iPad mini Pricing is Too High for Our Schoolkids

| Hidden Dimensions

“Education is the ability to listen to almost anything without losing your temper or your self-confidence.” -- Robert Frost

It was exciting to hear that Apple would talk about education in the Oct 23 event. But what we got were just tiny bits and pieces, crumbs. And not so great iPad mini pricing for our schoolkids.

____________________

Apple's educational announcements during the Oct 23 keynote didn't amount to much. There were minor improvements to iBooks Author, only one notable feature in iBooks 3 and a flashy but not exactly market-defining quote from a Texas school superintendent.

I am familiar with how things like this go. A quote is solicited, through channels, by Apple marketing. The best is forwarded to one of Phil Schiller’s senior execs. So while it’s true what Mr. Cook said, this is the kind of thing Apple is “hearing” (41m47s in the Keynote), the manner by which the quote was acquired is often not that by which the speaker would have us infer. In effect, Dr. Ponce gets his name in lights and all concerned are happy. It’s handsome marketing disguised as technical exposition.

Cutting Through the Glitz

While Mr. Cook said (43m22s) that eBooks created with iBooks Author are in 2500 schools in the U.S., the slide behind him, which has to be considered definitive, said "2500 classrooms." That sounds a lot like wriggle wording. How many classrooms per school? The result could be something on the order of 250 schools. "According to the National Center for Education Statistics, there were 98,817 public schools during the 2009-2010 school year."  No matter how you do the math, there's nothing to boast about.

Image Credit: Apple

So what has Apple done, in practical terms, to make the iPad mini accessible and what is Apple doing to take a real leadership position in K-12 education?

Marketing or Action?

First, iBooks is only available in iOS. One could argue that because there are so many iOS devices out there (400 million) Apple doesn't need to worry about making iBooks available on other platforms, even the Mac. Recall, however, that the iPod didn't really take off until Apple both ditched FireWire and went to USB and also made iTunes available for Windows. Vendor lock-in is not a strategy that will allow widespread penetration of education via iBooks when students and schools can't afford premium-priced iPad minis.

Second, I know from private discussions that students in many schools, especially rural schools, are not going to be able to afford $329 for an iPad mini -- even with a standard educational discount. (Sure, support is baked in, but it's also baked into BMWs.) This country is still emerging from a deep recession. So the pricing is not a matter of keeping Apple's brand intact. Rather, it's a question of how serious Apple is about trading a little bit of profit, gained on the backs of students, for a visible commitment to education.

The announced pricing might be considered reasonable if Apple had massive R&D costs to recover. Coming from an experienced, savvy tablet manufacturer with over US$100 billion dollars in assets and in-place, advanced manufacturing equipment, it's hard to swallow.

But there's that nasty thing about the integrity of the iPod touch product line pricing and how it relates to iPad mini pricing. There was some hope that Apple would adjust the specifications of a non-Retina iPad mini to justify a price lower than the cheapest iPod touch, to get to something in the $250 range, a sweet spot as solid in its analyst prognostications as the iPad mini moniker has been. I wrote about that previously, and it's a hard decision.

Apple likes to talk about how wonderful tablets are in education, and to be sure, there are many showcase schools that are adopting them. There are countries whose schools are in better financial shape than ours, but by and large, teachers in the U.S. aren't currently looking at a one-on-one situation with iPads, that is, one iPad per student. Not by a long shot and not soon. And Apple did nothing on October 23 to improve that situation.

Take the Money and Run

One path would have been a vision, a commitment, and a desire to truly make an education tablet for the masses. Apple had the opportunity with the iPad mini to make it the pervasive tablet in U.S. K-12 education. Instead, Apple deferred. Tim Cook talked the talk about education, Phil Schiller has said in the past that education is in Apple’s DNA, but the company has created a premium priced product for a non-premium funded market. Even investors didn't like that attitude, according to news reports.

With this product, Apple has only partially slammed the door shut on the $199 tablets. Currently, those tablets are not so great for education either. However, when Apple leaves an opportunity on the table, we know that aggressive competitors will look to gain a foothold in any market they can.

Comments

geoduck

Well Said.

FlipFriddle

Ditto.

