Apple Must Rebrand iPad, iPod or Lose Tablet Market to Amazon, Google
It might sound like a farce, but it is true. Apple is no longer the easy king of the tablet market. With one press conference, Amazon has changed everything.
The online retailer unveiled four new Kindle Fire tablets, three of which feature high-definition displays. Amazon's pricing structure ($159 for the cheapest seven-inch model, $499 for the 8.9-inch 4G LTE iteration) is a significant blow to Apple, which has maintained the same iPad pricing structure since the day it was released.
Historically, Apple has been viewed as a company that produces premium products. iMacs and MacBooks are considerably more expensive than their Windows-based counterparts. When the iPhone was first released, it was one of the most expensive cell phones ever produced.
The iPad was different. While Apple's competitors had traditionally fought to undercut the company's prices, Hewlett-Packard (NASDAQ: HPQ), Research In Motion (NASDAQ: RIMM), Motorola, and other manufacturers were initially unable to release a tablet for less than $499. The price of those tablets only dropped after they flopped at retail.
Amazon was the first company to make a difference with a well-branded and heavily hyped $200 tablet, but it did so by producing a lower-quality seven-inch device. Google (NASDAQ: GOOG) followed suit with an impressive seven-inch tablet of its own.
The original Kindle Fire did not alter the industry, but there is no doubt that things will change from this point forward. Even if Apple did not lose a single customer, its market share would still decline as Amazon increases the overall size of the market. By offering a tablet for every conceivable customer -- at every conceivable price point -- Amazon is poised to take much more than 22 percent of the domestic tablet market.
Up until now, many expected Apple to sell its seven-inch tablet -- the presumably titled iPad Mini -- for $299. At least one analyst believed that Apple could dominate the market if it charged $249.
In light of Amazon's announcements, it would be difficult for Apple to release a seven-inch tablet for $249 while the iPod Touch retails for $199. However, if Apple wants to compete head-on and hit the $199 price point for its pint-sized tablet, then there is no way the company can continue to charge $199 for the iPod Touch.
A simple solution would be to knock the iPod Touch price down to $149. That might be the best move if Apple does not want to make any significant changes next year.
Long-term, however, the company needs to think about its full-scale strategy. How viable is the iPod Touch? How important is it to the company's bottom line? Does Apple want to continue selling the Touch alongside an iPad Mini?
If so, Apple might want to listen to the rumors and attach the iPod HD moniker to its seven-inch tablet. In doing so, the company could more easily differentiate between an iPad (which, by Steve Jobs' account, should not be seven inches) and the smaller iteration. It would allow Apple's initial claim that it would not manufacture a seven-inch iPad, all the while capturing a significant (if not dominating) portion of the low-end tablet market.
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