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

[OBLAMA2009]

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.

i wouldnt be surprised if apple mini severely eats into ipad sales though

 

[Suspicious-Teach8788]

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.

I honestly think that HTC and Moto deserve a place in this world. They provide hardware and software choices. I like HTC particularly. Moto just fails all around. But wasn't that the point of Android? It's a base OS for the OEMs to do whatever they want to it.

I'm fine with Nexus phones too, but why do they have to come in and severely undercut the ENTIRE MARKET. It's not just Apple. It's the OEMs also. I think many of us would be fine with a Nexus phone priced at $599 just like a $599 SGS3. The Nexus eats into OEM sales. It's not just Apple. So while ASUS gets paid off for the Nexus 7, SOMEONE absorbs the loss. Furthermore, it probably eats into ASUS' own sales.

Look at the Nexus 10. That will undoubtedly eat into the Galaxy Tab 10.1 So The Nexus 10 makes a profit and Google probably pays Samsung for it too, it cuts into the GTab 10.1. The question is whether Samsung nets anything out of this or would be better off selling Gtabs and Gnote 10.1s. I'm not sure.

Does LG have an incentive to sell the Nexus 4? If it's Google subsidizing, then I think that's wrong. Traditionally, hardware is meant to profit, and now we're throwing a curve ball at them. I mean what's acceptable? Do you want Apple's iPad division to run in the red and have the iOS App Store pay for it? Or maybe cut the iPad prices even more and pay it back with iPhone sales? What's acceptable?

 

[Chiropteran]

I'm fine with Nexus phones too, but why do they have to come in and severely undercut the ENTIRE MARKET. It's not just Apple. It's the OEMs also. I think many of us would be fine with a Nexus phone priced at $599 just like a $599 SGS3. The Nexus eats into OEM sales. It's not just Apple. So while ASUS gets paid off for the Nexus 7, SOMEONE absorbs the loss. Furthermore, it probably eats into ASUS' own sales.

You are presenting a false premise. The Nexus phones do not undercut the entire market. There are whole lines of entry level android phones available, sans contract, for $150 or less.

If anything, I think the Nexus phones are successful because they fill an important niche, the middle ground. It's easy to find a cheapo entry level phone for $149. It's also easy to find a flagship full featured phone for $600+. The price range of $250-$400 doesn't really have much competition though, and that is exactly where the Nexus phones fit.

You give up a few high end features- no LTE, no sd card slot, but the phone is a lot cheaper than a flagship model, while offering superior hardware compared to a cheap entry level $149 phone.

Traditionally, hardware is meant to profit,

Again, a false premise. Once the technology becomes commoditized, profit becomes very slim.

 

[Munky]

LOL at the premise of the article. No, the only people, other than the price-gouging manufacturers, hurt by the lower prices are those who overpay for the overpriced gadget and then feel stupid when someone else pays half as much for the same capabilities. Competition and lower prices are a good thing.

 

[cliftonite]

I honestly think that HTC and Moto deserve a place in this world. They provide hardware and software choices. I like HTC particularly. Moto just fails all around. But wasn't that the point of Android? It's a base OS for the OEMs to do whatever they want to it.

I'm fine with Nexus phones too, but why do they have to come in and severely undercut the ENTIRE MARKET. It's not just Apple. It's the OEMs also. I think many of us would be fine with a Nexus phone priced at $599 just like a $599 SGS3. The Nexus eats into OEM sales. It's not just Apple. So while ASUS gets paid off for the Nexus 7, SOMEONE absorbs the loss. Furthermore, it probably eats into ASUS' own sales.

Look at the Nexus 10. That will undoubtedly eat into the Galaxy Tab 10.1 So The Nexus 10 makes a profit and Google probably pays Samsung for it too, it cuts into the GTab 10.1. The question is whether Samsung nets anything out of this or would be better off selling Gtabs and Gnote 10.1s. I'm not sure.

Does LG have an incentive to sell the Nexus 4? If it's Google subsidizing, then I think that's wrong. Traditionally, hardware is meant to profit, and now we're throwing a curve ball at them. I mean what's acceptable? Do you want Apple's iPad division to run in the red and have the iOS App Store pay for it? Or maybe cut the iPad prices even more and pay it back with iPhone sales? What's acceptable?

