iPad: it's all about the $500 price tag- and all the Apps

iPad: it's all about the $500 price tag

* By Catholic Online
* 2/21/2011
* Catholic Online (www.catholic.org)

Competitors trying to come up with something comparable can't meet that sum

The iPad is still the first and best-selling product of its kind. It's mostly because of its very reasonable $500 price tag. Apple's competitors are having a hard time meeting that amount. Apple has traditionally aimed at the high end of the mobile computer market with MacBooks marked $1,000 and up. In addition, Apple execs repeatedly told investors they couldn't produce a $500 computer that wasn't a piece of junk - and the iPad is certainly not a piece of junk.
Competitors are struggling to match the $500 price point because they aren't as fully integrated as Apple, which in terms of retail strategy, a digital content market, hardware and software engineering is everything.

Competitors are struggling to match the $500 price point because they aren't as fully integrated as Apple, which in terms of retail strategy, a digital content market, hardware and software engineering is everything.

LOS ANGELES, CA (Catholic Online) - In contrast, Motorola's Xoom tablet is debuting in the U.S. with an $800 price tag. Samsung's Galaxy Tab, with a relatively puny 7-inch screen, costs $600, without a contract.

The question on many people's minds was how Apple was able to get their latest high-tech gadget at the $500 price tag.

Apple now has 300 retail stores worldwide selling iPads directly to customers. According to Jason Hiner of Tech Republic, that's advantageous, because if the iPad were primarily sold at third-party retail stores, a big chunk of profit would go to those retailers.

Apple has also partnered with a few retail chains such as Best Buy and Walmart, but those stores always seem to get a small number of units in stock. Hiner says that the true purpose of these partnerships is probably to help spread the marketing message, not so much to sell iPads.

"The company can swallow the bitter pill of hardly making any money from iPad sales through its retail partners because it can feast off the fat profits it makes when customers buy directly through its retail outlets and the web store," Hiner says.

"However, companies like Motorola, HP, and Samsung have to make all of their profit by selling their tablets wholesale to retailer partners."

Hiner fails to mention the high overhead costs that Apple must pay handsomely for each of its 300 stores. Apple running its own stores does present clear benefits. The customer outreach is enormous, and in Apple stores, Apple products don't have to compete with gadgets sold by rivals on other shelves.

Apple is the most vertically integrated company in the world. In addition to operating its own retail chains, all Apple hardware and software are designed in-house, and Apple also runs its own digital content store, iTunes.

Competitors are struggling to match the $500 price point because they aren't as fully integrated as Apple, which in terms of retail strategy, a digital content market, hardware and software engineering is everything.

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U.S. E-Book Sales To Reach $2.7 Billion In 2013

Falling prices and new business models will help U.S. e-book unit sales to grow from an estimated $313 million in 2009 to $2.7 billion in 2013, according to a new Yankee Group forecast. The research firm predicts that e-book downloads will outpace those of paid mobile apps during the period, growing at an annual rate of 83% compared to 72%.

A separate Gartner forecast last week predicted that mobile app sales worldwide will triple to $15.1 billion in 2011 from $5.2 billion last year.

In addition to wider adoption of e-book readers -- the Kindle has become Amazon's best-selling product ever -- the growing affordability of digital titles will be a key factor driving sales. By 2013, the typical e-book retail price will fall to $7, down from an average of more than $9 in 2009, according to Yankee Group. With a third of consumers on the fence about embracing e-books, lower prices could help make the difference.

New ways of selling e-books and new formats will also help expand the market. Emerging models include e-book rentals from companies like Chegg and Skoobit, which allow students to rent textbooks at discounted prices for a given period. Given the high cost of print textbooks, the study noted that a quarter of students express high interest in e-books, making college campuses a ripe market.

Other business approaches expected to gain steam in 2011 include ad-supported e-books, micropayments for book chapters and shorter works and annual subscriptions. Sesame Street's online store, for instance, offers 100 e-books for $40 a year.

The Yankee report also points to a growing range of tools for discovering e-books, including predictive analytics engines such as Reader and WhatShouldReadNext. Google's integration of e-books into search results and book-based social networks like HarperCollins' Authonomy.com and Inkpop will also play a role in boosting sales.

New e-book formats -- such as platforms from Vook and Sideways that enable authors to embed audio and video into their text -- will provide additional incentives for people to make the switch from print. Amazon nearly doubled its e-book library from 450,000 to 810,000 titles in December.

While projecting that e-book revenue will top app sales in the next few years, the study nevertheless highlights the importance of apps and smartphones to the e-book market. Barnes & Noble's e-book apps for the iPhone hit 1 million downloads in three months. "Exposure to e-books through smartphone apps has led nearly a third of smartphone owners to consider digital formats," states the report.

Given that, Apple's reported rejection of Sony's iPhone app for buying e-books from the Sony Reader Store could be a troubling signal. What impact that move could have on companies like Amazon, which offer free mobile apps and sell e-readers competing with the iPad, isn't clear. The online retailer also offers apps on other smartphone platforms including Android, BlackBerry and Windows Phone 7. The company last month said Kindle e-books now outsell paperback books on Amazon.com.

Courtesy of ©2011 MediaPost Communications. All rights reserved.


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