Bosco (Brad Hutchings)

School budgets are weird things. If a school in a non-bankrupt district wants these, it can afford them. This is the netbook price point from 3 and 4 years ago that made so many 1:1 projects possible. The challenge is more in coming up with activities that aren’t bandwidth hogs. Even with everything hosted locally, 20 or 30 kids hitting 1 or 2 access points will bog the wireless network down if they’re all hitting it at once. At least with netbooks, you can wire the desks with Ethernet. Android tablets support an adapter for wired use through microUSB.

Lancashire-Witch

Try buying an iBook in New Zealand, for example.

Tom Schmidt

But do we know the education pricing? It’s not $329 per unit, and for huge volume orders they discount it more & don’t disclose the pricing.

Terrin

I disagree with your comments on pricing. As I mentioned in an earlier post, $329 is not the price Apple will charge schools. First, Apple has an actual customer service sales team dedicated to education. As you suggest, Apple offers students and teachers a slight discount for personal use machines. I am guessing Apple will offer the $329 mini for about $300 to students and teachers. Apple, however, also offers discounts for institutions buying, with special pricing on bulk purchases. So the pricing will be lower than the standard individual pricing for schools buying in bulk.

Second, Apple also often times offers a special education version of the product. So, if schools only need 8 GBs of storage, Apple could and may offer a substantially cheaper version. It does this with the Mac. Apple also often times will offer significant discounts to schools on bulk purchases of refurbished or last generation machines. Further, Apple has 30 to 40 percent margins on products it sells. Apple will often times cut its margins significantly for schools. I remember once when Apple was looking to clear out its inventory before 4th quarter earnings. It offered the University of Michigan Computing Store $2100 Power Macs for $1599 and it threw in a free $599 17 inch monitor. I still have that machine in use.

Third, what people also do not understand is that companies that are serious about education are also providing service and support for a period of time lasting longer than a typical warranty. Both Dell and Hp have an education support and sales staff. Companies like Amazon and Google would have to invest heavily in supporting the education market if they wanted to seriously compete with Apple in education. They’d also have to charge more for the product as neither company is likely going to make much money on content provided after the sale which is their whole business model.

Moreover, since Apple has established relations in education it will know what the competition is offering, and can quickly adapt. Schools don’t make purchases quickly.

I sort of agree with the comments concerning iBooks. Apple should consider bringing iBooks at least to the Mac and PC. However, iBooks publisher does allow content to be exported to a PDF.

KurtG

I disagree with your comments, John.  I think the price is useful for schools, especially if there is an education discount.  The biggest hurdle in all these things is simply how to use technology intelligently to support and improve education.  Lots of area for improvement in that one.

kevinlane

I wish Apple had priced the Mini at $299 - just $30 cheaper.  The psychological effect of being under $300 would, in my opinion, make a big difference. 

Remember, while we may think of the new iPad Mini as a smaller version of the iPad, to an elementary aged child, it will be nothing less than an iPad - the smaller size will not diminish the educational effectiveness of the iPad (and with smaller hands, it may even enhance it.)

So, in effect, schools would have been getting a fully functional iPad (Mini) for under $300.  But that $30 difference may detour some districts that otherwise would have gone iPad into buying cheaper (and less able) Androids.

As an educator who daily makes use of the power of iOS in my classroom, i hope not.

aardman

You can’t slam the door shut on $199 tablets if you’re unable to churn out enough product to replace the volume of the competitors you plan to kick out.  I think the relatively high price was dictated by supply constraints.

ibuck

aardman: “I think the relatively high price was dictated by supply constraints.”

Interesting POV, raising a few questions…
1. Did Apple’s concerns about the iPad Mini cannibalizing regular iPad sales—and profits have driven the $329 price?
2. When do you think Apple will lower the price? After the holidays in January?  February? 
3. To what lower price point(s)? 
4. And how will Apple handle the backlash from early adopters?

geoduck

ibuck, aardman:
Didn’t Apple do something like this a few years back with, I think, an early model of iPhone? Released it at a price and then something like 30 or 60 days later dropped the price rather significantly because of complaints? I can’t remember the details but I do remember the incident and the howls of protest from these same early adopters that felt they got ripped off.

john m getz

Have they reduced the price of the first iPad or second iPad after a bit of time.  Not that I remember. Correct me if I’m wrong.  So why do folks think this model will be reduced for the holidays?