"Deserve" a place?? It is a business, either they survive or they don't.

 

[golem]

LOL at the premise of the article. No, the only people, other than the price-gouging manufacturers, hurt by the lower prices are those who overpay for the overpriced gadget and then feel stupid when someone else pays half as much for the same capabilities. Competition and lower prices are a good thing.

But if this continues, how much competition will there be? Acers a brand that pretty much competes mostly on price and they couldn't come up with anything that is as good as Nexus 7 for the price.

Going forward I see this.

Low end no name tablets.
Ainol and the like

Mid priced
Nook
Fire
Nexus

Higher priced
Surface (not a given it will survive)
Ipad
Nexus

Unless your the one chosen to make the next Nexus tablet (android side), why even bother?

 

[Axon]

Ironic that we "care" about this in the mobile device area, but ruthlessly poop on GPU manufacturers for a $10 difference.

I have no problem with Google or Amazon's pricing scheme. They wanted to undercut apple and get a piece of a valuable market share. They did that. As was said above, the Nexus devices get the "bang for your buck" crown. The price to performance ratio is unparallelled in the market. Good on them, and good for consumers.

I have an ipad 3 that I purchased for the screen alone. Apple subsequently puts out the ipad 4. I got burned in a way, but mostly a hypothetical way. No one weeps for me. Why should I cry for Apple?

Plus, in the end, none of this stuff is true. Apple sold a ton of ipad minis. You make a good product and it sells. The ipad sells. The Nexus 7 sells. Both are good products. The Nexus has already cycled its hardware with no eventful occurences. Nothing to see here.

 

[Chiropteran]

But if this continues, how much competition will there be?

Like every commoditized market, in the end there will only be 2-3 serious competitors, possible 4 if we are lucky.

AMD (barely) vs Intel. Sony PS3 vs Microsoft XBox. AMD vs Nvidia. Coke vs Pepsi. Chipotle vs Qdoba. Verizon FIOS vs Comcast Cable. Anandtech vs Tom's Hardware.

 

[golem]

Ironic that we "care" about this in the mobile device area, but ruthlessly poop on GPU manufacturers for a $10 difference.

I have no problem with Google or Amazon's pricing scheme. They wanted to undercut apple and get a piece of a valuable market share. They did that. As was said above, the Nexus devices get the "bang for your buck" crown. The price to performance ratio is unparallelled in the market. Good on them, and good for consumers.

I have an ipad 3 that I purchased for the screen alone. Apple subsequently puts out the ipad 4. I got burned in a way, but mostly a hypothetical way. No one weeps for me. Why should I cry for Apple?

Plus, in the end, none of this stuff is true. Apple sold a ton of ipad minis. You make a good product and it sells. The ipad sells. The Nexus 7 sells. Both are good products. The Nexus has already cycled its hardware with no eventful occurences. Nothing to see here.

That's the thing. Everyone seems to think this article relates mostly to Apple. The Fire and Nexus do affect Apple, but I don't think they affect Apple as much as other Android manufacturers. Apple sells pretty much all the Ipads they can make, their losing market share, but that was a given.

How about every other manufacturer of Android 7 inch tablets besides Asus, or every other manufacturer of Android 10 inch tablets besides Samsung? Asus is doing well with the Nexus 7 now, how about when Google rotates to someone else? Do they just sit out that generation?

 

[golem]

Double post

 

[golem]

Like every commoditized market, in the end there will only be 2-3 serious competitors, possible 4 if we are lucky.

AMD (barely) vs Intel. Sony PS3 vs Microsoft XBox. AMD vs Nvidia. Coke vs Pepsi. Chipotle vs Qdoba. Verizon FIOS vs Comcast Cable. Anandtech vs Tom's Hardware.

True, when you think about it. Amazon, Apple, Google, Microsoft (maybe) are all strong competitors, maybe that will be enough.

 

[poofyhairguy]

I honestly think that HTC and Moto deserve a place in this world.

They do if they earn it. Samsung has earned their place- the Nexuses don't threaten their lineup. If Moto and HTC have built brand loyalty then they will survive.

If not then oh well. Its not worth keeping them around just to have more choices if the choices are bad.

But wasn't that the point of Android?

The point of Android is to lock Google into the next Windows.

