The economics of a free iPad...

Apple has a lot of headroom on iPad pricing and publishers have incentives to offer bundled deals...
Written by Tom Foremski, Contributor on

According to iSuppli, Apple can make the low-end $499 iPad for about $229.

Those costs will fall fairly quickly.

Apple gets a 30% cut of any media sold through its online stores. That can be a nice piece of change, especially when you consider the New York Times is considering charging as much as $30 a month for the iPad version of the newspaper. At that price, the New York Times could offer a bundle deal - a free iPad with an annual subscription. It could also charge advertisers more money for the richer ads.

Other publishers could band together for similar deals, a free iPad with a local newspaper, plus magazine, plus book-of-the-month club subscription.

Apple could offer an iPad to publishers for $100. The publishers would promote their subscription bundles and the iPad. Apple doesn't have to spend a dime advertising the iPad -- another reason it could offer a cut price deal to publishers.

Clearly, there are a lot of ways that the economics of the iPad and the media industry could be sliced and diced, that make sense to offer a 'free' iPad. That might not happen straight away, but it is likely to happen because it can.

A risk with bundled deals might be that customers just want to a cheap iPad and they won't be reading the publications and that means they won't be viewing ads. Advertisers will be able to tell because there will be tracking technology that measures engagement and interaction.

But Apple will still benefit because with more iPads in people's hands, there are more opportunities to sell all kinds of other media, and that means more revenues for Apple. And that's another reason that Apple can offer iPads for lower prices to publishers, for their bundled deals.

I'm looking forward to my 'free' iPad.

Please see ZDNet:

iPad iSolationism

Special Report: Apple iPad

Editorial standards