Apple's Phil Schiller defends iPad mini pricing

Schiller defends iPad mini pricing

After yesterday’s introduction of the iPad mini, Phil Schiller, Apple’s Senior Vice President of Product Marketing, found himself defending its $329 price tag. While Apple’s biggest competition in the category of smaller tablets, Google and Amazon, price their small tablets starting at $199, Schiller defended the iPad mini as a premium product worth the higher price, and said that customers understand this and are willing to pay. Schiller highlighted this at yesterday’s press event, drawing direct comparisons to Google’s Nexus 7, as Noel Randewich and Poornima Gupta for Reuters report:

Apple is under pressure to defend its dominant position in tablets, a market it created with the launch of the first iPad in 2010. The intensity in the marketplace was evident in Tuesday's unveiling of the iPad mini as Schiller took the unusual step of doing a side-by-side comparison of the smaller iPad and Google's Nexus 7 tablet.

“Others have tried to make tablets smaller than the iPad and they've failed miserably," Schiller said during the event. "These are not great experiences."

On stage yesterday, Schiller compared the iPad mini’s app experience to that of the Nexus 7, and said that while the Nexus 7 runs blown-up phone apps, the iPad mini runs full iPad apps. This is one of the main selling points for the iPad mini, that it is a full iPad and that the app experience reflects that. Schiller also tauted the decreased weight of the iPad over the competition, despite the fact that the screen area is 35% larger than the Nexus 7.

Unlike Amazon and Google, who are selling their tablets at or close to cost, Apple always looks to make a substantial profit on its devices. This is reflected in the price of the iPad mini. Apple can afford to make a $250 tablet, certainly, but to generate the profit that they want to out of the device, they sell it for a higher price. They are not selling a cheap tablet, they are selling a cheaper iPad. That might be enough. Despite the existence of cheaper rivals, the iPad has held on to a large majority of the tablet market for over two years now. With the iPad mini, Apple seeks to continue that dominance by betting that what people don’t want a small, cheap tablet, but rather a smaller iPad with a lower price tag. Time will tell if they are right.

What do you think about iPad mini pricing? Is it too high, or are you getting what you pay for?

Source: Reuters

Joseph Keller

Joseph Keller is a news reporter for iMore. He's also chilling out and having a sandwich.

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There are 56 comments. Add yours.

dloveprod says:

Maybe if it had a gig of ram and an A6 processor and retina display people would think it was an ok price. They could even raise it to $349.

Obsidian71 says:

Who is this "people" guy? He sounds very demanding. I'm sure there are plenty of others not so caught up on specifications.

icebox93 says:

People are demanding because they'd like their devices to last more than one product cycle before they need to be replaced. An A6 chip and some more ram would make this a serviceable device for longer than the specs as they are.

Obsidian71 says:

Define "need" because there's a lot of confusion about "need" versus "want". Everyone "wants" the latest device but the iPad 3rd generation still runs everything that is available and will continue to do so in the near future.

GaiusPrimus says:

But the "near future" when it comes to Apple is much nearer then one would think.

okli says:

the entry price is a big marketing FUP.... I hope its break the neck of this FUI Schiller

Obsidian71 says:

The white iPad mini has already sold out so I guess your hopes are dashed

okli says:

the black one sold out too.... but it doesn't mean the price is right... it should be 299$ to start.... compare it to the iPad2 and New iPad new.... DUDE

wormeyman says:

The price difference is clearly apple's profit margin and nobody wants to pay for that even if we know that it is necessary to keep the company alive.

CORYK333 says:

Might not WANT to pay it, but you can be damn sure they WILL pay it.

SteveW928 says:

Of course we don't want to pay more than we need to, but like Ces1ne said, we will. Apple knows that. They are just maximizing the profit on this product as best they can. The question is whether this is ultimately the best strategy. I'd have shaved a bit of the margin for a better chance of holding their dominance in mobile sector. (i.e.: go a bit more for quantity over maximizing each sale, especially at the entry point to their tablet line.) I'd have gone for $299 over $329. While it's only $30, in the N.A. market at least, it's the psychological barrier the $329 imposes.

okli says:

U're right as usual... big W... shame U are not on Apple exec. board, U'll make much better job... than this Phil-Dude, which based on his decision record isn't worth a $ despite millions of them ... if he would be payed according to his performance, he would be in multi-billion dept to Apple... FUT

Mirage299 says:

The way I look at it is compare it with the iPad Retina display. You save more than $150 to get a slightly smaller tablets with high specifications. So in my opinion it's fine.

