Yesterday, Amazon announced the new Kindle Paperwhite, a refreshed Kindle Fire and the brand new Kindle Fire HD. As expected, all of them are priced aggressively, particularly the Kindle Fire HD models that start at $199 for the 16GB 7-inch model.
There have been plenty of reactions to these prices but by far the most asinine is that Apple is ripping people off with their pricing of the iPad. But are they really?
There is a big difference in the way Amazon and Apple operate and the way they choose to do business. Amazon first and foremost is an online retailer with a lot of stuff to sell. The Kindle has always been a way to get people to buy stuff from their store. Initially it was just e-books, but then Amazon started selling a lot of other digital content too, and then there was this ton of non-digital content as well for which Amazon is known for. And for that they created the Kindle Fire.
In order to entice people to buy these devices, the prices had to be low and that’s not a major concern for Amazon because at the end of the day, their goal is to get people to buy content from their store. Once people buy these devices, they have no choice but to buy from Amazon due to the somewhat locked nature of the Kindles. And then there’s also this thing where Amazon actually has good content, so people would buy from them anyway.
This is similar to how Google operates. They don’t give you top notch search, email, maps and other services for free out of the goodness of their heart. At the end of the day, these serve as gateway for Google’s main business: advertisements.
But Apple is not like that. Apple has always been a hardware company. They make their money selling hardware. This is why they can afford to give stuff like Mountain Lion for $20, because they made money selling you the hardware.
Sure, Apple also has content stores, but they serve as enhancements for the hardware. All the stores, except for the iTunes store, were created after Apple launched the iPhone. Even the iTunes store was launched to complement the iPod back in the day.
In other words, the Kindle is like the appetizer before the main course. The iPad is the main course, with the different stores acting as condiments. You can have the main course without the appetizer, but you can’t have the condiments alone.
As such it is ridiculous to expect Apple to use the same pricing strategy as Amazon. Apple already sells the iPad at a very thin margin. The $499 price point now seems like standard* but it was a huge deal back in the day when Apple announced the iPad. It was a near impossible price point that only a company like Apple could meet because they source their parts at a significantly lower price than other companies.
Even today, things have not changed. Apple is using a ridiculously high quality panel, a massive battery and other top notch components inside the new iPad that the competition can only dream about, and still selling it for the same price. If you think they are making a lot off them then you are delirious. If you think they should drop the price and sell them at a loss like Amazon then you are retarded.
One can say at the end of the day it does not matter to the consumer how the company reached the price. For them, it’s the final price that matter. And sure enough, the new Kindles are cheaper to purchase than the iPad. But are they actually any good? I haven’t used any of them, few have, but even if you compare them on the paper the new iPad is still far ahead in terms of hardware as well as software. Basically, you get what you pay for.
So tell me again, how exactly is Apple ripping people off with the iPad pricing?
Update: Turns out Amazon also puts ads on the Kindle Fire. Another reason why they can afford to sell them so cheap.
*I find it funny how when Apple does something revolutionary and then a few years later when someone else improves upon it, somehow everyone forgets Apple did that thing first and start berating them for not being good enough. Like the $499 price point for tablets in this case.