Apple: Changing the world?

We’ve all heard about, and possibly seen the iPad by now. For those who haven’t, I’ll just say it’s an upscaled iPod Touch/iPhone, which physically resembles a huge iPhone, while retaining its slim and light form factor. As Steve Jobs said, in his keynote unveiling yesterday, it’s meant to fill the gap between an iPhone, and a Mac. That’s pretty much all it is, and I must say, I’m impressed, and can’t wait to get my hands on one, when I have the necessary funds. What I was more impressed with, though, is Apple’s pricing decisions when it comes to the physical product, its software, and any relevant 3G contracts, if you so wish to opt for a 3G model, for on-the-move internet access.

The iPad is set to start at $499, which is really quite affordable, considering that one, it’s an Apple product, two, it’s new, and Apple know they can make a lot of money from their early adopters, and three, from looking at the cost of the iPhone when it first came out. Jobs justifies this ‘low’ price point by stressing that he wants the iPad to be in as many homes, and hands, as possible. This seems like a noble aim, especially when considering that 3G functionality doesn’t dramatically increase the price of the device (+$130 extra). Things get a little stranger when you look at the way Apple have priced their 3G contracts. Again, they’ve chosen to go with AT&T in the US, but data contracts for these devices are only going to cost $14.99 for a 250MB monthly allowance, or $29.99 for an unlimited monthly allowance. Madness!

One of the good, or bad things (depending on how you look at it) about doing a business degree is that you become more aware, to a great degree, of the cost of things. That’s cost of goods, and profit margins, and the like. How can AT&T afford such contracts? Admittedly, there’s going to be no video or audio upstream (assuming that Apple stick by their guns on the Skype issue; that is, only allowing use of Skype with a WiFi connection), but with the expansion of the iTunes store, and, of course, the added ease of use the iPad lends to the YouTube app, it’s understandable that Apple are still going to see a great deal of usage-heavy 3G downloads on the iPad. I assume that there’s some maximum limit for their ‘unlimited’ data package, but this kind of aggressive pricing suggests that Apple intend to make money on the number of contracts they sell, and not the individual contracts themselves.

Something that also surprised me was Apple’s new suite of iWork programs: Numbers, Pages and Keynote. Microsoft charge a fortune for even the most basic student version of Microsoft Office, which i Apple have seen as something of a window, seemingly. The iWork software has been retooled to make the most of the iPad’s touch functionality, and I must admit that it looks extremely slick, and very easy to use. What’s more, Jobs announced yesterday that Apple are going to release said programs onto the App Store, for $9.99 for each app. Now, this is dangerous. Apple are trying here to invade Microsoft’s territory, and start chipping away at its huge Office user base. Office is purely popular because its software works with anything, as most people use Office to produce things. Its only major downfall, as with most Microsoft software, is ridiculous pricing. Now, there are shady ways to get around this, but not many people are aware of how piracy works, and how to pirate said products. I think Apple are aiming at these types of customers. You’ve got to take into account that someone with a grasp of how technology, and indeed the App Store works, could cotton on to how to source products like Microsoft Office illegally. Sure, there’s a discrepancy in ability between being able to utilise things such as the App Store, and knowing how to pirate software, but piracy is becoming increasingly easy, in some cases. Certainly, there are raised levels of awareness regarding piracy itself, what with the media’s tendency to harp on about it. Who knows. Perhaps this media attention has lead to some discovering piracy altogether. Apple’s pricing strategy is risky, but it’s definitely one to watch, I’d say.

Whether or not Apple’s strategies lead to increased penetration of the iPad and its component services are uncertain. We’ll just have to wait and see. However, it seems most noble an aim for Apple to attempt to get as many people to adopt their iPads as possible. While this isn’t as noble as it could be, ($499 is still a lot of money) it’s something of a refreshing change from Apple, who have been known to price high, certainly with new products.

It’s something of a different story when you look at the mixed reception the iPad has received. I’d personally love to have one, as it constitutes an e-book reader, digital photo frame, and tablet computer. Others, however, pass it off as nothing more than an over-glorified iPhone. Perhaps, then, this low price point is necessary to persuade these great many ‘ummers and arrers’ to take the plunge, and opt for an iPad. Who knows, they might even enjoy it.

I was originally going to title this post as, ‘Apple: Power to the people?’ It seems, though, that at the end of the day, business is still business. What originally seems noble, is actually a clever marketing decision. Sigh.

Let’s look at the plus side of things, however. Apple’s aggressive pricing of their iWork software might lead for Microsoft to change their pricing structures. While it’s silly to suggest that they’d change their set routines drastically, Apple’s work here might start to effect some kind of change in the Microsoft dominated office software ecosystem. Also, releasing these applications on the App Store is something to be marvelled at. Sure, digital software versions are not uncommon, but this, coupled with the one-touch-buying and ease of use the App Store allows, could mean big things, possibly revolutionising the ways we think about buying software.

I’m curious. What do other people think?


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