This week, HTC announced the Jetstream, a 32GB Android tablet with a 1.3-megapixel camera and AT&T 4G LTE connectivity. Issue is it’ll cost you $700, and requires a two-year contract with AT&T. Would you buy that over an iPad?
“Never mind an iPad, you can buy two 40-inch TVs for that price,” says Sarah Rotman Epps, senior analyst at Forrester Research specializing in consumer product strategy. “It’s wishful thinking of HTC and AT&T to launch at this price point. Start the countdown to the fire sale, à la Motorola and HP.”
Not only is it wishful thinking; it’s borderline delusional for HTC to think it will be able to move units of the Jetstream at $700–the company isn’t even offering a Wi-Fi version, and without contract, the tablet costs $850. Other iPad competitors in the space–the Samsung Galaxy Tab, Motorola Xoom, BlackBerry PlayBook–have been unable to compete with the iPad, even at competitive prices. Only the HP TouchPad has seen success–and only once it dropped the device’s price by 80%, to $99. If HP found the bargain basement price (or something even lower) for a tablet, HTC might have found the cathedral ceiling.
The high-priced devices (not) flying off shelves
1// HP Slate 500
HP’s anti-TouchPad boasted an $800 price tag at launch–and runs Windows 7.
2// Motorola Xoom
Without carrier contract, Motorola’s much-touted entry to the tablet game cost a whopping $800, too. After poor sales, however, Motorola decided to lower that price to $599.
3// Mervis iPad
Let’s not leave Apple out of the mix! After all, there’s Mervis’s 64GB diamond-encrusted iPad, made up of 11.43 carats and only costing you the bargain price of $19,999. Did I mention it comes with 3G?
“It’s definitely too high,” says Ben Bajarin, a consumer technology analyst with Creative Strategies, referring to the Jetstream’s cost. “They would have a hard time competing even if the price point was the same [as the iPad], let alone $200 more. The thing that’s become glaringly clear is that if you’re going to price something around or even more than the iPad, the product itself has to be surprisingly better than the iPad. And that’s where people are falling short.”
“HTC works with the carrier partners to set prices, and that’s all the color I can provide,” an HTC spokesperson tells Fast Company. When asked about the universal reaction to the news–Yahoo, ComputerWorld, the Huffington Post, Venturebeat, Gigaom, and others all questioned the Jetstream’s high price–the spokesperson declined to comment.
It’s hard to think of a single metric where a competitor in the tablet market outshines the iPad, at least enough to justify purchasing the device at the same price point (or possibly higher). By sales, performance, reviews, apps, and more, the iPad is the clear industry leader. Can any consumer justify spending more than what it would cost to purchase an iPad? “At this point, probably not,” Bajarin says. “I think Apple has a whole lot more going for them than Android does beyond just any price advantage. They have a much more mature ecosystem. Until a product is, first of all, on par in terms of design, user experience, support and ecosystem, I don’t see how [competitors] can price it anywhere near [what HTC is charging for the Jetstream]. That’s just way too high. Consumers are going to look at [the Jetstream] as an unfamiliar product–and 4G LTE isn’t that big of a draw yet for them to say, ‘Well, that justifies the cost going up.’ To some degree, it’s going to help consumers easily make a decision to go toward a product they already know they’re going to like.”
It’s certainly not the first tablet boldly priced higher than the iPad. The HP Slate 500 was marketed at an astonishing $800 when it first came out. (“Running Windows, no less,” laughs Bajarin.)
The problem is that it’s difficult to keep prices down on tablets when margins for the hardware are so low. HP, for example, took a significant hit to sell the TouchPad at the price of $99–it could’ve cost the company as much as $300 million. For other hardware players such as HTC and Samsung, it leaves limited options when they’re not offering software and services like Apple does. “They’re just in the hardware game,” Bajarin says. “The only shot they have is on price. Because of that, they’re pricing up [the devices] because they can’t take a blood bath and lose money on the hardware when hardware is the only way they make money.”
That’s why experts in the space such as Forrester’s Sarah Rotman Epps are so excited for Amazon’s tablet. She estimates the device could sell between 3 to 5 million units in its first quarter alone. Why? Because it’s rumored that Amazon’s tablet would be marketed in the $250 to $300 range. And why can Amazon afford to sell at such a low price? Because they can make up for losses through software and services.
“Amazon is in an interesting position because they have more of a business model than just selling hardware,” Bajarin says. “All signs are pointing to Amazon heavily discounting the cost of the hardware, but then being able to make that up in terms of sales of books or physical goods or any number of other ways.”
Adds Bajarin, “It’s that $250 to $300 range that is the sweet spot, where you wouldn’t be taking such a blood bath on the hardware–but you’re going to have to have a business model to make up for it in software or services.”
As for the $700 Jetstream: Well, good luck, HTC.