Apple Can't Charge More than $1,000 for a New TV
A new study shows that while consumers are eager to purchase Apple's (NASDAQ: AAPL) first television set, the company may not be able to charge more than $1,000 for the unit.
According to AppleInsider, consumers who are willing to pay the most (roughly 32 percent more than the current TV set they own) are within the 18 to 29-year-old demographic. Consumers within the next demo (ages 30 to 44) are willing to pay 15 percent more.
Older consumers (ages 45 to 64) are willing to spend an additional 22 percent. Those who are 65 or older would spend 18 percent more than the cost of their current TV. Collectively, consumers said they would spend an average of 20 percent more.
In breaking down the numbers, however, it seems that Apple is still hundreds of dollars away from achieving the premium pricing structure it desires from the television market. The study, which was conducted by AlphaWise and Morgan Stanley, found that consumers typically spend less than $1,000 on a TV.
Thus, when 18 to 29-year-olds said that they would spend 32 percent more for an Apple television set, they also revealed that their current TVs retail for less than $800. The average TV price among all consumers surveyed is somewhere around $900. With a 20 percent premium, consumers say they are willing to spend $1,080 for a new Apple television set -- just $81 more than the cost of Apple's 27-inch LED Cinema Display.
This creates the same kind of pricing dilemma that Apple faced with the iPad Mini. Prior to its unveiling, Apple unveiled the third-generation iPad for $499, lowered the price of the iPad 2 to $399 and released a new iPod Touch for $299. Older iPods were being sold for $199 to $249. This left very little room for Apple to price the iPad Mini without cannibalizing sales of an existing product.
If Apple charged less than $300 for the iPad Mini, consumers would buy it instead of the iPod Touch. However, if Apple charged more, then consumers might be tempted to ditch the Mini and go with an iPad 2 instead. Apple decided to risk the latter scenario and attached an MSRP of $329 for the 16GB Wi-Fi version of the iPad Mini. In addition to the reduced memory, Apple also dropped the Retina Display from the Mini -- likely to save money, but also to prevent the Mini from diminishing the value of other iDevices.
Now Apple is facing a similar -- if not greater -- challenge for its first television set. First it must deal with the challenge of its existing products. If Apple charges less than the Cinema Display, sales of the Mac monitor will come to a screeching halt. If Apple charges more, consumers may be less interested in buying a new TV.
Apple must also address the size issue. While it is possible that Apple will offer a 27-inch TV for those who want a smaller set, the average consumer demands a screen that measures at least 36.6 inches diagonally. That size is expected to jump to 38.8 inches in 2013. This means that Apple is likely to focus on making TVs that are larger than the Cinema Display.
However, if Apple decides to charge $1,000 for a 37-inch set, it would not simply diminish the value of the Cinema Display -- it would be the most expensive 37-inch TV available.
Panasonic (NYSE: PC) charges less than $700 for a 37-inch Smart TV. Sony (NYSE: SNE) charges $799 for 40-inch model. Samsung produces a wide selection of small Smart TVs that range from $419.99 to $739.99.
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