I'm fine with Nexus phones too, but why do they have to come in and severely undercut the ENTIRE MARKET.

I don't think you can say Google undercut the entire market. It is more like Google put a new tier in the smartphone market- middle-upper range. Not quite as good as the best, but better what was a mid-class phone a year ago. Especially in America where the outright cost simply doesn't matter and is a niche option.

In the tablet market Google is fixing a broken Android tablet market before Amazon steals it all. From the Xoom the Android tablet market has been broken when it comes to pricing and positioning. Google just fixed that.

I think many of us would be fine with a Nexus phone priced at $599 just like a $599 SGS3.

I think the pricing should be set by market demands. I personally would pay hundreds more for a SGS3 over a new Nexus because I hate LG build quality and I like expandable storage. My mom might pay extra for the SGS3 because the commercials made her like the brand.

The Nexus as a brand really doesn't have an identity with consumers, and therefore is priced as a commodity as it should be.

So while ASUS gets paid off for the Nexus 7, SOMEONE absorbs the loss. Furthermore, it probably eats into ASUS' own sales.

The Nexus 7 sales are Asus sales. You just assume its sold at a loss. Maybe so many people buy 16gb models that the overall line turns a profit. If it is thin margins then fine, we are basically back where computers are.

I'm not sure.

Samsung is or they wouldn't bid for the Nexus. If anything I bet Samsung isn't looking at lost sales to the Nexus compared to sales the Nexus will bring from customers of other value tablets. No Samsung tablet so far has been priced aggressively.

Does LG have an incentive to sell the Nexus 4?

Sure they do:

1. They get better experience with Google's code and early shots at updates, which as we have seen with Samsung can help with your non-Nexus lines.

2. It gives LG some legitimacy in the community. Until the Nexus we NEVER talked about LG phones. It doesn't exist to me because of (expected from LG) build quality issues, but the fact they are finally being talked about in the Android space is huge.

3. The Nexus lines run for about a year. That price-point will eventually be profitable within the life of the phone if it isn't now.

Traditionally, hardware is meant to profit, and now we're throwing a curve ball at them.

Not really. Look at the computer OEM market.

What's acceptable?

When I pay as little as possible for quality products. In some ways the new Nexuses are the first acceptable Android devices to a whole new audience.

 

[Munky]

But if this continues, how much competition will there be? Acers a brand that pretty much competes mostly on price and they couldn't come up with anything that is as good as Nexus 7 for the price.

Going forward I see this.

Low end no name tablets.
Ainol and the like

Mid priced
Nook
Fire
Nexus

Higher priced
Surface (not a given it will survive)
Ipad
Nexus

Unless your the one chosen to make the next Nexus tablet (android side), why even bother?

Competition is an incentive for the manufacturers to innovate and give the consumer what they want. Some manufacturers are less competitive than others, some go out of business, but that happens in many industries. I would still rather have more competition than less.

Acer can create compelling products if they make the effort. I remember a year ago they had an AMD Brazos Windows 7 tablet that could spank anything from Apple or Android in terms of capabilities, and if I was in the market for a Windows tablet at the time I would have probably bought one. Now that Windows 8 is making a strong entry into the tablet market, that's just one more market where a manufacturer can compete and innovate if they weren't as successful with Android.

 

[BladeVenom]

Kindle HD costs $174 to make, they sell for $199.
iPad Mini costs $198 to make, they sell for $329.
http://news.techworld.com/mobile-wi...dle-fire-hd-reveal-differing-business-models/
The Kindle is not sold at a loss, Jeff Bezos has said they are sold at a break even price. So Apple probably has about a 50% markup on the iPad mini.

 

[badb0y]

Kindle HD costs $174 to make, they sell for $199.
iPad Mini costs $198 to make, they sell for $329.
http://news.techworld.com/mobile-wi...dle-fire-hd-reveal-differing-business-models/
The Kindle is not sold at a loss, Jeff Bezos has said they are sold at a break even price. So Apple probably has about a 50% markup on the iPad mini.

Seems about right, Amazon is not looking to profit off hardware as they are trying to get people invested in their ecosystem.

 

[golem]

Competition is an incentive for the manufacturers to innovate and give the consumer what they want. Some manufacturers are less competitive than others, some go out of business, but that happens in many industries. I would still rather have more competition than less.

