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Apple may be “nimble” on its price point for the upcoming iPad tablet PC, according to Credit Suisse analyst Bill Shope, if customers refuse to flock to the device during its initial rollout within the next two months.
Shope met with Apple executives about the device sometime last week, and came away reporting-perhaps unsurprisingly-that the company believes there will be a relatively low rate of cannibalization between the iPad and similar touch-screen devices, including the iPod Touch and the iPhone.
“Apple wants the iPad to be the best device for a few key use cases,” Shope wrote in a note, excerpts of which have appeared on The Wall Street Journal’s blog. “This clear segmentation of capabilities suggests that cannibalization may be less of a concern than most currently believe.”
But Apple executives are apparently willing to lower the price point for the iPad if the device fails to gain traction in the market. That would be similar to Apple’s decision to slice the price of the iPhone by $200 some two months after the device’s release. Apple later extended store credit to early adopters who had paid the iPhone’s initial $599 price.
Immediately following its Jan. 27 unveiling of the device, Apple listed a variety of price-points for the iPad based on options. The 16GB version will cost $499 with Wi-Fi, and $629 with Wi-Fi and 3G. The 32GB version will cost $599 with Wi-Fi, and $729 with Wi-Fi and 3G. The 64GB version will cost $699 with Wi-Fi, and $829 with Wi-Fi and 3G.
Rumors of a price drop may drive customers to wait for an actual price drop rather than purchase an iPad immediately upon release, making the Apple executives’ reported comments into a self-fulfilling-and ironic-prophecy. Even without reductions, those price-points are lower than for a number of Apple products, specifically the company’s traditional PCs. Nonetheless, they represent a substantial markup from competing devices such as Amazon.com’s Kindle, which currently markets for $259 with another price cut rumored in the works.
The iPad’s higher price point has been seen as a potential competitive disadvantage by some analysts, at least within the e-reader segment. “IPS offers a better viewing angle than traditional LCD technologies,” IDC analyst Susan Kevorkian wrote in a Jan. 27 research note, referring to the iPad’s screen, “but is not any better than other LCDs outdoors, and its backlighting can induce discomfort from eyestrain, something that Kindle has hedged against with its E Ink display technology.”
Apple seems to intend the device as an all-around multimedia center, though, and a filler of the gap between smartphones and traditional PCs. Its ability to display book and periodical layouts with complicated layouts and colors intact, as opposed to e-reader’s monochromatic display, has been seen by some segments as a major factor in both its competitive strength against other companies and its ability to appeal to publishers.
Apple CEO Steve Jobs was reportedly in New York City Feb. 3 to discuss the iPad’s capabilities with high-ranking executives from The New York Times. Jobs, wearing what was described by New York magazine’s anonymous source as “a very funny hat,” apparently demonstrated the device for Times publisher Arthur Sulzberger Jr. over dinner at Pranna, a high-end restaurant near Madison Square Park.
A Camera in the Works for iPad?
In a sign of iPad’s increased competitive pressure on the media market ahead of its release, publishers have already started locking horns with Amazon over the prices of e-books on the Kindle store. On Jan. 31, Amazon temporarily ceased sale of all Macmillan’s e-books on its online storefront, after the publisher announced a desire to raise the price of those digital texts from Amazon’s traditional $9.99 to a range between $12.99 and $14.99. Other publishers followed suit, with Hachette announcing on Feb. 5 that it would request higher price points for its works.
“It’s important to note we are not looking to the agency model as a way to make more money on e-books,” David Young, chairman and CEO of Hachette Book Group, wrote in a memo posted on the media blog Mediabistro. “We’re willing to accept lower return for e-book sales as we control the value of our product-books, and content in general. We’re taking the long view on e-book pricing, and this new model helps protect the long term viability of the book marketplace.”
The iPad’s price and competitive profile could also chance as the device adds more hardware and software features. According to rumor, Apple may be planning to integrate a camera into the device; fueling this idea was a recent job notice posted on Apple’s corporate site for a Performance QA Engineer for its iPad Media division.
“The Media Systems team is looking for a software quality engineer with a strong technical background to test still, video and audio capture and playback frameworks,” read the job posting. “Build on your QA experience and knowledge of digital camera technology (still and video) to develop and maintain testing frameworks for both capture and playback pipelines.”
That employee will ultimately “be responsible for the development and maintenance of methodical testing strategies and accompanying test documentation,” as well as tracking bug reports and overall project progress.
The job posting follows rumors from earlier in February that the iPad could include a built-in camera. In a Feb. 1 posting on its official blog, Kansas-based Apple product repair company Mission:Repair mentioned that it had recently received spare parts for the iPad contained a space where a camera could potentially be inserted.
“We received our first shipment of iPad parts today,” Ryan Arter of Mission:Repair noted in that posting. “Upon opening them up and getting our hands on some of these rare items, we immediately noticed what appears to be a ‘spot’ for a camera within the iPad frame.”
The camera module from the unibody MacBook apparently fits into the frame received by Mission:Repair: “The lens fits in the hole, the LED that indicates that the camera is on fits, and the ambient light sensor hole is also correct. It appears that the plans to have camera in the iPad is a reality.”
The combination of that blog and Apple’s job posting gives more weight to the idea that a future version of the iPad will contain a camera, even though Apple’s official iPad page makes no mention of such a feature. However, Apple also has a history of integrating new hardware into subsequent versions of its devices; the iPod Nano, for example, now includes a built-in camera module in its most recent iteration, and previous rumors have suggested that the iPod Touch could also receive one at some undefined future point.