People simply aren't going
to pay $500 for a Samsung tablet when they can get a very similar device for
$199. As a result, the average price level for good-quality Android tablets
will ultimately sink to that level. In fact, the word ultimately may be
overstating things. I wouldn't be surprised to see price reductions in the
tablet market in anticipation of the Christmas season releases of the Kindle
Fire and Nook Color 2.
So by the end of the year,
tablets in general will be cheaper, especially for models with 7-inch screens
where all the competition is. The price shift may take a little longer for
10-inch tablets. But perhaps this is an area where Apple will lead to a new
pricing environment for the larger devices.
Think about a scenario in
which Apple releases the iPad 3 sometime early in 2012, but rather than simply
closing out the iPad 2 line, it reduces the price and continues to sell them.
This is essentially what Apple did with the iPhone 3GS after the iPhone 4 was
introduced. The advantage of this to Apple is that it gets to keep its market
share intact, while not letting the price of its premier product erode.
If Apple were to follow a
strategy for the iPa
d similar to what it did for the iPhone, then we'd see the
iPad 3 on sale for the $500 that you can currently buy an iPad 2, and the
latter would then be reduced to something like $300. This pricing strategy
would force the 10-inch Android tablets into that price range as well, since it
would be hard to convince most customers to pay more for an Android tablet than
for an iPad.
Of course, it wouldn't have
quite as much of an effect on the 10-inch tablets, especially the Android
tablets that exceed the iPad in features. You can already see this in phone
sales where many 4G Android phones sell for a higher subsidized price than the
iPhone 3GS. A few even sell for more than the iPhone 4. But those all have 4G
data capabilities, which the iPhone doesn't.
So the result is that there
will still be expensive tablets out there that people will still buy. But the
general level of tablet prices will drop, and as a result, more people will buy
them, regardless of what Apple does with the iPad. No matter how you look at
it, this general broadening of the tablet market is a good thing, and it will
make for a nice Christmas.
Editor's note: This article was updated with the official price that Amazon announced for the Kindle Fire on Sept. 28.