Acer can create compelling products if they make the effort. I remember a year ago they had an AMD Brazos Windows 7 tablet that could spank anything from Apple or Android in terms of capabilities, and if I was in the market for a Windows tablet at the time I would have probably bought one. Now that Windows 8 is making a strong entry into the tablet market, that's just one more market where a manufacturer can compete and innovate if they weren't as successful with Android.

But how do you compete with Google and Microsoft in the Android and Windows 8 tablet arena? Any hardware innovation that you come up with, unless it's a unique innovation that only you can create will be copied from you in the next generation. You have to keep on coming up with new hardware innovations each product launch or patent the hell out of everything.

But on the other hand, both Google and Microsoft have a huge advantage, first to market with a new version of the O/S. They will have this each and every new generation of the O/S.

So OEMs have no cost/price advantage (how do you compete with a company price wise when you have the same cost, but they don't look to make a profit?), a fleeting or non existent hardware advantage, and a constant O/S disadvantage?

 

[ChAoTiCpInOy]

Kindle HD costs $174 to make, they sell for $199.
iPad Mini costs $198 to make, they sell for $329.
http://news.techworld.com/mobile-wi...dle-fire-hd-reveal-differing-business-models/
The Kindle is not sold at a loss, Jeff Bezos has said they are sold at a break even price. So Apple probably has about a 50% markup on the iPad mini.

Apple's gross profit margin for the last quarter was around 40%. The last quarterly conference call for Apple had CFO Peter Oppenheimer say that the iPad mini margin was significantly below the average for the company. I would interpret that as 20-30% for the iPad mini.

http://www.theverge.com/2012/10/25/...rgin-is-significantly-below-corporate-average

 

[Munky]

But how do you compete with Google and Microsoft in the Android and Windows 8 tablet arena? Any hardware innovation that you come up with, unless it's a unique innovation that only you can create will be copied from you in the next generation. You have to keep on coming up with new hardware innovations each product launch or patent the hell out of everything.

So what if it's copied? You still get to enjoy the benefits of innovation before the competitors catch up.

But on the other hand, both Google and Microsoft have a huge advantage, first to market with a new version of the O/S. They will have this each and every new generation of the O/S.

Google and MS are software companies. I don't need Acer, LG or Samsung to create their own OS which only leads to further software fragmentation. As long as they make competitive hardware to use the available OS, they can sell their products.

So OEMs have no cost/price advantage (how do you compete with a company price wise when you have the same cost, but they don't look to make a profit?), a fleeting or non existent hardware advantage, and a constant O/S disadvantage?

What OS disadvantage? Unless MS and Google somehow cripple the OS they provide to the OEMs then I don't see how they would be disadvantaged.

 

[golem]

So what if it's copied? You still get to enjoy the benefits of innovation before the competitors catch up.


Google and MS are software companies. I don't need Acer, LG or Samsung to create their own OS which only leads to further software fragmentation. As long as they make competitive hardware to use the available OS, they can sell their products.


What OS disadvantage? Unless MS and Google somehow cripple the OS they provide to the OEMs then I don't see how they would be disadvantaged.

It's much more expensive and risky to be the innovator. It's much cheaper to copy a popular innovation.

Google and MS can use any manufacturer to make their hardware, what I'm saying it's a even playing field whether you're a hardware manufacturing or a software company outsourcing to a hardware company.

Jellybean 4.1 came out 5 months ago on the Galaxy Nexus and Nexus 7. Jelly bean on competitor phones and tablets have just started coming out and 4.2 is about to roll out. You don't consider that a advantage?

 

[Chiropteran]

Jellybean 4.1 came out 5 months ago on the Galaxy Nexus and Nexus 7. Jelly bean on competitor phones and tablets have just started coming out and 4.2 is about to roll out. You don't consider that a advantage?

That is by choice. The manufacturers choose to modify android with various skins, which adds to the time required before putting out the OS update. Also many manufacturers simply skip updates.

It's both an advantage and a disadvantage. In the manufacturer's mind, the skins they add somehow add value. I'm not sure I agree, but that is what they think. As far as skipping updates, it saves them money they would otherwise spend in testing and writing drivers.

A manufacturer *could* release vanilla android versions and as long as they had drivers and such ready I don't see why the delay would be nearly as big as it has been in the past. Thus far, no manufacturer has wanted to do this.

