HP single-handedly destroys non-iPad tablet market

After getting a taste for $99 tablets, will consumers continue to stomach $500 price tags?
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

After less than two months on sale, HP has pulled the plug on the TouchPad tablet and is so desperate to get rid of them that it is having a firesale, selling the 16GB TouchPad for $99 and the 32GB model for $149. But not only has HP killed the TouchPad, it has also single-handedly destroyed the entire non-iPad tablet market.

So what went wrong with the TouchPad? I think that several factors contributed to the death of the TouchPad:

  • No app ecosystem
  • An OS that people didn't care about
  • HP's own lack of confidence in the product - I agree with John Gruber: HP's new CEO, Léo Apotheker, has no interest in playing in the consumer market at all
  • The iPad effect - Probably the biggest reason that the TouchPad withered and died on the vine is the iPad

Let's look at that 'iPad effect' in a little more detail.

Apple sell millions of iPads every quarter, and it seems that most tech companies have no idea why it sells. In order to try to compete with the iPad, HP developed a tablet with a design and the tech specs similar to that of the iPad, priced it like the iPad, spent a ton of money on commercials featuring celebrities, and pushed the tablet out to big retailers in huge quantities.

And still no one cared about the TouchPad.

The reason: People are buying the iPad not because it's a tablet, but because it is an iPad. Apple has NOT carved out a market for tablets, Apple carved out a market for the iPad. Think about it: When Apple released the iPod back in 2001, did this create an enormous market for media players? No. It created an enormous market for the iPod.

And why should the iPad carve out a market for tablets? Apple doesn't even refer to the iPad as a tablet! Sure, Apple refers to them as amazing, magical, even revolutionary, but not as tablets.

Price is another factor. When Apple unveiled the iPad, tech pundits were bowled over by the price. $499 was seen as cheap. And it was cheap - for an Apple product. Was $499 cheap for a tablet? Well, the TouchPad (which, remember, was a pretty decent tablet) didn't sell at $499, and even a drop to $399 didn't invigorate sales much. However, once HP dropped the price to $99 as part of its firesale, this move resulted in overwhelming demand for a product that was essentially dead and that HP would no longer release updates for. This price drop was enough to push the TouchPad to the top of Amazon's electronics chart, above the Kindle.

So there you have it. Unless you're selling iPads, the stampede-inducing price point for a 16GB tablet is $99. OK, maybe this is a little on the low side, but the price definitely lies between $399 and $99, maybe around the $250 mark. But according to iSuppli, the bill of materials and manufacture of the 16GB TouchPad comes in at $298.

Which is why HP has destroyed tablets. The demise of the TouchPad has uncovered the dirty truth - the $500 tablet price point is too high ... way too high. This applies to webOS tablets, Android tablets, and it will likely apply to Windows 8 tablets, although the Windows might have a bit more oomph than webOS and Android and might be able to sustain this price for a while -- but eventually OEMs will engage into a race to the bottom and prices will fall.

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