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The Future of Subnotebook Pricing
Corpuscavernosa recommends a story from InternetNews about the development of the subnotebook market. The author notes the beginnings of a trend toward selling the devices bundled with certain services rather than as standalone products. He notes two examples; a free Asus Eee PC with a broadband package, and another for opening a bank account. Quoting:
"Soon, the market will be overwhelmed by what I like to call 'mini me too' laptops -- commodity Asus clones that will drive margins for all players toward zero. There will be no real money to be made in direct sales of cheap mini-notebooks to consumers. I'm predicting that the successful pricing model for 'mini me too' laptops will look nothing like the notebook pricing model (where you always pay full price for the hardware), and a lot like the cell phone pricing model where you buy a service, and the hardware is heavily subsidized or given away free."
People still buy unlocked phones don't they? Last time I checked, some of those suckers have pretty hefty price tags!
and like cell phones, americans will all be tight arses and opt only for the free/subsidized notebooks, and yet wonder why their notebooks seem to be intentionally crippled, while europeans buy theirs outright and have everything work as it should
I've read that in the 70s, 4-function calculators went from high-margin, luxury items to throw-away promotional items. The only calculators I've bought are a financial calculator, and a scientific calculator for basic statistics; all of my other calculators are freebies. It took a bit longer, perhaps as the product is far more complex, but are we seeing the same ultra-commoditization of mobile computing devices?
Slashdot: Playing Favorites Since 1997
Companies that can get a really good manufacturing and distribution process in place will make a lot of these things, others will wash out, and others may follow the model described in the article.
In any truly competitive market (like the market for bulk, wholesale USDA Grade A Wheat where there is no product differentiation and lots of buyers and lots of sellers), sellers make zero economic profit. Economic profit is the profit above the profit you could make in another industry - so, if you build a computer business with 100,000 and get a 20,000 profit and that 100,000 would only have gotten you a 5,000 profit in the pizza business, that 15,000 difference is the economic profit).
Over the long-term, companies don't play in markets that don't have zero economic profit or better - because they have better options to put their time and money into.
Now, these mini notebooks aren't going to be a truly competitive market because, like standard laptops, there is significant product differentiation. People do have a certain amount of brand loyalty, they want different features (20GB vs 16GB, Windows vs GNU/Linux, screen size, subjective thoughts about aesthetics and the like). This is very similar to the laptops most people use today - they're vastly the same, but have little tweaks to them that cause consumers to favor one over another.
If these mini notebooks achieve the same level of product differentiation as current laptops, margins should be similar. In fact, if the mini notebooks are sold with service, that offers the chance for more differentiation. I mean, when people buy mobile phones, they usually choose their carrier first (usually). That means that the margins for the device can be higher because the different service is adding another level of differentiation.
I dont think so. Cell phones have something on computers: they have a service that can go away if you dont pay the monthly fee.
Computers one buys from a store does not. Microsoft and a few other companies have played around with "software as a service", but the smart ones snubbed it. Instead, it'll stay Linux and get cheaper and cheaper.
Somehow i do not see the cellphone subsidy model working in this case. Laptops are one of the most frequently "lost" or stolen items i know of. If such devices are coming subsidized, you can bet your ass that there will be a hefty contract along with it as well as limitations on what you can do with it.
I mean, who wants the liability of having to continue to meet your contractual obligations for near the cost of the device, in exchange for having to use it their way.
Ice Cream has no bones.
The comparison to cell phones is rather poor. A cell phone is almost totally worthless without the service attached to it (and vice versa). The implication is the two are linked together, where the provider benefits by reducing a high barrier to entry (initial high cost).
A portable computer is tied to no such service. It's useful without any internet service in particular, and there's thousands of FREE places around the world to get free Wi-Fi internet. So tell me again why this bundled business model is going to take over?
If you want to make a comparison, compare it to banks giving away free junk, like a toaster. Hardly anyone that wants a toaster goes to open up the bank account just to get the toaster. I don't see why the ultra-mobile laptop is any different.
AccountKiller
I can see this model becoming used in schools where the schools bribe students with a laptop to do well on standardized tests. Or perhaps giving every student a laptop and free wi-fi access at the schools, however if your GPA slips below something your MAC address gets banned until it starts going back up.
Taxation is legalized theft, no more, no less.
If this is such a great hypothesis then why did things like the AMD geode or the recent (forgetting the name) $20/month balck box computer catch fire?
was the time just not right?