 

[lothar]

It's much more expensive and risky to be the innovator. It's much cheaper to copy a popular innovation.

Google and MS can use any manufacturer to make their hardware, what I'm saying it's a even playing field whether you're a hardware manufacturing or a software company outsourcing to a hardware company.

Jellybean 4.1 came out 5 months ago on the Galaxy Nexus and Nexus 7. Jelly bean on competitor phones and tablets have just started coming out and 4.2 is about to roll out. You don't consider that a advantage?

Not at all.
Asus tablets has had Jelly Bean since August(only a month after the Nexus did which came out in July).

If other manufacturers choose to heavily skin Android such that it delays their own updates, that's only a problem for the manufacturer and the people that bought such manufacturer's products.

 

[gotsmack]

eh, I don't care. We'll have like 2 or 3 players in the high end android tablet space, Amazon Google and B&N in the 200-300$ space and a rotating list of players in the ultra low end.

For phones we'll see more variety because of the subsidies from the carriers but the prepaid non low-end android phones will be mostly Nexus.

I don't see how OEMs having slow updates is a problem. They made their bed now its time to lie in it. F them for putting on their stupid skins and they deserve to lose business.

there is no near tern or mid term concern of OEMs going outbid business. The US is not the only market and Nokia hasn't made any money off phones in a while and they're still kicking around. I think Sony has been losing money for a while now too and they are still around.

 

[Puddle Jumper]

I honestly think that HTC and Moto deserve a place in this world. They provide hardware and software choices. I like HTC particularly. Moto just fails all around. But wasn't that the point of Android? It's a base OS for the OEMs to do whatever they want to it.

I'm fine with Nexus phones too, but why do they have to come in and severely undercut the ENTIRE MARKET. It's not just Apple. It's the OEMs also. I think many of us would be fine with a Nexus phone priced at $599 just like a $599 SGS3. The Nexus eats into OEM sales. It's not just Apple. So while ASUS gets paid off for the Nexus 7, SOMEONE absorbs the loss. Furthermore, it probably eats into ASUS' own sales.

Look at the Nexus 10. That will undoubtedly eat into the Galaxy Tab 10.1 So The Nexus 10 makes a profit and Google probably pays Samsung for it too, it cuts into the GTab 10.1. The question is whether Samsung nets anything out of this or would be better off selling Gtabs and Gnote 10.1s. I'm not sure.

Does LG have an incentive to sell the Nexus 4? If it's Google subsidizing, then I think that's wrong. Traditionally, hardware is meant to profit, and now we're throwing a curve ball at them. I mean what's acceptable? Do you want Apple's iPad division to run in the red and have the iOS App Store pay for it? Or maybe cut the iPad prices even more and pay it back with iPhone sales? What's acceptable?

You are crazy if you think anyone would be willing to pay $599 for a Nexus when*a $299 Nexus is an alternative. I know I wouldn't.

 

[sjwaste]

The editorial's conclusion is complete bullshit. Setting prices the way Google and Amazon have doesn't "set expectations" for the consumer. It prices their products in the fat part of the demand curve. These devices are toys, and given the choice between $600 to have one or $0 to not, which is what you had with the iPad only, many chose the $0 option. All that Google and Amazon have done is identified the price at which the majority of the market starts to shop, and are selling accordingly.

It's basic fucking economics. The appalling part is that the author doesn't understand that.

 

[magomago]

That is by choice. The manufacturers choose to modify android with various skins, which adds to the time required before putting out the OS update. Also many manufacturers simply skip updates.

It's both an advantage and a disadvantage. In the manufacturer's mind, the skins they add somehow add value. I'm not sure I agree, but that is what they think. As far as skipping updates, it saves them money they would otherwise spend in testing and writing drivers.

A manufacturer *could* release vanilla android versions and as long as they had drivers and such ready I don't see why the delay would be nearly as big as it has been in the past. Thus far, no manufacturer has wanted to do this.

LOL YEAH. Agreed. I have no clue why they think fancy skins that annoy people, aren't fully functional, and restrict updates severely are preferred. I'd argue that its a reason to AVOID a manufacturer...and that is exactly of the main, and the initial, appeals of the Nexus Phones