Oct. 23, 2012 at 6:54 PM ET
If Apple had popped a $249 iPad Mini, the thing would have swept down from Mount Cupertino and set fire to every competitor with its fiery breath. If Apple had gone with a $299 iPad Mini, the devastation would still have been gnarly. At $329, the iPad Mini will have no shortage of buyers, but Apple leaves open an argument for a $199 non-Apple tablet. So why did Apple price it so high?
For starters, Apple is about profit. In the computer, phone and tablet businesses, Apple's competitors whittle away their pricing until they're making little or no money, because they believe they'll gain market share.
Apple keeps prices competitive, but only to a point. There's no $499 Apple laptop, although plenty of Dells and HPs regularly start that low. Ditto for desktop computers, where Apple's idea of a deal is the $599 Mac Mini.
The iPad Mini is $329 because that's exactly what the highly paid bean counters at Apple calculated would be the highest price possible that would still sell. It may one day go down — in fact, I would say the price has to drop by Christmas 2013, if not sooner. But while you can always lower prices, it's a lot harder to raise them later on. Apple always starts at the top.
So while it was foolish for me to even think Apple would price competitively, I was surprised, because now there's a new conundrum: Do you buy an iPad Mini for $329, or go just $70 more for a full-fledged iPad 2? This struck me as tight spacing, until I realized the bigger point: Apple doesn't think you will confuse a 7.9-inch tablet with a 9.7-inch tablet.
You know from the pictures that they're quite different in size, but holding them, you realize that their uses really are different. If you are in the market for something to use for sketching and text documents and spreadsheets, maybe even accompany it with a Bluetooth keyboard or whatever, then heck yes, you will pick the iPad 2 (or a newer model).
But if you just want something to read books on, and watch some shows and maybe surf the Web, then you are actually more INTERESTED in a smaller iPad, and won't think too hard about what $70 more gets you in terms of screen surface area.
That brings us back to square one, however: Apple is trying to convince us of separate uses for large and small iPads, but is trying to differentiate its product from the competition by price. Riddle me that, Avi Greengart, research director for consumer devices at Current Analysis:
"The price doesn't reduce the purchase case for some of the cheaper tablets," he told me when I saw him at the Apple event. "But this one stands above them." He smiled and added, "besides, compared to the Nexus 7, the design is so much nicer."
For people who aren't buying because of design (and there are many), Greengart contends that the universe of apps available for the iPad — 275,000 made expressly for that tablet, according to Apple CEO Tim Cook — means that any tablet bearing the Apple logo is simply going to be more useful. "The iPad Mini is far more versatile" than its competitors, says Greengart. "It costs more but it's worth more."
For a final thought, I turned to my friends on Twitter, with the simple question: "Do you think the $329 iPad Mini is a) a steal b) priced just right or c) crazy expensive?"
From self-described "major Apple fanboy" @jasonwal, I got "a little high." Another instapundit, @weatherninja, said that "a $299.00 price tag would have been a better value," and that $329 means he may in fact go $70 more for the full-size iPad 2. @seanethompson seems to have been thinking along the same lines as me, calling the price "more expensive than most consumers would like, but in the ballpark given component costs and great user experience." Other responses ranged from expensive to crazy expensive. "I'm curious on the profit margin," wrote @gevans. "I bet it's at least 40 percent."
Whatever the real percentage, I think @gevans may be onto something. Apple products can be priced as high as the company wants, as long as people buy every product that gets made, and that hasn't seemed to be a problem of late. And as competitive as Apple is, a side effect of iPad-onomics is that there's room for more affordable options at the bottom of the pricing ladder. At least until that price drops to $299, or $249, and the villagers run for cover.