The way hardware is sold has changed tremendously over the past decade, with companies such as Google and Amazon now willing to forego making a profit on selling a device, and choosing instead to make up the lost revenue from advertising, services and app sales. But how long until a company takes this a step further and makes the hardware free?
Think this isn't possible? Think again.
It's a model that has worked for smartphones for years, with carriers spreading the cost over the duration of the contract. Sure, the consumer pays the price eventually, but there's no upfront fee and no clear distinction between the fee paid for the carrier contract and the fee paid for the device.
The same would apply here. The tablet wouldn't really be free, but its cost would be recovered over the lifetime of the device.
Let's also not forget that hardware is cheaper than ever, and with tablets such as the 7-inch Kindle Fire HD now down to under $120 it's now feasible for a company such as Amazon to claw this cash back over a couple of years from sales of digital and physical goods.
Free might seem risky – and it is if the company doesn't have its alternative revenue stream ducks in a row – but there are also massive upsides.
- It's a place the likes of Microsoft and Apple can't enter because neither firm is geared up for such a revenue shift.
- It's a wide open space. Apart from the smartphone arena, no one's doing this.
- It's new, and the first one into the space has a chance to invent, define it, and make it their own, while simultaneously puttng the competition on the back foot.
- It could be tied into a membership scheme, such as Amazon Prime, perhaps as a perk for higher 'platinum' tiers.
- It would give a device huge potential to infiltrate the market. There are a lot of hands out there that don't have tablets in them.
- It would massively shake up the market, not just at the low end, but across the board. While I don't think that it would kill off the exsting budget market, but it would certainly redefine the market space.
- Tie in to home automation and IoT, opening up yet potential another revenue stream.
Building a decent sub-$100 tablet is possible today, and recovering the cost of this over a couple of years – especially if it is tied to something such as Amazon Prime – is well within the realms of possibility. Also, if the device was tied to a membership scheme such as Prime, then the lifespan of the device could be better controlled.
This could also pave the way for additional revenue streams in the form of early upgrade fees and warranties.
I've mentioned Amazon Prime in this piece a few times, and that's because ultimately I think that it is Amazon that is best placed to do this give its massive hardware, software and services ecosystem.
While a device like this might not be suited to the likes of us who push the envelope of what gadgets can do – a device like this is going to have limitations built into it as to what it is and isn't capable of – there are swathes of people out there who would benefit from this, and would do more – and more importantly, spend more – if they had a device like this in their hands.
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