Hagen

Slightly different condition, geoduck. The first iPhone was priced at $499 and up, working the entire cost into the sales price. When people balked at that, Apple re-negotiated with the carriers to add a subsidy, and lowered the price to $299 and up. The early adopters complained, and got a $100 credit in the Apple Store in compensation. The iPad mini has no such carrier subsidy, so re-pricing on that mark is very unlikely.

mhikl

I agree with you, after some contemplation, John. The price is too much but the size is not optimal, either. Just because elementary children are pint size doesn’t’ mean small does the job. Check out the book sizes of small children and the size of font by which they read.

Here is how I think Apple can solve the problem of price, meet a need, change the world and spur the sale of all things Apple. All Apple needs do is come out with an educational iPad that is value packed and cost effective for schools. Let’s call it the iPad e. It would only be available to schools sold in bundles. It would be the same in every way to the iPad regular with the following exceptions. It would drop the expensive bits and concentrate on what is important for education. Gone would be the expensive aluminium, the cameras, the fancy expensive screen and any other expensive part unnecessary for its function in the classroom. If a camera or whatever is needed, the teacher’s or classes regular iPad or iPm can take the photos and the rest is left to Wi-Fi.
All this should bring down costs substantially. It would not need to have the latest, most expensive processors etc. The iPad 2 and now iPad m suggests as much. Apple would not need to make its heavy profits from this device as it will certainly make the iPad, any iPad the first choice for those with children. Good deed points shouldn’t be overlooked.
Then it needs to have a cover, a special bouncy rubber casing that makes the thing thicker and safer. Such would not be a fashion statement. And these thick covers would be attached with screws or other that makes them secure. They might even have room in the form to house a sensor or locater that is purchased elsewhere or possibly from Apple unless this can be worked into the iPad e at the right cost. Schools might be interested in the security of a device with this included. The bouncy rubber casings would also come in a multitude of colours, enough that each classroom could have their own colour and would be sold separately. They might even have the school’s name on them, especially if this was a third party add-on.
There would be no need for scheduled, annual updates to hard-ware introductions. These are not heavy hitters, they are classroom work-beasts that can connect to the internet through the school’s system, be used for books and take advantage of educational apps. They may even be useless on the internet outside of school to make them less desirable on the resell market, aka theft.
The incentive for parents to go Apple would certainly be in Apple’s interest and there the iPad mini would shine in Apple sales. I honestly think that schools would then find the step into tablets so affordable their proliferation could cause other tablet makers to throw their hands up in defeat in the educational market and possibly be the step that makes the iPad invincible.

geoduck

Thanks Hagan. I couldn’t remember the details

John Martellaro

mhikl: I like how you think.  Excellent ideas.  It just goes to show that if Apple really wanted to make a dent in the education universe, it could be done.

ctopher

Mhikl and John: sounds good until you realize that a new bill of materials, new tooling and likely new assembly procedures and you have just burned through your economies of scale. What you are proposing is a new product.

Michael Long

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.

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

geoduck

Mhikl and John: sounds good until you realize that a new bill of materials, new tooling and likely new assembly procedures and you have just burned through your economies of scale. What you are proposing is a new product.

But Apple did produce the eMac, which was the same idea.

wab95

John:

I think you make several good points here, and now appreciate that I had misunderstood your earlier comment about iBooks.

That said, what strikes me, nonetheless, is the assumption that the iPad Mini was supposed to an K-12 educational device. Why so? I recall many of the arguments in favour of a 7” tablet prior to the Mini’s release (many here on TMO) ranging from easier portability, i.e. pocket-ability (surely an undesirable trait for a school device) to being more amenable to reading in bed while falling asleep (surely recumbent and somnolent students being in scant demand in most schools).

I concur with mhikl above that small people do not equate with small tablets. If anything, the larger tablet is less easy to pocket and pilfer, and the larger 9” screen better lends itself to the interactivity that is the iPad’s educational advantage over non-interactive media. While this is clearly the case for higher education, the internet is rife with stories of young children getting on just fine with the original iPad. Given the principal uses of competing 7” tablets, I should think the Mini is the archetypal personal consumer device for adults, and a sub-optimal educational tool for young children. I am not convinced that Apple ever positioned, even by implication, the iPad Mini as an educational tablet.

Just two other points; cost and iBooks. To be clear, these are my speculations only.