Also if you look at these mini PCs it seems like their are teirs on these. Some are low cost low power, some are higher cost higher power. when people talk about these on slashdot the conversation goes like this:
nerd 1: oooh the XO is only $100 or $200 dollars.
nerd 2: yeah but it's a dog. I could get an fluvio flivitron for only $100 more and it has a real graphics card.
etc...
so no one on slashdot is really interested in the low end machine other than to talk about it's price. (Except of course when the price-tards are trying to put down macs by claiming this or that POS is "the same" but costs less)
Some drink at the fountain of knowledge. Others just gargle.
"No one goes there any more. It's too crowded." --Yogi Berra
This is why I wanted to slap my econ teacher in B-school around.
There are no billionaire economists - but they know it all, don't they? And yet, an uneducated man from Arkansas became one on the richest men in the World from making zero economic profit: Sam Walton founder of Walmart.
Perhaps we could build vehicles that run on subnotebook computers. It would be a cost-effective solution to our energy crisis, and could save the big 3 automakers!
Asus's success is killing it. If you've been to their website, it is slow as a pig, 24x7.
Part of it is due to a clueless webdesigner, who loaded it up with flash, javascript and all sorts of other crap. Add to that a big rise in people visiting, and suddenly their servers are dog slow (at best) and down (too often).
In fact, it's a classic example of what not to do with web design and IT planning.
So, Asus, could you PLEASE put some bright people on this, and give them the resources they need?
At to the bright people: could you PLEASE not make having Javascript and Flash mandatory? Not all of us are smoking the Web 2.0 crack.
Thanks.
Never open a bank account in return for receiving a free gadget. You'll find that you won't be able to afford your "free" gadget, what with all the service fees and penalties you'll be paying on your bank account, ATM fees, plus the minimum deposit requirements and foregone interest you could've been earning elsewhere. AND they'll be spamming you about home equity loans ("loans available below prime!"), credit cards, etc.
And the "notebook" will likely be a piece of junk loaded with adware.
There's a reason they make these offers. That reason is the bank wants to make money from you.
I kinda like the "free with" concept, except... a PC, even a mini, is still a LOT more complicated than, say, a toaster! And something like THAT is what is really needed for people who just want to browse the Internet and do e-mail! As a retired former software support engineer, it is painfully apparent that a Windows PC or even a MAC requires more tech savvy than your average consumer is ever going to possess! (Consider managing the backup process, for example.)
Didn't they try this with desktop computers. When my sister went to college dad got dial up internet from MSN which came with a free computer which dad gave to her. It only makes sense to give away computers to use internet, especially now that companies are inserting ads. If my ISP stands to make money off of each PC on the network then the more PCs I have the better off they are. If you gave me a free subcompact-notebook, I would surf the internet more because I would be portable within my house.
I suppose that's the way we are going with blackberries and iphones. If the Eee could be used for making a phone call, it would be something like a blackberry on steroids.
It's not unlikely that major vendors will now put some effort into a user-friendly Linux, something that the volunteer crowd has failed at terribly in the past 10 years.
"I love my job, but I hate talking to people like you" (Freddie Mercury)
I think they are of value to some techies, and with a lot of non techies they are even overkill.
Ever lug around a heavy laptop all day on service calls? Id have loved to have some of these things back then..
---- Booth was a patriot ----
In most big US drugstores and office supply stores, and in every WalMart, there is a section that has pocket calculators, pocket dictionaries, low-end PDAs, and other small electronics. Some of those devices are quite sophisticated, even though they're very cheap.
Soon we'll be seeing laptops in that section, in a blister pack hanging from a hook. During "back to school" season, there will be big piles of the things. We'll see this as soon as the price can be brought below $200.
There will still be higher-end laptops, but the low end units will be the volume market.
Sell a stripped down version of windows xp
"Windows Netbook" to the OEMs for almost nothing and then charge users for extra features like wallpapers, little games like solitaire and pinball and follow the MAC example of charging for annual incremental updates which the sheep will happily pay for.
and Bill Gates can make even more unethical and undeserved profits.
It's a real shame there's so many suckers in the world ruining it for the rest of us.
The things which I think are cool, either die early or succeed only in limited niche markets with other don't-quite-fit people like myself.
Stuff which I find lame and un-appealing, (like iPods, cellphones, Facebook and instant messaging, for instance), go gangbusters and change the shape of reality as we know it.
I think the eee PC is super-cool, therefore it is doomed to be an awesome device which will enjoy a respected but mediocre public presence at best. --And I can see the pattern emerging already; a massive squirrely investment panic by all the big companies based on early excitement for a market model people are already backing off from. Read the engadget comments under the UMPC's sometime. People are already bitching about the various decisions made by Asus and the new designs put forth. That must-have magic is already kaput, the market force now running on the steam from geeks like myself and that's it. Sure, they've sold a million or so units already. But there are a million or so geeks in the world. I said 'niche'. I didn't say non-existent.
