Engadget Editorial: Amazon and Google Device Pricing May End up Hurting us?

[Suspicious-Teach8788]

This. I don't remember people crying foul when Google Launched Navigation for free. Do you remember having to pay ~$80 for a simple map update and ~$10 a month just to use a GPS unit?

Sure it sucked for those companies, but who cares? Android tablet makers tried to emulate iPad pricing and got no where, then we get Google and Amazon tablets at low cost and they start to rise in popularity and now Engadget has a problem with it? Seriously, this combined with their other editorial on the Apple Maps thing has ended my visits to their site.

I'd argue the Google Maps situation was different. I was already using Garmin on my phone but how many users here even knew you could do that? People thought you had to pay to use GPS. They paid for AT&T navigator, Verizon navigator, trash like that. You couldn't install any apps on smartphones because they were locked down.

At that time in 2009, the iPhone had been out for TWO years already. Everyone knew about Google Maps on the iPhone and while it lacked turn by turn navigation, it was immensely useful in providing directions with GPS at least.

Google didn't shake up a well established industry. They changed the way things were going and kinda standardized the industry.

The difference here is phone pricing has always been this way, and smartphone pricing too. IT's just a bit screwed up in the US, but in general unlocked phones still exist.

I think the issue here is that for whatever low price they're using, it isn't a complete package. The Nexus 7 was a retreat from fighting the iPad. While it went to a 7" form factor, we also didn't have removable storage, limited storage, and a lot of lopped off features. The problem is people make the excuse "Well it's only $199." The same happened with the Nexus 4. "Well it's only $300, what do you expect?" I'm fine with Google offering me a cheaper phone, but when you have to cut features here and there that's a compromise I'm not willing to make.

And however the SGS3 is priced, no one cares about the $599 anyway. The US will always be stuck in that $199 contract pricing mindset.

 

[shortylickens]

Incorrect word to use. MSRP - BOM (bill of materials) != profit. BOM does NOT include operating costs of the company.

Yup, it took the resources of a billion dollar company to get us those cheap tablets.
Actually, thats the only reason we have home computers and cell phones too. That shit did NOT happen overnight.

 

[Suspicious-Teach8788]

People seem to think that's how things should be priced. Should we start a revolution that premium cars are being sold with margins? What about gas? LoL.

 

[Puddle Jumper]

there is no pricing collusion between carriers and manufacturers. just because the US has a broken phone/device purchasing system here doesn't mean it's the same around the world. handsets have traditionally cost like $400-$600.

what you're seeing here is like when emachines gave you free PCs with a 2 year internet contract. but that model obviously spelled failure as dialup was getting phased out. we were able to separate computers from service. luckily comcast doesn't sell you computers....

Why do you want phones to cost $400-600?

 

[BenSkywalker]

The Nexus 7 was a retreat from fighting the iPad. While it went to a 7" form factor, we also didn't have removable storage, limited storage, and a lot of lopped off features.

It matched the iPad's features, and it was a retreat? The other Android tablets went above and beyond Apple, because doing so while maintaining huge margins was very easy to do. Asus is building the Nexus7 for Google, and based on their financial reports they are doing quite well with it.

Asus makes quite a bit of money, consumers get a reasonably priced piece of hardware, Google suffers the hit on distribution and marketing banking on long term revenue to offset it. How is this a bad setup? I work in distribution, I know where the margins are, and the manufacture margin isn't close to what consumers end up paying- Google has simply removed this level of margins from the retail chain system to itself.

The same happened with the Nexus 4. "Well it's only $300, what do you expect?" I'm fine with Google offering me a cheaper phone, but when you have to cut features here and there that's a compromise I'm not willing to make.

Then buy a GS3, where is the problem? Noone is forcing anyone to buy the Nexus 4. I won't for very different reasons then you, but does that mean Google is making a mistake? Absolutely not, not in any way imaginable.

Am I willing to lose $50 worth of features to save $300? Almost always, yes. If you aren't , don't. Noone is forcing you to. You have a *choice*.

 

[openwheel]

terrible article. I couldn't disagree more.

