Every successful company gets that way by sacrificing something it doesn’t think is important. At Wal-Mart, it’s wages; at Amazon, profits.
At Apple, it’s market share—the proportion of the total number of a given consumer gizmo people want to buy. Over and over again, Apple’s leaders compare Apple to, say, BMW, which is another company that would rather build awesome, expensive stuff than price it at a level that everyone could afford it.
The pricing on the new versions of the iPad Mini, Apple’s most popular tablet, indicates the company is moving even further in the direction of capturing the premium end of the mobile device market, rather than democratizing access to Apple products, as analysts like Henry Blodget believe they should.
A 50% premium over nearest competitors may be too much to swallow
Here’s how the new iPad Mini stacks up: For $300, people can buy a tablet that has a screen inferior to its nearest competitor, Google’s 7″ Nexus 7, which has a “retina” display—the kind that’s important for rendering text in a way that makes reading on a mobile device a pleasure rather than a chore. Granted, the iPad Mini has a significantly larger screen—that extra 0.9″ of diagonal screen size yields a device with 35% more screen area. But the Nexus 7 is only $270.
Alternately, people could buy an iPad Mini with a retina display for $400. They’ll also get the additional screen real estate. But now they’re paying $130 more. The real question is: Is Apple’s ecosystem of apps and media so much better than Google’s? For those who have already invested hundreds of dollars in Apple’s universe, that’s a no-brainer, and that momentum is one reason why Apple is still the #1 maker of tablets in the world.
For price-sensitive consumers, the tablet to get is one of the many, many Android devices. It’s the same story that played out years ago when Macintoshes were expensive compared to PCs and therefore represented only a small fraction of the PC market.
Impact on Apple’s stock price
Here’s what this means to Apple shareholders: Apple may continue to increase its revenue and could, by maintaining its margins on devices like the iPad Mini, maintain profits, as well. But at some point the market for high-end tablets will saturate—and that may be happening already.