NickA says:

In the world of 7" tablets, it's all about price. Anyone with an Android tablet knows even though the app is "blown up" as it was put, in actuality it just means it scales properly. Had Apple taken that approach they wouldn't be so locked into a specific screen size, but I digress because iOS apps are more pleasing to the eye regardless of scaling.

Anyway, 349.00 it not a good price point when someone is looking at a Nexus 7 or Kindle Fire. If you can afford 349, you can afford 399 for an iPad 2. Why compromise on screen real estate when you don't have to.

And although build quality is better, that doesn't help the normal consumer cough up an extra 150 bucks for the iPad mini.

Obsidian71 says:

The mini hasn't even shipped yet and you're trying to tell us you know what the general public thinks about the mini. I'm sure you've got a bridge to sell me along with some pixie dust and unicorns as well.

CORYK333 says:

Regarding your "Why compromise on screen real estate when you don't have to." paragraph....it's not about "losing" screen real estate, it's more along the lines of "gaining" portability compared to the full size iPad.

SpartyOnDX says:

First of all, it is $329 not $349. So the argument is now $329 compared to $399 and is a lot different, $70 is a good chunk of change. Honestly, I think decided between the iPad mini and the iPad 2 will be a very tough decision for a lot of people. You are losing portability with the iPad 2 and the same resolution will look sharper on a 8" screen. It comes down to portability vs. screen real estate and the ladies out there can fit the iPad mini in their purse a lot better than the iPad 2.

$329 is the right price point for Apple, like all Apple products, it is priced higher than the competition but the build quality is better, resale value is higher, app and accessory ecosystem is better and the "I'm cool because I have an Apple product" is still there. People have and will continue to pay for all of these things.

Sure Apple could have priced it at $229 and crushed the competition and still made money on their apps. But that would make it seem that their small tablet was = to and Android tablet which would water down their brand and actually do more damage than good in the long run.

FLskydiver says:

Never wanted an iPad 2 (I held out for the 3) because the device was too big yet didn't really have the resolution necessary to functionally replace the magazines and aviation related charts and maps I was hoping it would replace. That changed with the retina display.

However; for the non-retina display resolution, the size and weight of the iPad and iPad 2 just doesn't make sense to me. An iPad mini is a much more attractive proposition to me; BECAUSE of it's increased portability (pocketability) and its significantly decreased weight -- not to mention one handed use. It actually turns the non-retina iPads into something you'd want to read on (like a paper kindle; only in color).

Truly, I still wished they'd competed with the 7" Kindle and at least bumped it up to a resolution capable of 720p video (as I still feel the device in general has too few pixels to really be much use outside of reading), but that would have fractured iOS too much to be worth while (making it harder on the developers of hundreds of thousands of apps).

I only see people with really poor eyesight choosing an iPad 2 over an iPad Mini. Can't fathom why anyone would want a bigger device with lesser performance, portability, and ease of use.

ilongbored says:

For $50 more, you could get a refurbished 3rd gen iPad. If you're looking to get into the tablet market, that's the best way to go. My wife saw the iPad mini and wants it to replace her Nook. Small enough for a reader, but good enough to do all the other tablet things.

arin.failing says:

i agree with it. as with ANY apple product, you pay more for the same device as the competition. the difference, however, is the engineering behind it. the price point is always high enough to make the consumer think, "do i REALLY wanna spend the extra cash," but not so high as to make them think, "oh HELL no!" i think people will need to do UNBIASED comparisons, and if product quality outweighs price (which it ALWAYS should), then the iPad mini will win. people will eventually figure it out, even if they have to go through a couple of sub-par android tablets within a year. apple products "just work", and they work WELL and for a LONG time with 0 change in performance from day 1 to day 1000.

tomhoward says:

I'll stick with something that can actually display 720p content. After having comparing against a 8.9" screen at 1280 x 800, the 7" at 1280 x 800 is a dream to read PDF's on, the lines on charts are actually visible.
I don't know how Apple think that a screen equivalent to the cheapest netbooks on offer (typically 1024 in width) is even slightly acceptable.

