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."

Comments

Cell Phones

[mixmatch]

People still buy unlocked phones don't they? Last time I checked, some of those suckers have pretty hefty price tags!

Re:Cell Phones

[nurb432]

That was my thought too.

Going the route of the cell phone means there will be few 'unencumbered' laptops floating around and they will all be tied to some service, which will limit what you can and cant do with them.

Re:Cell Phones

[cayenne8]

"People still buy unlocked phones don't they? Last time I checked, some of those suckers have pretty hefty price tags!"

Not in the US they don't...most people in the US have no idea what a 'locked' phone means. They just accept it as normal that you sign up for 1-2 years, and each time you do that...you get a free, or cheap (price wise) phone.

If you tried to sell my US citizens a unsubsidized phone at what they really cost....they'd be flabbergasted...and then ask why the hell you'd want to do that?

Calculator Redux?

[MSTCrow5429]

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?

Re:Calculator Redux?

[poetmatt]

Short answer: I would agree with you that we are.

Long answer:

The article is completely off with its "There will be no real money to be made in direct sales of cheap mini-notebooks to consumers. " statement. Tell that to every business who has taken a smaller per-item profit to dynamically increase revenue via volume.

It's the truth of all business and a continually evolving economy and the technology underlying: building something expensive, make it cheaper, sell tons, build something better to replace it.

Once this occurs and computers/laptops/asus eee equivalents get to be in the range of "absolutely anyone can afford one for a decent one", everyone will have one just like how everyone can afford a cellphone nowadays.

I'm not sure the author understands economics

[saterdaies]

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.

Subnotebooks like Cell phone plans?

[Creepy Crawler]

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.

Re:Why there are no economist billionaires.

[SunTzuWarmaster]

You are correct. Economics not a science because it is not correct all of the time. Real sceinces like physics (black holes, wormholes, ultra-small interactions, anti-matter), chemistry (bonding theory, atomic model), biology (the issue of the appendix, 'natural' supplements, numerous other things they have been wrong about), microbiology (advancement of certain fungi, spread of disease, availability of microbiologies in harsh environments), and geoscience (plate tectonics, changing weather patterns, ice ages, global warming) are correct 100% of the time and do not change their theories.

Do you honestly believe that because we switch dominant economic theories every "few decades" that it is less of a science? I mean, we flip-flop on issues like anti-matter every few years for physics.

Of course, I'm replying to an anonymous coward, so I get no mod points and no one ever reads my refutation. *Sigh*