The iPad has become an integral part of my work-flow as a pastor. Recently I wrote about using my iPad when delivering sermons. Naturally all the recent speculation about Apple selling a smaller version of the iPad this fall has captured my attention. There is much speculation about the features of the new iPad Mini and even greater speculation about the pricing. For five very good reasons, I believe Apple will enter the 7-inch tablet market at the $199 price point.
Reason #1 - Apple loves to surprise on the low end. I know many readers might initially take issue with this statement, noting that Apple has always been about profitablity and higher margins. This is true with the iPhones and MacBooks, but has not been the case with tablets. People forget this now, having become accustomed to the $499 iPad, but when this price was initially introduced NO ONE was expecting a $500 device. Most of the speculation was at the $1,000 price point. Most tech prognosticators were comparing the new expected tablet to the existing net-book market. Apple came in at half that price.
Reason #2 - Apple has lower costs because of its purchasing power. Even at $199, Apple can make a profit. The gang over at This Week In Tech joked on Sunday that Apple owns the aluminum market and anyone wanting to make a new laptop would need to use magnesium. That was a funny exaggeration, but is not far from the truth. Comparing Apple's cost structure to anyone else's, including Amazon's, simply is not an (ahem) apples to apples comparison!
Reason #3 - Apple wants to own this market. Sure - when the 10-inch iPad was initially introduced, Steve Jobs made a big deal about never making a 7-inch version. In fact, he said people would have to sandpaper down their fingers to use one. Remember that Apple was never going to make a phone (or a tablet) until they did. Apple does not want to cede this smaller tablet market to other brands.
Reason #4 - The iPad Mini will become the gateway drug into the IOS marketplace for many new customers. I've seen this happen myself. My wife, Mary Kay, owned and loved her iPad before she ever bought into the iPhone. Rather than buying a two-year old iPhone to test the IOS waters, new customers will be able to purchase a brand new, unsubsidized $199 iPad Mini. I believe there will be significant elasticity of deman above this price point. (... meaning new people will choose not to buy if the price goes much higher.)
Reason #5 - The profits will come with more memory and with future devices. Apple doesn't have to make money on the $199 device initially. Surely they will still sell 2 other higher memory iPad Minis for $299 and $399 and they WILL make their profit margins on these devices. Remember also that once Apple sets the price, they won't change it any time soon. It's been just over 2 years since Apple initially introduced the iPad. Yet the prices are still the same. The tech gets better but the prices don't drop. Apple knows their cost curves will drop in the future so if they can capture the lion's share of the 7-inch market now, it will be even more profitable in the future.
This blog is primarily aimed at church folks and pastors. So why is this tech news such a big deal? Tune back in tomorrow and I'll tell you why this is something pastors should be focused on now. In the meantime, I'd love to hear your thoughts. Will Apple come out with the iPad Mini this fall? Will it be priced at $199? Comment below with your own speculations.