The only way UMPC's will take over on the kind of level the big players are all terrified of missing out on is if the average girlfriend can't live without one. --And they're Oh-So-Almost, what with their lids which beg for stickers and funky colors. Sadly though, Hello Kitty, and Power Puff Girls, and Sailor Moon are old hat and there's nothing new driving sticker sales at the moment. And girlfriends, pardon the sexist broad-stroke generalization, aren't practically minded when it comes to tech gear. They want to talk and squeal and giggle over dramatic fluff with their friends and they want to have what their friends have and they want fashion statements. The UMPC come SOOO close, but sorry. Mini PC's which take half a minute to boot up, and need to be fiddled with and need to be sat down with and don't fit neatly into a purse aren't cool. They're lame. Sitting down and focusing is for when you're at home after work or school, and you already have a PC for that.
The eee PC came close, with their pink 700's, but they've moved in a direction which pleases people like me; better screens, better keyboards, better functionality, etc. I am very happy about this. But take-over the world appeal? Neh.
Now if there was an animated TV series sensation featuring empowered teen-age girls in cute outfits and dippy soap-operatic themes which sported hundreds of brilliant stickers which desperately needed to be affixed to a shiny mini laptop lid, then perhaps AT&T would have a chance to get their evil claws in. But until then, nope. Cell phones do it better, faster, longer, cuter and easier. And you don't have to wait thirty seconds for them to boot up. (Though, hopefully before the other shoe drops and the UMPC market is abandoned, somebody will have worked out the 'instant-on' thing.) --But I do find it wonderfully amusing to see all the big manufacturer's lose money because of catastrophic mis-readings of the market. Frankly, that's the only real way for me to get the device that I want at the price I want; for big companies to mis-read things. Seriously, this is enormously fun to watch, and by the end of it all, I'll have a cool little writing tool with a decent battery life and internet access for maybe $350.
Of course, I could be wrong. It's Mercury Retrograde month, so I probably am, and in directions I can only guess at now even as I reach to click the 'submit' button. . .
-FL
Hmm. If someone came out with something like the Asus Eee 900/901 with a built-in HSDPA modem and 802.11 tethering, for free, attached to a HSDPA broadband contract for, say, $20 to $30AUD per month... I'd be in like Flynn.
Bring it on, I say!
For how long now have companies been using IPods to attract people to their service or product. "Buy 3 rooms of new carpeting today and get a FREE IPOD!" It doesn't mean that there is no real money to be made in direct sales of IPods. It means that IPods are very popular products at a reasonably affordable price point. In fact, so popular and affordable that it is worth the loss of the wholesale price of an IPod from your profit margin just for the added advertising draw "giving them away" has.
The mini-pc offers are no different...
"Hello Kitty, and Power Puff Girls, and Sailor Moon are old hat"
You obviously haven't been to Japan lately.......
> UMPC market is abandoned, somebody will have worked out the 'instant-on' thing
Check out the Nokia UMPCs. The N800/N810 will run for a week on standby, and are instant on from that state. You just tap the screen and it's ready to roll in under half a second. The new ones have Firefox and the same screen res as an eeepc, but in a smaller form factor.
The N800 only has a stylus, but the N810 has a mini keyboard. Runs Linux underneath.
This is fairy tale thinking. I sense a disgruntled UMPC maker venting as he sees his inflated profit margins disappear.
How many Wii's, PSPs, DSs,mobile phones or other cheaper electronic gadgets do you see being distributed by banks or other businesses? The most you can expect is a usb stick and that will probably be way out of proportion to the benefit they hope to get out of you. This guy is clearly talking out of his ass.
I have no uses for a phone without a contract with a carrier, but I've a lot of things to do with a subnotebook with no add-on services attached. Basically everything I've been doing with a PC in the last 20 years or so.
A subnotebook is not a notebook but it's not a phone too. Businesses will try to attach services to them, but I don't think that it will be impossible to find a bare subnotebook. Well, if a subnotebook with a two-year HSDPA contract will cost as much one without I'll get it, but I won't if I have to pay f more.
I know that as recently as two years ago when I was working for Circuit City, we would discount laptops up to $150 off of the price we paid just to get people in the door -- and hopefully sell some warranties, accessories, and services (our real money-makers).
I'm just pointing out that we've already hit the point the author was talking about in notebooks, too.