This is technology, let's lower the price. Depreciating value is the key here. Amazon and Google are doing it perfectly from consumer's point of view.

Apple and such luxury tech gadgets should NOT have huge market share. Consumers are hurting in terms of value per dollar.

 

[ControlD]

People seem to think that's how things should be priced. Should we start a revolution that premium cars are being sold with margins? What about gas? LoL.

No, I just want things to be priced at an acceptable level. Technology generally sees the prices of goods decrease as those things start to become a commodity. It happens all the time. I remember when CD players first came out and they were $800 for a unit that did nothing but play discs. As CD players became common the price plummeted. The same can be said for any number of devices: PCs, flat screen TVs, DVD players, etc. Seeing cheaper phones should start to follow the same trend I believe although you can bet the major manufacturers will try to keep the prices artificially inflated as long as they can. I hope more companies follow Google's lead not less.

 

[Red Storm]

People seem to think that's how things should be priced.

Are you talking about the iPad?

 

[KentState]

People seem to think that's how things should be priced. Should we start a revolution that premium cars are being sold with margins? What about gas? LoL.

It already started with premium cars. Infiniti and Lexus went after BMW, Mercedes and Jaguar in the early 90s and took a lot of the market with near knock offs. Now Hyundai is doing the same with a less expensive competitor to Lexus.

 

[Suspicious-Teach8788]

Are you talking about the iPad?

The thing about an iPad is it may be priced too high. Who knows? It might not. I don't doubt that if Android gave Apple a truly good run in the tablet ecosystem we could see prices fall.

Apple did lower prices on its Macbook Airs through the years. It's not like Apple doesn't change.

But at the other end of the spectrum, selling tablets for BOM + $5 isn't really reasonable either. BOM isn't your true cost. You have to account for running the company and all.

Maybe Google is willing to eat a loss and subsidize their OEMs with some money for building these Nexus tablets, but in general, Samsung, HTC, etc aren't making their tablets to sell at a loss.

To suddenly expect that this IS the new standard and that everyone should compete at this level is ridiculous. We always say competition is good, but if nothing can force the iPad below $499, then I don't see a problem with that. But forcing the iPad to drop by selling for a loss and at the same time screwing your own OEMs over isn't the solution.

What I'm saying is use traditional methods to compete to bring the price down. Not by messing the market up.

It already started with premium cars. Infiniti and Lexus went after BMW, Mercedes and Jaguar in the early 90s and took a lot of the market with near knock offs. Now Hyundai is doing the same with a less expensive competitor to Lexus.

Right that's fine. Android can sell low cost tablets, but what Amazon and Google are doing is different. What you're talking about is cheap Chinese tablets. Google and Amazon are using a diff business model where they suck you into their ecosystem and sell tablets at a loss. You can't expect the same from Samsung, HTC, LG, Motorola. A $399 or $349 tablet is doable. I'd like to see them do that first rather than a race to the bottom at $199.

 

[Chiropteran]

Right that's fine. Android can sell low cost tablets, but what Amazon and Google are doing is different. What you're talking about is cheap Chinese tablets. Google and Amazon are using a diff business model where they suck you into their ecosystem and sell tablets at a loss. You can't expect the same from Samsung, HTC, LG, Motorola. A $399 or $349 tablet is doable. I'd like to see them do that first rather than a race to the bottom at $199.

I think you are way off base. The $199 Nexus 7 and Kindle Fire are not actually the bottom, despite what you want to imply. There have been plenty of cheap Chinese tablets for less, even half that price. The difference is that the Nexus 7 and Kindle Fire offer a great deal of quality for a very reasonable price.

There is no race to the bottom, otherwise garbage $79 tablets like the Novo7 would be leading new sales records.

What I'm saying is use traditional methods to compete to bring the price down. Not by messing the market up.

I've heard this before, in World of Warcraft, said by little kids when they are undercut on the auction house. "Messing up the market", for who exactly? It's a win for consumers, it's a win for the manufacturers who are selling devices, it's only really "messed up" for the older manufacturers who think 90% gross profit is fair.