Cost. Several articles here on TMO and elsewhere have suggested, data being hard to come by, that both the Amazon and Google tablets are heavily subsidised. Jeff Bezos has openly stated that Amazon makes its money, not on the sale of Amazon’s hardware, but by people using their hardware, presumably to purchase content and merchandise. Google’s model, on the other hand, involves income generation through the sale of eyeballs on adverts as well as in user data. Both, therefore, can not only afford to sell their tablets at or below cost, but are driven to in order to entice uptake in the face of Apple’s superior market position and competitive hardware offerings.  Apple, on the other hand, make their money through the sale of product, i.e. the hardware. Asking Apple to compete on price with Amazon and Google is asking them to fight this battle on their competitors’ terms. Apple will lose. Why? If it’s not self-evident, permit me to address the final point before answering.

iBooks and iBooks Author. While there is a point to be made about expanding marketshare for iBooks in education, the analogy with iTunes and Windows may not be apt. It goes back to how Apples make their money, principally on hardware sales. When they ported iTunes to Windows, while it didn’t directly sell more Macs, it did sell more iPods, ergo hardware. The differentiator between the iPod and other MP3 players, other than a superior build and interface, was iTunes - the killer app - and the online music store. With the iPad, Apple may well feel that, apart from an intuitive interface and superior build, they too need a killer app for education sales to differentiate the iPad from competing tablets, PCs and netbooks. Porting iBooks at this stage to the competition would thus be less like putting iTunes on Windows, where they still sold iPods, and more like allowing iTunes to run on Palm smartphones, in which Apple stood to lose an MP3/Smartphone differentiator to the competition; after all, why buy an iPhone if you could get iTunes on a cheaper competing smartphone?

The tablet wars for the educational space are akin to a chess match. And just as with a chess match, the board is a fluid space over time. In the opening stages, a well positioned knight or bishop may provide an attack and help to gain the centre of the board. At a later stage, having positioned the queen and rook, that same piece may no longer be required, or worse, may now be vulnerable to attack if not repositioned.

My sense is the same with iBooks. At this still early stage, Apple may feel it premature to open iBooks to the competition, as they may lose what they may believe to be a product (hardware) differentiator. Perhaps, once that space is better secured, they may feel it time to reposition iBooks. This may even soon, if the data make it clear that iBooks is not an important device differentiator. However, I can see at this stage, by Apple opening iBooks to Amazon, for example, an opportunity for an opponent, with one move to fork Apple’s educational bid by simultaneously offering this attractive app on a cheaper device and depriving Apple, in the same move, of hardware sales and needed revenue to stay in the match. Check and mate. Apple is out of the match.

Apple’s is the long game, and it may be premature to pass too hard a judgement on what may be a work in progress, with a yet more moves ahead before the strategy, and any relative advantage is clear.

Peter

Just give it a year, when the 2nd gen mini is out, the 1st gen mini will be $250.  The schools can then take advantage of it, on top of the educational discount.

Alvin

While I would have like a 250 price (I was ordering 2 site unseen for my boys) - that was not realistic - analyst claim that the BOM runs for around 210 for the 16 G - so how can apple turn around and sell it for 250 - it never made any sense

John Martellaro

Alvin.  That BOM analysis may be related to Mr. Ive’s comment that the iPad is a full iPad, “concentrated” in a smaller size. However, if the feature set were changed, reduced, then the BOM would go down and Apple could sell for less. Perhaps there were engineering issues that dictated otherwise, but it certainly seemed to be a conscious decision to make the iPad mini a FULL featured iPad—a premium product at a premium price.

Alvin

John M.
Looking at their promotional video, it looks like a major redesign - all internals have been miniaturized (board, battery, etc) -  this is not just taking components from the Ipad and then slap it to the mini - next year, i am guessing that this mini will become the 249 and the new mini gets the 329 price again.
What do think?

