Motorola’s pricing strategy

February 8, 2011 § 1 Comment

A few weeks ago, Motorola had on its hands, two certifiably hyped up and much wanted devices- the Atrix 4G superphone launching on AT&T and the Xoom tablet launching on Verizon. What was known was that the devices had some of the best technical specs in their respective fledgling categories and also boasted the Motorola stamp of quality- one that has good street cred with the success of the Droid platform. Also in tow was their excellent experience in crafting cool Android products. In all, a win-win. Coinciding with the split of the company and the launch of Motorola Mobility (NASDAQ: MMI), this was to be a rebirth of the iconic Motorola brand with a new identity.

What has followed is a very puzzling pricing strategy that threatens to kill all the buzz surrounding these products (if the Internet forums are to be believed). The Atrix was supposed to be ATT and Motorola’s champion against iPhone on Verizon. And from a product stand point, it still is. But from a cost standpoint, it has the possibility of falling short of its lofty goals. The phone has been priced at $199 on a 2 year contract but the Atrix accessories which include a cool laptop dock and an entertainment dock have both been priced significantly out of a normal person’s reach.  The dock costs $300 when bought along with the phone (total $500) and $500 if bought separately. To note, a brand new iPad costs $500 in comparison. The entertainment dock comes with a wireless keyboard and a mouse for $200. Full pricing details are available here. To me, it seems like the pricing does not reflect that of its competition and does not capitalize on the uniqueness of its accessories. If there is a hidden secret sauce here, I am missing it. The Atrix looks like one of the coolest devices to be launched this year, one I was seriously considering upgrading to. At this price point, I am not sure if I can afford it.

The Xoom tablet was officially launched to the American public with a Superbowl ad that reminded us of the iconic Apple 1984 ad, just that Apple was “The Man” this time around. Earlier in the month, Google and Motorola had previewed the tablet and the new Android Honeycomb OS that will power it. People (and yours truly) were really excited for the tablet. It looked and played cool. And then came the hammer that the Xoom would cost $800. Yep, the first genuine iPad competitor (ignoring the Samsung Galaxy tab which was running an Android version designed for smartphones)  will cost almost twice as much. Yes, I agree that the $800 Xoom has inbuilt 3G which the $499 iPad does not. But people tend to compare apples to oranges all the time. And the barrier of entry is much higher for the Xoom than the iPad. In addition, the VZ data plans for tablets are pretty expensive (not that any tablet 3G plan is cheap). All in all, the Xoom is going to have a tough time matching the iPad sales numbers which is a pity considering that it looks and feels like a fantastic product- comparable if not better than the iPad.

I am no business executive or finance maven but in my humble opinion, Motorola should have launched a WiFi only SKU comparable in price to the iPad. The WAN version should have been priced closer to the iPad 3G price ($630) although Apple has immense pricing flexibility due to their purchase volumes ( I should someday write a post on Apple’s excellent supply chain management). The Atrix accessories should have been much cheaper. If you think the laptop dock to be really a screen with a connector and 15 inch LCD screens costing less than $80 in the market (cheaper with more volume) pricing it at $300 or worse still $500 puts it out of the reach of very many people. Until this changes, Motorola has lost a surefire customer in me for the Atrix and a possible customer for the Xoom.

I didn’t think there would be a day where the “premium” Apple products are also the most affordable ones in their segment. To be clear, I am not blaming Motorola for all this. It is probably a mixture of costs, strategy and also carrier constraints which are driving the pricing but it is something that is worth a revisit. For my sake if not anyone else 😦

Update: To validate the barrier for entry point, HP/Palm just announced the TouchPad tablet with webOS and the first model to ship will be Wi-Fi only. Well played HP/Palm. Very smart business move. More on the TouchPad here and here. I will write a separate blog post on this topic soon.

Bite sized games

January 25, 2011 § Leave a comment

If you were asked to remember the first game that came to your mind, chances are that it would be “Angry Birds“. This insanely addictive and immensely popular game has captured the minds and fingers of mobile users all over the world. Be it on iOS or Android, the game has taken its place in millions of mobile devices and promises to go even further with smartphone proliferation. Angry Birds is not alone. The Internet is abuzz about a 14yr old kid whose game, Bubble Ball topped the iPhone App Store game download charts recently. And most developers by now have read the BackFlip Studios case study presentation from GDC, where the company charted its growth from a one man operation to a developer whose primary game is a free app that generates over $1million a year in ad revenue.

Are console games on their deathbeds?. Is this the end of full sized blockbusters like Gran Tourismo, Call of Duty and Halo?. No. But there is an undeniable paradigm shift in the kind of games that attract attention and sell. Gone are the days when blockbuster games were PC or console only experiences. Today, the standard for console and PC blockbusters are very high. For developers with smaller pockets and not so infinite resources, the world of bite sized games is much more preferable. The mobile game market is exploding with all sorts of players big and small. Electronic Arts makes big blockbusters like its Madden NFL franchise. It also generates a ton of money selling Scrabble and Sudoku on every conceivable platform from iOS to Android to Kindle. The risk with these smaller games is much lesser than the budgetof a console game which can run a few million dollars. There is also a greater appetite for such games from users who dont mind spending 99 cents to $4.99 compared to the the $49-$59 that pc and console games cost.

To point, consoles now have a significant library of download only titles on the Xbox Live, PSN and WiiWare platforms where smart and addictive games are cheaper to build and play, not to mention, easier to obtain via direct downloads. Game developers and publishers will continue to build multimillion dollar blockbuster titles for the PC and consoles. But they will also prop their calendar and revenue with smaller download only titles that have the potential to turn into goldmines. They will also port such games to as many platforms, mobile and otherwise to reach the widest audience possible and maximize their revenue from the small investment.

It is a great time to be a small developer who can build breakout game hits from the confines of his home office. It is also a great time to be a gamer to experience fascinating games, indie and otherwise on all platforms at a very affordable price. Game On !

Disclosure: I did not invent the title moniker. I first saw its usage here. Since then, some references have popped here and there.

Revisiting the future of palm

April 30, 2010 § Leave a comment

A week ago, I had written about Palm’s woes and the future of a good mobile OS. Couple of days ago, it was announced that HP stepped up to scoop the mobile device company for 1.2 billion dollars. Considering that the valuation of Palm was more than twice the sale price less than a year ago, it seems like HP has got itself a bargain. Only time will tell if this is as good a deal for HP as we think it is today. Synergies can be challenging as HP knows very well- for years now the Compaq-HP wedding has been questioned. What is undeniable is that HP has landed itself a good mobile OS backed by a great developer team.

After my initial draft of this post, I read this morning that HP was considering dropping Windows 7 for its tablet offerings. Whether this is due to fears that the Slate wouldn’t stand up to the iPad in its current form or the hope that a better tablet can be made with webOS is unknown. What is known that HP wants to use webOS in as many ways as possible and considering HP’s past, current and future ambitions, this could be big.

This indicates that the mobile OS wars will now have a muscled up fourth competitor to RIM, Apple and Google. This makes for a very interesting battle ahead and for the consumer, this is just a great time to buy a nice smartphone.

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