But at the other end of the spectrum, selling tablets for BOM + $5 isn't really reasonable either. BOM isn't your true cost. You have to account for running the company and all.

No, you really don't. The company is a sunk costs, and you are paying to run it whether your device sells or not. If Amazon decided to discontinue selling the Kindle Fire in all it's flavors, how much money do you think they would save? Other than the prime web real estate used to advertise it, it costs Amazon nothing at all to sell the Kindle Fire. A bit of sunk of money developing it, but that is done. Maybe a few dollars later to support it (or maybe not, given the lack of attention the previous model gets), but that is a set cost, while the number of units that can be sold is not.

This is not a new concept. When you buy a book, you are buying the end result of 1000+ hours of work done on the author's part. If books were sold based on the cost to write them, they would be as expensive as cars. Authors and publishing companies realize that production costs are mostly set costs, which do not increase with the number of books sold, so the price of a book is far lower than the cost to produce one book. Book publishers make money, so it seems this strategy can indeed work in the real world.

That $5 from one Nexus 7 is not supposed to be enough money to pay for the development of the device. The millions of Nexus 7 sold thus far are supposed to pay that cost.

 

[cliftonite]

Because Google and Amazon have their services. What do Samsung, Acer, HTC get to do?

And with the $300 price mark, people have made excuses left and right for Google's Nexus 4 missing feature A, B, C. So now what? We can't get high end models, and have to compromise for devices missing features? If they're trying to make $300 the new standard, then it should be a formerly $600 level phone sold at $300, not some $600 phone missing a feature here and there. Otherewise I feel like $300 deserves to be a mid range phone. I'm asking for balanced specs here.

No one expects a $300 phone to have the same features as a $400 phone. If I really wanted more storage and LTE I can go buy a galaxy s3, galaxy note, or any of the other android devices unlocked for $600 to $700.

 

[cliftonite]

People seem to think that's how things should be priced. Should we start a revolution that premium cars are being sold with margins? What about gas? LoL.

You are the one that is complaining about a budget model (nexus 7, 4) not having features of premium models (Galaxy S3, Note, iphone, etc).

 

[Skurge]

The thing about an iPad is it may be priced too high. Who knows? It might not. I don't doubt that if Android gave Apple a truly good run in the tablet ecosystem we could see prices fall.

Apple did lower prices on its Macbook Airs through the years. It's not like Apple doesn't change.

But at the other end of the spectrum, selling tablets for BOM + $5 isn't really reasonable either. BOM isn't your true cost. You have to account for running the company and all.

Maybe Google is willing to eat a loss and subsidize their OEMs with some money for building these Nexus tablets, but in general, Samsung, HTC, etc aren't making their tablets to sell at a loss.

To suddenly expect that this IS the new standard and that everyone should compete at this level is ridiculous. We always say competition is good, but if nothing can force the iPad below $499, then I don't see a problem with that. But forcing the iPad to drop by selling for a loss and at the same time screwing your own OEMs over isn't the solution.

What I'm saying is use traditional methods to compete to bring the price down. Not by messing the market up.



Right that's fine. Android can sell low cost tablets, but what Amazon and Google are doing is different. What you're talking about is cheap Chinese tablets. Google and Amazon are using a diff business model where they suck you into their ecosystem and sell tablets at a loss. You can't expect the same from Samsung, HTC, LG, Motorola. A $399 or $349 tablet is doable. I'd like to see them do that first rather than a race to the bottom at $199.

What makes you think Asus makes a loss on the Nexus 7? They are selling about a million of them a quarter and they are boasting about it. I'm pretty sure they are making more money on the Nexus 7 than their transformer pads.

Samsung never boasted about the Gnex cause they were selling the GS2 for a lot more and the GS3 for nearly double.

I'd wager they will sell more Nexus 10s than Note 10.1s and make more money off that too.

Same deal with LG

The Nexus 7 doesn't cost anywhere near $199 to build and the more they sell and the more time goes by, the more money they will make off each device. I'm sorry, but the only OEMs that are hurting are they ones who can't make a good enough product and to be frank, I don't really care about them

You mention the nexus devices missing features, well if you want to pay $300 for an LTE radio, go right ahead and get an Optimus G. You can fight the good fight and help LG by paying double for the same device.