Mr. DNA

If any characteristic quality can be found in Apple’s DNA, it would have to be shameless corporate greed.  Their products are all made in China, where labor costs are inconsequential—but those products are priced like they were made in America.  While the company is certainly not alone in shipping jobs overseas, no one is profiting off the currency exchange rates quite so as much as Apple.  In every case where they had a choice, Apple chose not to help the domestic economy… so it’s nice to see an Apple news site which does not robotically applaud every word that spews from Tim Crooks mouth.  While Apple’s retail sales figures are admittedly impressive, I concur with the observation that its products are not something we can afford institutionally:

These products exist in a closed ecosystem which is based on PROPRIETARY software, connectors, interfaces and communications standards to every possible extent.  Apple gouges customers with ridiculously expensive cables, adapters & accessories.  They even encrypted the AirPlay data stream, just to prevent other companies from selling compatible playback devices.  They also demand an unprecedented 30% commission on programs sold through the company’s app store.  By contrast, Android is free to all device manufacturers, and the source code is public.

Apple does not really care about education so much as it cares about owning the mobile device market.  The proof is in the policy:  They routinely patent stylistic elements of hardware & software design which are not recognized as inventions in patent law.  Then they sue competitors for vague similarities in appearance & functionality.  Imagine what would happen if car manufacturers were permitted to do this with the displays & controls on the dashboard!  If Apple had its way, every child would be taught to use gestures & behaviors which are only relevant on Apple hardware platforms.  When Steve Jobs said he wanted to change the world, he was clearly NOT speaking in terms of making technology accessible & affordable to the general public by promoting industry standards, like Google is doing with Android.  Furthermore, there is a serious legal & ethical question that begs to be addressed here:

The schools are funded by a property tax that effectively abolishes the right to property ownership.  This hurts the poor & unemployed more than anyone else.  It certainly can be frustrating to watch your neighbors buying all sorts of luxury goods while you pay for their childrens schooling, and you can’t afford any of those luxuries yourself—much less a child.  But that is the harsh reality for millions of Americans.  Should we also be forced to finance the continued expansion of a trillion dollar corporate behemoth which already enjoys the biggest profit margins in the industry?  I can appreciate the fit & finish of Apple devices, but their relentless anti-competitive trade practices are nothing less than malicious.  We should not condone the purchase of those products with funds that were stolen from us by municipal governments which use their police power to monopolize the business of education.

At the very least, we should elect state legislators who will prohibit spending tax revenue on closed systems which employ proprietary interfaces, and software that only runs on a single vendor’s hardware platform.  This is just common sense.  As the U.S. economy teeters on the brink of collapse and the true unemployment rate climbs above 25%, for many people it is no longer a question of whether they can afford an iPad: it’s a question of whether you can still afford a home after being forced to purchase outrageously overpriced Apple products for every student, teacher and government bureaucrat who thinks they are entitled to take whatever they want from those who have nothing to spare.  This may not be happening everywhere—but it should be happening NOWHERE.  Closed computing platforms have no justifiable role in a taxpayer funded organization.

When Apple brags about selling to schools, it is essentially saying that unemployed people who can barely make their mortgage payments should be expected to sacrifice their home in a tax sale so Apple executives can furnish their palaces with the fruits of our labor.  Although such intimate tragedies rarely receive the news coverage which they deserve, in this economy it won’t be long before the problem becomes too big to ignore.  Apple is only good for education because it teaches by example how the patent office is corrupt and the taxation policy is unfair.  The sooner we get busy reforming these dysfunctional systems, the better.

J.

@Mr. DNA:

Car manufacturers sue one another over these very issues all the time.  Lawsuits over patents, trade dress, design, etc. are extremely commonplace in every industry, but don’t make the news because they are not “sexy” like Apple v. Samsung.

We already have legislation and regulations on how public entities make purchases.  Institutions are beholden to their local citizenry, and that’s how it needs to stay.  No need to muddy the waters with new legislation.  If the people don’t want their school buying Apple products, they will elect a school board that doesn’t buy them.  Simple.

I agree with your point on Apple’s financial motivations, however.  This is all about remaining the most valuable brand in the world.  For every other company, moving production to China means incredibly lower MSRP.  Not so for Apple.  Can you imagine what they would charge for an iPad if the politicians get their way and “bring jobs back to America?”

Bosco (Brad Hutchings)

Lawsuits over patents, trade dress, design, etc. are extremely commonplace in every industry, but don’t make the news because they are not “sexy” like Apple v. Samsung.

Well, here is someone who doesn’t know what he is talking about. See the three F’s: fashion, food, and football. You can watch a short video to find out how some industries work and innovate fine with rampant copying and without billion dollar lawsuits over such.

When you fail to do your research on that point, it brings the rest of your argument into question.

Log-in to comment