Massive Tablet Attack, Price War Ahead

Last week was a bonanza for the tablet business.  There were already a lot of bits of circulating crappy tablets, but last week we saw the fully unleashed fury of the consumer electronics industry.  Tablets were already big at CES last year, but when Apple unveiled the iPad it sent everyone back to the drawing board.  The result: an impressive crop of much more refined and competitive priced offerings this year.

Every major consumer electronics company has piled into this market with a set of products that are remarkably similar in specifications in the Android space.  The level of physical and software polish is impressive too.  The early videos of Google's Android 3.0 platform look terrific and, like the iPad, the leap from Android phone to Android tablet will be easy for developers.  We can expect a huge and wonderful array of software at the time of launch.

The best tablets out there already look to be the ones from Motorola, Lenovo, and LG.  In addition to those top tier offerings, there are host of competent also-rans that could ring up big sales even if  they don't push the envelope technically - top of that list being the Vizio tablets.

Users opting for the WiFi version, according to TNW Apple

One thing we can also expect in 2011 to a small degree and 2012 to a much larger degree: a vicious price war in the tablet business.  Tablets are not much more costly to make than smartphones, but they are sold in fundamentally different ways.  Tablets are often sold unlocked or in WiFi-only variants - and that makes their pricing much more transparent - when users can compare WiFi and 3G/4G devices side by side and calculate the value being offered by carrier subsidies.

By many accounts, the WiFi iPads are the top selling devices - more than 2/3 seem to be WiFi only - sold without carrier subsidies for prices starting at $500.  And even where carriers want to offer subsidies, their ability to do so is limited by the data plan pricing.  AT&T's tablet data plan is $25 for 2.5GB of data a month.  Even with a 2 year contract, that's $600 in revenue.  If AT&T uses that to buy down by the price of the tablet by $200, that cuts revenue to $400 for exactly the same services.  Given margins, it's not the end of the world, but hardly good for carrier margins.

The end result: transparent pricing + reluctance to subsidize = price war!