You want a rear facing camera on you nexus 7, go ahead and but an iPad mini for $100 more.

As for the Nexus 10, what are you giving up on that? Nothing and it's still cheaper than the compertition.

Another thing you fail to mention is each of those devices have advantages over their higher priced competitors.

Nexus 4's SOC is the best on the market bar the GPU. Another thing you fail to mention is the International S3 doesn't have LTE and it's still priced at $599.

The Nexus 7 has a more powerful SOC than the Kindle Fire HD and the Nook tablet (whatever it is). It has a better screen and SOC than the Galaxy tab 7. And it has the software advantage of being a nexus device. Same with the Nexus 4

The Nexus 10 is a slam dunk no matter which way you look at it. Most powerful SOC around, Compatative battery life, 300ppi display, 32GB option, stereo speakers. And it is still cheaper than any other competing tablet.

These compromises that you are talking about are made thoughout the mobile industry. You just seem to be crucifying google more than the others. Everyone makes compromises, how large they are could be up for debate, but they are there. I haven't seen a single no compromise device yet. So yes lack of LTE may be a bigger omision than 4inch display to some people, but it may not be to others.

The point still stands wheather you think they are excuses or not. The Nexus 4 has batter hardware than the best selling android phone the SGS3 and costs half as much.

No other android tablet is as powerful as the Nexus 10 and is as cheap. If that is where things are going. I don't mind. Samsung and HTC can still sell their phones to carriers locked and still make a ton of money or they can build nexus devices and make less money, but still make money non the less.

Wow, I think thats the longest post I've ever made.

 

[destrekor]

What makes you think Asus makes a loss on the Nexus 7? They are selling about a million of them a quarter and they are boasting about it. I'm pretty sure they are making more money on the Nexus 7 than their transformer pads.

Samsung never boasted about the Gnex cause they were selling the GS2 for a lot more and the GS3 for nearly double.

I'd wager they will sell more Nexus 10s than Note 10.1s and make more money off that too.

Same deal with LG

The Nexus 7 doesn't cost anywhere near $199 to build and the more they sell and the more time goes by, the more money they will make off each device. I'm sorry, but the only OEMs that are hurting are they ones who can't make a good enough product and to be frank, I don't really care about them

You mention the nexus devices missing features, well if you want to pay $300 for an LTE radio, go right ahead and get an Optimus G. You can fight the good fight and help LG by paying double for the same device.

You want a rear facing camera on you nexus 7, go ahead and but an iPad mini for $100 more.

As for the Nexus 10, what are you giving up on that? Nothing and it's still cheaper than the compertition.

Another thing you fail to mention is each of those devices have advantages over their higher priced competitors.

Nexus 4's SOC is the best on the market bar the GPU. Another thing you fail to mention is the International S3 doesn't have LTE and it's still priced at $599.

The Nexus 7 has a more powerful SOC than the Kindle Fire HD and the Nook tablet (whatever it is). It has a better screen and SOC than the Galaxy tab 7. And it has the software advantage of being a nexus device. Same with the Nexus 4

The Nexus 10 is a slam dunk no matter which way you look at it. Most powerful SOC around, Compatative battery life, 300ppi display, 32GB option, stereo speakers. And it is still cheaper than any other competing tablet.

These compromises that you are talking about are made thoughout the mobile industry. You just seem to be crucifying google more than the others. Everyone makes compromises, how large they are could be up for debate, but they are there. I haven't seen a single no compromise device yet. So yes lack of LTE may be a bigger omision than 4inch display to some people, but it may not be to others.

The point still stands wheather you think they are excuses or not. The Nexus 4 has batter hardware than the best selling android phone the SGS3 and costs half as much.

No other android tablet is as powerful as the Nexus 10 and is as cheap. If that is where things are going. I don't mind. Samsung and HTC can still sell their phones to carriers locked and still make a ton of money or they can build nexus devices and make less money, but still make money non the less.

Wow, I think thats the longest post I've ever made.

