $1000
dollar laptop for "only" $400 dollars, or you could get a $600 laptop for
"free", and laptops below $600 dollars simply wouldn't make sense, and neither
would sticking with your current device (note you're only allowed to connect
one device at time, two devices need two broadband connections). You'd be
throwing away money in that scenario since they'd still charge you the $600
dollars over your contract term and it would make complete sense for you as an
individual to upgrade each time to another high-end machine (even though
Europeans would be completely baffled by your collective behaviour and your
insistence that mid-range Acer and Asus machines are "free" and therefore
"worthless" since they buy their computers and broadband connections
separately, or at least if bundled they get an appropriate discount for buying
less expensive machines).

In that kind of distorted market I can imagine Apple doing quite well, since
their competitors would be forced to compete on their mid-to-high-end terms,
on their home turf, in a market quite unlike that of other nations.

~~~
ovi256
You seem to imply that in some pure, completely free phone market Apple would
be priced out. Unfortunately, that market does not exist.

So Apple understood the market conditions and adapted to them ? More power to
them.

~~~
ZeroGravitas
A (relatively) free market for phones _does_ exist globally, and Apple's first
mover advantage (and the profits and marketshare it brings) is being rapidly
diminished in a fairly textbook case of free market competition. I believe Tim
Cook has gone on record about these price pressures.

But that wasn't my point.

My point was that people within the U.S. bubble seem to recognize on some
level that they've got a weird market dynamic for smartphones. But they seem
to think that this has only helped Android ("because it's free"), and hindered
Apple.

Which seems a bit odd to me, as outlined in my first post. I think people who
are outside the bubble can understand this better since a) Android is doing
well outside the bubble too, so we don't need to look for crazy excuses to
explain this "anomaly" b) we have a better grasp on the distortions that those
in the bubble experience because we have an outside perspective (e.g. Android
phones are not actually "free", nor do iPhones cost $200).

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terhechte
The iPad 2 costs 499, just like the iPad 1 one year ago. the iPad 1 costs 399
now. I guess that confused him.

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lwhi
Exactly - the premise of the whole article is incorrect.

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amstrad464
The conclusion of the article is that by pricing relatively low, Apple makes
"the attractive new market for tablets a lot less attractive for companies
planning to sell less than 10 million tablets this year."

While the claim that the new iPad is cheaper than its predecessor aims to
highlight Apple's pricing strategy, it is not a premise. Even if the iPad 2
was more expensive than the original iPad, it could still be cheap in relation
to competitive offerings. It could be sold at a price allowing only for small
profit margins without economies of scale. His premise is that it is.

~~~
lwhi
No. The article states that Apple has priced their tablet $100 cheaper than
the first iPad; it surmises due to high competition in the marketplace, Apple
have adjusted their pricing structure to gain a competitive advantage.

This _is_ a premise and it's also incorrect.

The iPad is being sold at the same price as the previous offering. They
haven't adjusted their pricing strategy.

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o6uoq
I think the real question here is - why does it cost $100 to have 3G ability
when a 3G dongle is just a few bucks?

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biot
You could rephrase that question as: why do companies charge what the market
can bear?

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radu_floricica
Because the market can bear it! Uh... I think I see what you did there...

