Apple’s iPad Won’t See a Price Drop

With Apple’s iPad slated for pre-orders next week and availability on April 3, we’re entering a new phase of iPad poker –are you in or are you folding? This round is different from the time immediately after the iPad’s introduction. Back then, folks were making snap decision commentary — betting blind without knowing what the hole cards were. But now it’s later in the game. People have spent more time thinking about what the iPad can or can’t do for them. And come Thursday Friday, when pre-orders start, they’re either all-in or walking away. Actually, there’s a third option and that’s to wait this hand out. I’m hearing more and more comments from people planning to wait for an iPad price decrease, but there are three reasons I think those folks will be waiting for nothing.



We’ve been here before

Much of this “wait for the price drop” sentiment stems from the original iPhone 4 GB and 8GB models, which debuted in late June of 2007 for $499 and $599, respectively. By September of that same year, the 4 GB model was scrapped and the 8 GB unit dropped $200 to $399. The situation generated an early adapter uproar by many — myself included — and Apple tried to make good with $100 Apple Store credits for those who paid the higher prices.

The entire event tarnished Apple’s luster in the eyes of consumers and this isn’t a company that repeats mistakes often. Apple learned a hard lesson in 2007 — you can correctly justify that technology pricing changes fast, but consumers don’t care. A 33% price drop on a hotly anticipated phone within two to three months of availability doesn’t sit well with people. We can argue supply and demand or say that people paid $599 because they felt it was worth it, but that has little to do with the public’s perception of the situation. Apple won’t tread this path again with the iPad.

Apple’s going it alone

Going back to 2007 again — there was another player involved with the iPhone. AT&T was, and still is, the exclusive U.S. carrier partner. For all intents and purposes, you can’t officially buy a new iPhone without AT&T involvement sans jailbreaking. The vast majority of iPhones use AT&T’s voice and data network, and AT&T earns much more from iPhone users than its other customers. Last year, Om noted AT&T’s iPhone addiction and the revenues it produces from each customer: “[t]he average iPhone user gave AT&T about $94.74 a month vs. an average postpaid AT&T customer, who spends about $59.21 a month with the company.”

The iPad is a different beast though. Yes, the iPad 3G model will work only on AT&T’s data network, but there’s no voice component, nor any 2-year AT&T contract like that of the iPhone. So there’s likely no subsidy paid to Apple from AT&T. You won’t be able to grab an iPad in AT&T’s retail locations, either. Simply put: this is an all Apple product so there’s no price or subsidy negotiation with a carrier about the device. I’m sure Apple and AT&T talked about the 3G service features since it’s a new approach — instead of a long-term commitment like the iPhone has, iPad users can simply enable 3G for a month at a time. Without subsidies or heavy carrier involvement, there are fewer pricing factors involved.

Product lines and pricing tiers

Apple going it alone doesn’t really prove that the iPad pricing might change. But since the company has control over the price, it’s worth looking at where that price fits in with other products across the Apple line. After the iPad introduction, the Boy Genius Report put this chart together showing Apple’s product line and base prices