When Apple unveiled the original iPad back in 2009, it invented a category. Sure, “tablet PCs” existed long before the iPad, but every single one was a flop. They didn’t meet the demands of businesses and they lacked the fun factor and intuitiveness to appeal to a broad consumer base.
So Apple had a very important number to crunch: the price of this new device. Certainly there were some driving factors: how much does the thing cost to make and how much of a profit margin does the company want to aim for? Apple couldn’t necessarily compare the device to past tablets, but it was safe to say that the tablet was somewhere in the middle of an iPhone and a Macbook Air.
Apple’s laptops are notoriously expensive. The regular Macbook started at $1,000 (it was just discontinued this week). The Macbook Pros were recently refreshed and boast a superior quality exterior, but they cost anywhere from $1,250 to $3,000 for a high-end model with upgrades. The brand-new Macbook Air lineup is more consumer-focused but still starts at a full thousand dollars.
The iPhone 4 starts at $649 without a wireless contract and drops to $159 with one.
Now, critics of Apple have long moaned about the infamous “Apple tax”—the premium they claim the company charges for its products, which some dub “luxury” goods. “No one should pay $2,000 for a stinking laptop!” And what about that cinema display? “A freaking monitor for a thousand bucks? Are you kidding me?”
The critics often fought with the die-hard Apple fanboys who claimed the products were worth every penny. The hardware was higher quality, the software ran smoother, the overall experience—from buying the product to using it—was simply better. And that’s why it cost more. It was worth more.
The iPad launched and the prices were revealed. $500 for a wifi-only, 16 GB model, up to $850 for a 3G-compatible 64 GB model. People cried out in disgust. Who’s gonna pay nearly a thousand dollars (with tax) for this tablet thingy? What does it even do? May as well get a laptop for that price. Or may as well just use a smartphone and keep the wallet closed.
But the key here in the pricing is the entry point: $500 for a 16 GB wifi iPad. Whether people thought it was overpriced or a good deal was just speculation at the beginning—people compared it to smartphones and laptops but not to other tablets because other tablets didn’t exist. When competitors came out with their own iterations, it became obvious that Apple wasn’t pushing for profit. Anyone who held reservations about the Apple tax applying to the iPad quickly reversed their opinion.
Since the iPad’s history-making debut, dozens of competitors have come out: numerous Android-powered devices like the Galaxy Tab and Motorola Xoom, RIM’s QNX-styled BlackBerry PlayBook, and more recently HP’s webOS-based Touchpad. And each time, pundits have said that to compete with the iPad, these tablets needed aggressive pricing. It hasn’t happened.
Samsung, RIM, HP. Android, QNX, webOS. Companies making tablets designed to take on Apple’s “magical and revolutionary” device have been priced similarly—starting at $500-plus for 16GB, wifi-only models, and going up from there. This isn’t because these companies think they can kill the iPad at its own price point. They know they can’t. It’s because they can’t go any cheaper.
Thanks to some very favourable relationships with key manufacturers—the word “exclusive” comes to mind—Apple is able to craft its iPads to an exceptional standard of quality (top-notch glass screen and metal casing) and charge the same as others pumping out cheap plastic. Apple’s tablet is thin, light, well-built, and boasts arguably the best tablet operating platform. If competitors can’t price their products substantially less, no one will buy them.
And no one has been.
So, where’s the Apple tax?