Surface price

I was thinking about this and I think that MS is constrained in some ways, but still has options to surprise people. It's true that they have to worry about alienating 3rd party manufacturers by undercutting them on price. If Sony takes a bath on the launch of the PS3 to make it competitive with the XBox, that's one thing, but I'm pretty sure that MS does not want to actually destroy a competitive Windows 8 tablet market. Especially considering that they actually make money selling those licenses. I think this even if you made the argument that's it's the only way to have a chance of eating into Apple market share. I think this because that argument is still only speculative. MS would have to consider destroying a functioning, if middling, ecosystem on just the chance of a success. I had thought that the realities of pricing these tablets might make MS reconsider what they charge for an OEM Windows license. But I also don't think that's likely at least for the time being. Maybe if they feel pressure to in a year or so.


But what they can do is play around with the value proposition. MS has said that the RT tablet will be competitive with other ARM tablets. And that the Pro tablet with Ultrabooks. But how competitive? MS could keep up this pretense by comparing device type and not feature set. In a sense, make a high-end device cost the same as one of the cheaper competitors. If you read the Surface.com site, they say that the keyboard covers come with the tablets. They are clear to point out when something is sold separately (HD Digital AV Adapter). This is often an added expense with other tablets. If we suggest that maybe the cover is at least a $50 value, then if they price it next to a bare bones tablet, it effectively works as a $50 price advantage. They would have to be clear and point this out to consumers.

In fact, this tablet might be very expensive for MS, what with the special magnesium case and optically bonded screen, etc. They might have very small to nonexistent margins. Another company might not be able to justify not getting a certain return on the investment. But this is MS. They play the long game. They've thrown away bucketloads of money on things like the faulty XBox hardware, and pricey acquisitions. Throwing away money on a tablet, to extent it might be a loss leader, to be competitive against the iPad, might work for them.

Fundamentally, I'm drawing a distinction here between the idea of MS trying to undercut it's competitors, both Windows tablets and iPad, with a very low price, and the idea of them instead selling the value for the price. I think there's greater chance of the latter. But who knows?