Obsidian71 says:

1024x768 will show all the vertical height and slightly crop the horizontal. I don't know why people think they can actually see minute differences in resolution. ProTip: You can't. You have to double the horizontal and vertical widths before you can appreciate a nice resolution jump in most cases.

gordol says:

I think the iPad Mini base price (16GB, WiFi only) should be $299. This price would keep it in line between the iPad 2 and the base iPod Touch price points. Alternatively, Apple could have used the Mini to replace the iPad 2 and keep the $329 price point.

iSRS says:

Agreed and think it will be. Maybe in 6 months, maybe in a year.

peterb77 says:

I think the 300 dollar mark is an obstacle. If Apple had somehow coughed up a way to make it 299.00 these things would sell like crazy. Heck they may sell like crazy anyway...

mrjlwilliams73 says:

It's a little bit more than I think it should be, and would be nice to start at $279 or so.

gordol says:

With the base iPod Touch at $249, there does need to be a noticeable price difference to the Mini otherwise it would cannibalize the sales of the Touch. IMO, $20 isn't enough of a jump but $50 is.

iSRS says:

Good point about the touch.

Prediction: with iOS 7, fourth gen iPod touch will go away. 5th gen will drop to $249 or offer 16 GB at $199.

iPad mini at $299. iPad 2 will go away.

iPad remains at pricing now.

isights says:

When the original iPad was released, the market was stunned by its highly aggressive price point. Prior to its introduction, watchers were afraid it might be over a thousand dollars. Then we thought Apple would shave their margins and manage to hit $800. But when Steve showed us a starting price point of $499, our jaws dropped. Executives at competing companies fainted outright.

This was not that day.

Read: The Bean Counters Are Back In Charge At Apple
http://www.isights.org/2012/10/the-bean-counters-are-back-at-apple.html

Obsidian71 says:

Reading the blatherings of some bean counter is a recipe for disaster. If they knew what they were talking about they'd be retired on some beautiful beach sipping nectar. If they're posting an article about what they think we want to read they're a lackey for "the man" like anyone else.

GaiusPrimus says:

You sir, are wrong. The article has a phrase in it that does explain the mentality of a lot of consumers: "Is one 7" touch-screen tablet running a Kindle app the same as another 7" touch-screen tablet running a Kindle app?"

I understand that people will say that the mini can do other things, but so can the Fire.

Thomasj106 says:

You also have to take into consideration not only the build quality Apple puts into their products, but the amount of tech support they are willing to offer. How many other companies offer a walk-in-the-door repair service? On top of which, their eco-system is surpassed by none. Is the price a little higher than you would like? Yes, but with good reason.

tail24 says:

The mini will be come my indash car entertainment system. I'll get the LTE model to have streaming and GPS and at a price tag of 459 I don't think that's bad at all. I'll sell my Pioneer aviv deck for 400 and my iPod for 150 which will cover my iPad mini and new Bluetooth streamable deck. Perfect size for a good product with lots of capabilities. Too bad the new maps data sucks compared to googles even though the software program is much better

gordol says:

Get the Garmin or TomTom software, GPS/Mapping software solved. :)

macharborguy says:

that is why you install Navigon or some other proven and quality mapping software.

I have a Wifi iPad 3, connected via Bluetooth to a Dual GPS Receiver, and using my iPhone 5 on Verizon as a data tether. TuneIn Radio / Apple Podcast App (only one i like that works in landscape, otherwise i'd use PocketCasts) + Navigon = a great on-dash device.

afazel says:

I'm an Android guy, not because I'm a fanboy, but because for my needs it is better. That said, I was eying this pretty closely during the announcement. If it had been $250, I would have jumped on it. If it had been $329 for the 3G/4G version, I would have jumped on it. As it is, I'll keep my Asus TransformerPad 300. It's a great tablet, and right now I don't have a compelling reason to switch.

I'd also like to point out something that everyone already knows. While the iPad mini may have a bigger screen than the Nexus 7, the Nexus 7 has a better screen. It was very unlike Apple to compete based on specs, and in this case they missed the mark. Quality > Quantity, and I was surprised to see Apple try to compete based on quantity.

At least now I won't have to install iTunes again *shudder*

ArigatoMrTalboto says:

Torn about this...