Microsoft was heading this way with increasingly powerful Windows CE clamshells from IBM and others, but around 2000 they redirected all their effort towards Windows NT "Tablet PC"s. Now Linux is the new Windows CE and Microsoft is backpedalling over shutting down XP as they scramble after a market they could have owned.
http://www.amazon.com/gp/bestsellers/pc/
Apple seems to be doing an OK job of changing the 'free' perception.
Does anyone remember when TI released a calculator with a red LED display? Back in 1979 or so? Cost what, $2000? When $2,000 was real money. My dad used to make the comparison, that calculators used to cost half of what a car cost, "now they give them away at gas stations with a full tank of gas". Interesting to see a internet laptop being given away with the opening of a new bank account. Now if they can just resolve the northbridge energy consumption problem, with an SSD, and a solar panel on the lid, you might not be able to ever top off the battery, but certianly go a week between charges with on and off use 1-2 hours a day. Amazing that we're getting to the point of 'free' computers.
moox. for a new generation.
Hey, shitty 1970s and 1980s hair and clothing styles have come back. Anything can happen!
That said, I agree with what you're saying. The "ultra mobile" fad has come and gone a half dozen times, and each time it falls flat. The only way it'll make significant headways is if the devices make significant bounds over the existing (and previous) ultra-mobiles: they need to be instant-on, and of comparable functionality to desktop machines so that users don't have problems interfacing them.
~/ssh slashdot.org ssh: connect to host slashdot.org port 22: too many beers
Intel calls the eee PC and clones "netbooks", identifying the market as "internet access", and not "general purpose PC".
If they're right, and people buy these for internet access, then the phone analogy makes perfect sense. Although they can do anything a PC can do, the crucial thing is if enough people buy it for that specific purpose (it doesn't have to be everyone).
You have a very disturbing vision on women.
Ahhh...the great dumpster continuum. Many a free computer will be found there. -- sowth (748135)
Except these people make up a large and therefore profitable segment of the population of Slashdot's home country.
So consider this: Forget about "free". Is it true that the phones that European networks completely subsidize have more features than the phones that U.S. networks completely subsidize?
Hey, I just spent a forced two hours in a theater crammed with chicks who were rabidly lapping up, "Sex in the City." If that doesn't reinforce your vision of the female stereotype, nothing will. Of course, one theater filled with ditzy women is not ALL theaters filled with ditzy women. I know this in my heart of hearts, and I know numerous women who would never be caught dead in such place. But the girl I happen to be dating isn't one of them. --You can't choose who to love; my sweetie is dear and awesome and brilliant, but she's also a sucker for all the stereotypical mall-culture bullshit. --For her part, she hates how I leave 'shaver bits' in the sink and she'd never read Slashdot, so it all balances out. Humans come packaged with lots of fundamentally silly settings, but they can still be excellent people underneath. Please don't mistake my disrespecting the stereotypical behavior for disrespecting the person. --I'm just as ridiculous as anybody! Heck, we all blow farts, and farts are just plain idiotic.
-FL
A little superstistious aren't we. How do people like you get modded up. Go back to reading the astrology section of your newspaper, aligning your crystals, and avoiding ladders.
How does shit like this get modded up.
Newspaper astrology? No thanks. That's pointless. The real thing is actually useful. Of course, you wouldn't know this if you don't explore it first. --The practice of the true skeptic is to examine first and render a decision afterwards. --And if you had looked properly and honestly then you wouldn't be able to dismiss things so easily. This stuff is entirely testable, but it's the kind of testing which is best done for oneself. There's an amazing world out there, far bigger than many realize, and it's open to anybody who bothers to put their boots on and step outside. One of the better sites is this one. --Extremely comprehensive and free. --Though, I find Asian astrology to be often more robust in certain ways.
Interestingly, most who start off with a cynical view are actually incapable of exploring openly. There's a weird knee-jerk auto-response programmed into many people which makes them react with a gut-felt loathing and embarrassment which keeps them from learning how the world really works; from finding their own power. Thus it's a huge challenge to be a real skeptic; most just pretend and use the label to justify allowing their programmed fears to control them. It's easier that way, but self-defeating. It takes work to break out of the bonds, which is why they're called bonds.
-FL
THIRTY SECONDS? Are you using knoppix or something? puppy linux is 128 mb, modern hdd get 150 mb/s, and solid state is suposed to be faster your either not good at math, or dare defile /.
with using a non-hacked, as-is device, espetialy where OS is conserned. do you really neeed xandros to check you mail, or do anything else on a pc for that matter?
I know full well that tobacco is bad for you, so I smoke weed with crack