Before iPad was introduced, the most common price point people floated around the rumor mill was $1,000. That’s what people expected from Apple, considering its long history of pricing a bit on the high side for better products.
So when Steve Jobs dropped the bomb of $499 as a starting price, the world should have been sufficiently shocked and awed. Here was Apple, undercutting everyone’s price expectation on a new gadget by a rather significant margin. Cue the earthquakes, the locusts, etc. The world was coming to an end.
Instead, we get the Wall Street Journal, using a recent quote from an unnamed Apple exec at an analyst meeting to suggest that Apple will reduce the price on iPad before long.
Just like the “iPad will grow a camera before launch”, this rumor feeds into the Apple crowd very easily. After all, we all remember the iPhone started at $600, and that price was dropped significantly a few months later. Surely, Apple will do exactly the same thing again with iPad?
Well, probably not. At least not for the $499 version. Most experts agree that $499 is pretty aggressive for what iPad is. If Apple is overcharging for anything, it’s the $130 for the 3G option, which I’m guessing is Apple’s way of gauging interest in 3G for this kind of device.
Remember, this is a totally new market that no one knows much about. What features get included or not, or how important individual features will be to potential buyers is anyone’s guess. Apple needs to keep some flexibility as it gathers sales data in the first few quarters.
If the majority of people end up willing to spend that much more just to get 3G (I’m guessing they won’t), then Apple can reconsider how much to charge for the 3G chip. They would probably consider just consolidating the line and giving all iPads 3G by default, if it proved overwhelmingly popular. This is how WiFi slowly made its way to becoming a default feature in Apple’s laptops. Or they could drop 3G on all but the highest-priced model, if it proved to be not very popular.
This is what Apple execs most likely meant by “being nimble” on pricing.
The situation with the iPhone was very different. Apple was basically charging full price in a market that was used to getting phones for next to nothing, thanks to subsidies. Apple eventually had to cave and go with the standard subsidized pricing model, which left us all slaves to AT&T, which is now the only complaint people have about the iPhone. I seriously doubt that Apple wants to put iPad in the same boat.
So $499 as a base price will probably stay pretty steady for a while. The top of the line iPad could end up being cheaper in the long run. Instead of $829, it could be maybe $700. But don’t expect the entry-level to drop below the cost of an iPod Touch. That wouldn’t make much sense.