Apple will definitely price themselves out of consideration by a lot of shoppers looking for deals on cheap tablets, but the Android devices are barely being sold at or just above cost, and Apple's build quality IS obviously superior, not to mention the functionality that is enabled by the massive selection of apps.
Purchasers of Apple's products are more likely to keep creating revenue by purchasing apps, accessorizing, etc than purchasers of less expensive Android products, they're betting...

afazel says:

The iPad is no better put together than the Nexus 7 or the high end Asus Transformer tablets. There's a lot of talk about "scaled up phone apps," but for many of them it's not an issue. The ICS and JB design themes scale well between phone and tablet and offer a continuous interface. It's not really even worth mentioning anymore that the lack of tablet apps is the fault of the developers, and that Google has made it easy to create tablet apps through the use of "fragments."

I should probably get back into Android development so I can speak more intelligently about the subject.

woody88 says:

it cost too much.....

Sincerely,
Ballmer and Elop

Obsidian71 says:

Not much to defend here. Buying an Apple product is more than just the sum of its parts. It means i've got 400 stores in the US to walk in and get help. It means having a warranty that works in 13 countries. It means having access to the best ecosystem out there.

Sure you saved money on your Nexus 7 or Kindle Fire HD...but you can't match the support I get with my Apple products and to many people that's worth the premium.

Corey says:

The price is high. He may wish to claim it's a premium product, but it's not exactly a dominating piece of equipment, spec wise, and there's not really much that differentiates it from the competition. This is no longer an era where an iPad automatically has the huge leap in technology. The competition has caught up. I have no doubt an iPad Mini will sell well at that price, especially people who are explicitly tied in to the iTunes infrastructure with multiple purchases, but I don't see it being as much of a runaway success as previous iPad product has been. The 7" tablet niche seems to be an area that's more budget conscious than that of the 10" market. I think people who don't have an established tie to an iTunes based library may be less apt to spend the extra money on a tablet with specs that aren't quite class leading. Sure, there will always be those who will purchase based on brand alone, and those will account for a good amount of sales. But a first time tablet owner looking to get in on a budget has viable options in quality tablets that undercut the price of an iPad Mini.

An Apple Store is only a perk if there's one nearby. Not bashing it at all, but 400 stores doesn't cover a large chunk of the country. I'm in a fairly populous area and the nearest Apple Store is a 2 hour drive. There's not much convenience in driving two hours to have warranty work done.

agentmobile says:

I don't think $330 is an unfair price, not at all. Sure, I would think $300 would be a little better but like Rene said, they're trying to make a profit, which leads to more money for new products and innovation in a sense. And yes people do want a smaller tablet and there will always be a market for the 7" tablet , but i think 8" is small enough IMO. And the fact that the mini is 35% lighter than the 7" tablets is impressive. I could see myself getting the mini, but the only reason I'm passing on that is because I've never owned a tablet so I'm going straight for the New iPad with Retina display , I don't think it's too large for my needs. Can't wait to get one, gonna get the 32GB wifi+cellular in white

benbates says:

Personal opinion: it's a little too high. With the actual specs (or the A5X or A6 even), $250 - or so - would have been more attractive. To me, it reads off as a more powerful iPad 2, but smaller and for essentially the same price. As always, we'll have to see it in person to get a real feel for its value, and either way, you get the terrific ecosystem and great customer service along with it.

I was considering selling my third generation iPad and purchasing the mini instead, prior to the actual announcement. Instead, I'll just keep the one I have.

(And while I think the 4th gen. update came humorously soon, I don't really care either way. My 3rd gen. is still every bit as awesome as when I bought it!)

duoFurious says:

I'm just disappointed in the fact that there is not a retina display. Tech that's been active for 2 generations of iPhone and now iPad as well.

PhotoRon says:

The iPad Mini is not priced for the device it is, but for the device it will become. Apple is generally consistent in holding price points and I don't think it would want to have a device come out and then have to raise the price with the next generation. So what do we get? An overpriced shrunk down iPad 2. Who will buy it? All those early adopters and some people in the market for a smaller tablet who will be swayed by iOS and the ecosystem over the others to pay the higher price. What will we get next year? A6 chip and Retina Display making it more reasonably priced.

duoFurious says:

I agree by it's still a good device. Worth getting. I like my android tablet but getting lte And iPad mini with full OS is still very tempting

iAmManny74 says:

There's two factors that made the iPad Mini start of at $329. First, the blogosphere. All the hype around the iPad Mini was peaking at an all time high and people were anticipating it for quite while. It's evident that Apple reads blogs as this statement by Phil Schiller says it all, "You knew there would be something called "Mini" in this presentation, didn't you?" (when talking about the Mac Minis). Apple has a pulse on the tech community and probably said, "Everyone is excited about an iPad mini, so lets sell it at a higher price!"