For the Nexus 7, I'm sure Asus made out alright. Google didn't make a lick of profit on the 8GB models though, in fact, may have lost a little (especially at launch, so before the BOM could drop, and they had included the $25 Play Store credit). I'm sure Google's approach was take care of the OEM, we'll face the revenue pain... but recoup it through our services.

The bill of materials for the Nexus 7 was pretty much barely under $200. Maybe it was $180, maybe $190. Google was not turning the sales into positive revenue through the hardware alone. I imagine Asus got what they ultimately needed out of the deal.

The 16gb model only actually cost like $5 more to manufacturer, but they charged a $50 markup. I found it a fair deal at $250 (it's the model I got, but I picked it up at a B&M store), and everyone gets a little more profit out of that deal.

 

[Geekbabe]

I'll consume all the ads they want, aint costing me shit.
And amazon has given me about 350 free apps so far. Never paid for one.

The ads Amazon has displayed on our Kindle HD aren't annoying & are frequently good coupon offers that I have taken advantage of. I'm a Prime subscriber, do a ton of shopping at Amazon & am delighted at the great value my Prime subscription brings me. I am also very pleasantly surprised at how well made the Fire HD is.

I agree that there needs to be a middle ground between very expensive & dirt cheap devices, one concern I have is that the smaller form factor tablets so far have limited cellular options & those that do offer cellular are lacking in some way. I want 4G not 3G and I also want a high quality screen.

 

[badb0y]

Why are we talking about Amazon, Barnes and Nobles, ASUS, or Samsung? Amazon and Barnes and Nobles have their own subsidy model and ASUS and Samsung were hand picked by Google to build their stuff. What about Motorola? What about HTC? If you think it's possible for HTC or Motorola to compete with Nexus 7 and make enough money to survive you are delusional.

 

[Ravynmagi]

I'm not worried about phones. I think the carrier subsidization helps protect the high end expensive phones like the GS3 and Note 2. You get extra features with those phones and usually only pay about $200 or $300 out of pocket on your two year contract. Also these high end phones are really nice pieces of hardware.


On the tablet front there seems to be two problems. People don't buy their tablets subsidized. And I get the feeling most manufactures really are not bringing their "A game" when making tablets. Samsung especially, the Galaxy Tab 2 and Note 10.1 look like Samsung isn't even trying anymore. Acer, Lenovo, Sony, and Toshiba have all been disappointing with their offerings too. ASUS is the only one that seems to be really working hard at a quality product, but it seems they usually screw up one big detail with each model of their tablets as well.

I've been rather disappointed with the quality of non-subsidized Android tablets thus far. And then we have these $200 7 inch tablets from Amazon, B&N, and Google, and while each of these has some limitations, they've been tremendous values.

And it's only getting worse with the Nexus 10 coming. I can't even imagine why anyone would buy a Note 10.1, A700, or Excite 10, when then Nexus 10 is just so vastly superior over them. The only tablet that I think still has a case for being relevant is the TF700 with it's better storage, micro SD, and nice keyboard/battery dock, but they probably need to drop the price $100 to compete.


I really think the tablet manufactures brought this upon themselves with some rather mediocre hardware the last few years. And now their market share is being devoured by these much cheaper tablets from Amazon, B&N, and Google (at least in markets they are available).

One thing that non-subsidized manufactures still have going for them is they can sell their tablets in just about any country. Amazon, B&N, and Google are only selling in countries they provide services too.


I'm undecided if it is a good or bad thing if tablet manufacturing got consolidated down to just Apple, Microsoft, Google, Amazon, and B&N. Obviously Android user would loose a lot of choices if Samsung, ASUS, and others dropped out of making tablets. But perhaps we could look forward to better quality hardware and less software fragmentation.

 

[s44]

By "us" he means Apple and Apple fans, right?

Thing is, the mobile space is mature. Time for price competition until the next *real* advance (Glass?) appears.

 

[badb0y]

By "us" he means Apple and Apple fans, right?

Thing is, the mobile space is mature. Time for price competition until the next *real* advance (Glass?) appears.

