The clear winner here is the consumers no doubt, so who’s the loser? Most of us will point to Amazon’s Kindle Fire and some optimists might say iPad sales will be affected. Not even close. It’s every Android tablet maker company out there. If you’re not linked to the Nexus brand name which in this case ASUS, you’re more or less screwed. How will hardware companies such as Samsung, Dell, HP, Acer or Sony beat the price of the Nexus 7 on the spec that it has?
Brian Barret from Gizmodo wrote a great post on why he thinks Google can’t beat Apple even when selling at a cut price, and explains why Apple could easily reduce $100 off the current iPad price (IF they need to) and won’t even break a sweat. After reading it really got me thinking, that is so true. Here couple of quotes grabbed from that post, you should read it in full.
There has not yet been a 10-inch tablet that’s come anywhere close to rivaling the iPad. There just hasn’t. The iPad is Jaws; if you want to survive, get the hell out of the ocean and hop in the kiddie pool. And that’s the model Google’s working from. Make something so much smaller and cheaper that it’s almost an entirely different category of device.
The Nexus 7′s price advantage takes away any incentive to make a 7-inch Android tablet. Apple dominates the 10-inchers like a 1960s Muhammed Ali. So what do you, hardware maker? You give up. Or back another horse.
With such muscles comes at a cost, and to sell the Nexus 7 at $199 Google is probably taking a loss or best break-even on every Nexus 7 tablet sold. Their objective is to get as many android tablets out as possible to increase the user base. Google is able to sell at a loss because they could make up for that with digital contents that is sold through Google Play, and the ads. In Kindle’s case, Amazon Prime.
In contrast, Apple is actually earning nearly $200 on every unit of iPad sold, and the units shipped is in millions. If that alone doesn’t make Apple rich, there is the iTunes. In iTunes, Apple has one of the worlds largest online ecosystems and many considered the best in terms of providing digital contents to users. So in truth, if Apple see’s a slight shift in the market, they can always offer a price cut and still make profit selling the hardware alone.
Google and Amazon have an ecosystem to fall back on, but not companies that makes a profit out of the every hardware sold. So what’s left for the tablet makers that is leeching that ecosystem? 5″ or 15″ tablets? That, or create something different, example Microsoft Surface.