The other factor has to be the iPod Touch, 5th gen. Starting at $299, did you really expect Apple to sell the iPad Mini for less than an iPod touch? This is how I see it playing out in an Apple Store. Customer comes in, they see it's only $299 for an iPod touch, then they see the iPad Mini, starting at $329 and think to themselves, "Why not get a bigger device for an extra $30? See, Apple already has it's entry level iOS product, which is the iPod touch and from there, people can convince themselves to buy an iPad mini or a higher model of an iPad mini.

-Manny C.

9thWonder says:

he can defend all he wants. bottom line is:

too high. wouldn't pay that price. not getting. but then again i'm not getting a table anytime soon anyways. but a mini isn't in the running when i do,

D V says:

I think the price is about $30 higher than I expected and gives me some pause. I really don't see the iPod Touch pricing at $299 to be as relevant as others have made it out to be. However, after some thought, I offer the following guess of why the iPad mini is priced beginning at $329 (I see PhotoRon has a similar point as well):

1) Higher profit on 1st Gen model during holidays, plus room for competitive promotions should they be necessary. Why not make a little extra if you can, if people will pay for it. If they aren't due whatever the competition announces next week, throw in a smart cover or accessories, maintaining the price point. Why? See next point.

2) Maintain margin space for potentially higher cost 2nd Gen model (which is likely to come in 2013). If this 2nd Generation has a Retina Display and A6X, among other things, it may have a higher BOM. Rather than take a margin hit next year, Apple can pad margin on 1st Gen this year and have enough pricing space to maintain an Apple margin on next year's model. But does $30 make a difference? See next point.

3) Pricing tiers are nicely defined for 1st Gen model next year. Apple may choose to keep the 1st Gen iPad mini next year and drop it in price to $249 or maybe even as low as $229. We seem to already be seeing pricing at cost with many 7" Tablets around $150-$200 (Amazon, B+N, Google), for a reasonable current technology level. An 8" Apple device (even if it is the current unreleased iPad mini) in the low to mid $200 range could be a huge concern for the other 7" tablets. Meanwhile, the newer iPad mini next year can continue to start at $329 or so.

Talk about crowding the market out, by having a model in the $200s, $300s, $400s and $500s. This is maybe why the iPad 2 is sticking around for awhile. Just a thought.

gordol says:

Amazon and B&N can sell the Kindle and Nook at lower prices because they only need to recoup the cost of the device for the same reason you can get an iPhone for $200... They know that you will be buying content from them, be it a $0.99 game or a $12 book, on a regular basis. It would be silly to compete with them on tablet pricing.

Apple's tablet competition are Samsung (Galaxy), Acer (Icona), Asus (Transformer), Toshiba (Thrive), Motorolla (XYBoard) and Google (Nexus).

D V says:

Yes, you are right about why Apple would not want to compete with Amazon or B&N. The interesting thing I always think when looking at these two companies is that their "stores" can sell on iOS. Amazon has a Kindle app, a Instant Video app for iPad, a storefront app, etc. B&N also has a Nook app for iOS.

As for Google, I agree that a real Android device (and not the derivative kind from Amazon/B&N) is the real competition, but with Google's Nexus line, I wonder how much room there is for other versions from the various manufacturers.

gordol says:

I don't know about Kindle, since I don't use it, but the B&N "Store" is NOT available via the Nook app. To do that, B&N would have to agree to Apple's fee requirement of what, 30% per sale?

As for the Nexus vs other Androids, that is not a problem. The Nexus devices are the "reference device", and is supposed to be plain vanilla Android with no device or carrier skins or overlays such as Blur (Moto), TouchWiz (Samsung) or Sense (HTC). At no time has the Nexus phones diminished the sales of the other Android phones. AAMOF, the current Nexus, made by Samsung, sells poorly compared to the Galaxy 3 - from the same maker.