Apple fixes its mistake: iPad mini pricing invalidates ‘price umbrella’ theory

“Apple’s long-awaited iPad refresh is finally a reality,” Sameer Singh writes for BetaNews. “Apple’s new full-size iPad, rebranded as the “iPad Air”, starts at the usual $499 price. Apple also unveiled an iPad mini with retina display, with a higher starting price of $399 and retained the original iPad mini at $299. Finally, the aging iPad 2 was also retained with the price unchanged at $399. This essentially proves my theory that Apple’s pricing strategy has nothing to do with a ‘price umbrella’ and everything to do with margins.”

“If margins weren’t a concern, Apple could have retained the 4th generation iPad at $399,” Singh writes. “If Apple’s motive was to eliminate the price umbrella for competitors, it could have lowered the price of the original iPad mini to $249 or lower. Instead, Apple chose to reduce price by $30 which could be lower than the BOM reduction from last year’s launch. It is clear that Apple was spooked by the cannibalization and margin erosion caused by last year’s iPad mini launch and sought to correct that ‘mistake.'”

Singh writes, “This refresh may not have a major impact on holiday quarter sales. The most awaited product from this refresh, the retina iPad mini, is rumored to be in short supply until early next year and seems overpriced compared to market expectations. This leaves the $499 iPad Air, the $399 iPad 2 and $299 iPad mini. Based on this and the intensity of competition from cheaper, ‘good enough’ Android products, I wouldn’t be surprised if holiday quarter iPad sales remained roughly flat.”

Read more in the full article here.

28 Comments

    1. Here is the order of operation of this:

      1) Apple will amazing sales the day all the new products are released
      2) Apple will have great Q4 sales.
      3) By January they will have determined they broke some kind of sales record
      4) They day after the news in 3) is released an army of Korean financed tech writers will blog about how Tim Cook is destroying Apple.

    1. My brother was over yesterday so I could update his iPhone software. He mentioned that he bought one of those cheap android tablets for $140, I asked him what he thought of it.

      “well, it just kind of sits there on the desk and I never touch it. It is slow as hell and what a funky operating system. I would just as soon search the web on my three-year-old iPhone.”

      1. dtrenton – this is exactly the dynamic at work when Tim Cook talks about usage share hitting 81% for iPad vs. 19% for all the rest. Sooner or later the market is going to figure out that the cheap sh*t isn’t even worth the $140 they (would have) paid for it.

    2. Android is not good enough for tablet because the whole point of the tablet is that it’s simpler and easier than a full computer. Android users face problems like app-lack, battery drain, malware, inconsistent interfaces, slowness, needing to use a task manager, and a variety of other issues. It simply does not fulfill the value proposition of being more convenient to use than a full computer at anything particular, so it falls into disuse.

  1. With the new iPad air, I believe the pendulum will shift. I was going to get a mini to replace the iPad 2 I bought my Mom, but at 1 pound in weight, I am getting her the air.

    1. Size. Otherwise they have the same processor, same resolution and same configuration – except iPad Air will have a 128GB conf.

      I’ve seen arguments on both sides – small it better vs fullsize is better. Personal preference right now.

    2. iPad Air is less portable but the on-screen targets are easier to hit for people with larger hands or poorer eyesight.

      The iPad Mini Retina is more portable and shares the same pixel density as the iPhone. Many people have no problems with the smaller targets and the lighter weight and smaller size make it ideal for games that depend on the accelerometer and gyroscope. Even at 1 pound you may not want to hold the iPad Air up to play it. (I balance mine on my knees and steer with my legs while playing Sky Gamblers flight sims.)

  2. So, “…the retina iPad mini, is rumored to be in short supply until early next year …”. What if Apple had a few BILLION sitting around and wanted to step up production. Did you notice that just the iPad mini would be in short supply. Is it because the iPad mini is the only iOS device using the A7 chip? Or the M7 chip? Or the retina display? Or new battery? Or ???

    Maybe Apple is making the iOS devices that they earn the MAXIMUM profits on first. Notice that people still can’t get a high end gold iPhone with the A7, M7, retina display, … yet?

    Again, Apple will state next week, “If we could have made more we would have sold more.” The only reason the low end stuff is selling is because the higher end hi profit iOS devices are not available yet! Hey Tim Cook, isn’t that what you are great at? Show us next time and get the lead time down before Christmas this year!

  3. Long awaited? Seems like it happened right on schedule. I’m glad Mr Singh thinks that self-comments about validation are the same as facts but I can think of another theory as to the pricing scheme.

    Production capacity. Who know how the sourcing of different materials and components affects Apple’s decisions. Maybe they converted over retina screen production and so need 100% of the output for the new Air and Mini Retina.

    In any case, another pundit/reporter/bozo speaks out of their ass.

  4. Singh just pronounced his idiocy by claiming that android products of lesser cost are good enough to substitute for Apple products this is not only false but a gross misunderstanding of the difference between Apple products with a integrated ecosystem and android products that do not

    1. Plus more LTE, AC, and a 128GB option.

      What some people don’t understand is how connected we are to these devices. What does $70 come out to when I divide it by the number of hours I’ll use it?

      Apple made the decision that the mini != cheap, just a different form factor, and for me it’s perfection (minus the TouchID).

    2. Every year is a new upgrade(s). It never came at a premium before. Sucks, more so for me because the mini is $419 in Canada. $90 increase, total with tax almost $500. Screw that I’m getting an Air.

  5. What’s wanting in this article is any appreciation of intelligence by the customer. It’s entirely about what-stuff-costs via shelf-price. No ROI, no TCO, no usability comparisons, no app numbers or quality comparisons. IOW: It’s just a quick and dirty price comparison article. So big fat yawn from me.

    Meanwhile: Intelligent customers buy according to a lot more than price. The new iPad Minis are HYPER-improved over the previous generation and will have a huge draw of customers no doubt. Etc.

  6. The margin is only an issue on 16 GB models. I wonder how many 16 GB models are sold vs. the rest.
    The 32, 64, 128 GB models with their $100 per “storage step” increases have huge margins comparatively due to the premium they charge for the increases. $100 for a 16 GB upgrade, REALLY ?

  7. “Based on this and the intensity of competition from cheaper, ‘good enough’ Android products, I wouldn’t be surprised if holiday quarter iPad sales remained roughly flat.”

    Uhhh, why is MDN posting articles from Comedy Central, rather than Mac news?

  8. “This essentially proves my theory that Apple’s pricing strategy has nothing to do with a ‘price umbrella’ and everything to do with margins.”

    Who said it was about price umbrella in the first place?

    1. Tim Cook claimed that Apple would no longer permit competitors to survive under a price umbrella and that they would compete aggressively on price in mobile devices.

      What’s happened is they went back to a strategy of holding price points and adding features.

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