Apple? Who's talking about Apple? They don't really come into play here because they are the ecosystem and the hardware provider so they don't really have a race to the bottom. Just look at the PC market, Apple make's the most expensive computers and has a <10% market share and still makes more money than other computer companies lol.

 

[Red Storm]

Apple? Who's talking about Apple? They don't really come into play here because they are the ecosystem and the hardware provider so they don't really have a race to the bottom. Just look at the PC market, Apple make's the most expensive computers and has a <10% market share and still makes more money than other computer companies lol.

The "race to the bottom" has begun to eat into Apple's tablet marketshare. Android tablets were first priced equally to iPads and they pretty much got no where, then we started seeing things like the Kindle and Nexus tablets and they have helped boost Android tablet popularity.

So when the iPad was greater than 50% market share @ $500 and Android tablets were also $500 but not selling, Engadget has nothing to say (nor should they). Now we've got less expensive Android tablets eating into Apple market share and suddenly Engadget is concerned about innovation and competition? This and their other editorial look like shill posts.

 

[badb0y]

The "race to the bottom" has begun to eat into Apple's tablet marketshare. Android tablets were first priced equally to iPads and they pretty much got no where, then we started seeing things like the Kindle and Nexus tablets and they have helped boost Android tablet popularity.

So when the iPad was greater than 50% market share @ $500 and Android tablets were also $500 but not selling, Engadget has nothing to say (nor should they). Now we've got less expensive Android tablets eating into Apple market share and suddenly Engadget is concerned about innovation and competition? This and their other editorial look like shill posts.

I think anyone who thinks Apple will hold onto the market dominance it has in the tablet space right now is a fool. They will drop to 10% just like they did in the PC market but that's not necessarily a bad thing since Apple has a different business model than Google or Amazon.

 

[Ravynmagi]

The "race to the bottom" has begun to eat into Apple's tablet marketshare. Android tablets were first priced equally to iPads and they pretty much got no where, then we started seeing things like the Kindle and Nexus tablets and they have helped boost Android tablet popularity.

So when the iPad was greater than 50% market share @ $500 and Android tablets were also $500 but not selling, Engadget has nothing to say (nor should they). Now we've got less expensive Android tablets eating into Apple market share and suddenly Engadget is concerned about innovation and competition? This and their other editorial look like shill posts.

The iPad's market share has plummeted in the last year I believe. Think it was around 75-80% just a year ago. It dropped to 65% earlier this year and now I'm hearing just about 50%.

Yet Apple is still selling more iPads than ever. These cheap tablets don't seem to be affecting iPad's sale negatively at all, but instead just creating a new market for people that would never spend $500 on a tablet in the first place.

 

[Red Storm]

The iPad's market share has plummeted in the last year I believe. Think it was around 75-80% just a year ago. It dropped to 65% earlier this year and now I'm hearing just about 50%.

Yet Apple is still selling more iPads than ever. These cheap tablets don't seem to be affecting iPad's sale negatively at all, but instead just creating a new market for people that would never spend $500 on a tablet in the first place.

The previous gen iPad and iPad mini would've absorbed some of that market. Which is funny because it's possible we would have never seen the iPad Mini if it wasn't for the Kindle and Nexus. My only point is that as an editorial from a very popular tech news site, it's a very poor article.

 

[poofyhairguy]

Why are we talking about Amazon, Barnes and Nobles, ASUS, or Samsung? Amazon and Barnes and Nobles have their own subsidy model and ASUS and Samsung were hand picked by Google to build their stuff. What about Motorola? What about HTC? If you think it's possible for HTC or Motorola to compete with Nexus 7 and make enough money to survive you are delusional.

I see that as a good thing- whoever makes the Nexus line profits and whoever makes skinned crap fails. Time to line up and place your bid to make Nexus devices.

So if in the future the only Android tablets that are really successful are the Nexus line, then there goes away the problem with Android updates and version fragmentation.

The HTCs and Motos of the world screwed themselves when they invested all this money to create value with their skins no one wants. At least Samsung can fight back on the Nexuses some because some people like TouchWiz more than stock Android, and people like me will pay crazy premiums for features like expandable storage.