$199 BlackBerry PlayBook is Not Sustainable

For the past week or so the BlackBerry PlayBook has been selling extremely well at the discounted price of $199. This low price is helping the PlayBook get into the hands of more people, and making the user base not only bigger, but also more diverse. Trying to help a friend buy one, has left me unable to find a 16GB version for sale anywhere online. As a developer this is all candy and rainbows as it means that there are more potential customers to sell apps to. For RIM however, continuing to sell the PlayBook at $199 is not sustainable.

There is no doubt that the bill of materials for the BlackBerry PlayBook is higher then its $199 sale price. Additionally once you consider distribution costs, and some profit for the retailers RIM is losing a significant amount of money on each tablet that is sold. While the idea of positioning a product as a loss leader is not uncommon, there isn’t too much upside for RIM in this case.

To begin with it positions the PlayBook as the equivalent of the Kindle Fire, or the Nook tablet. However, beyond screen size, these devices do not have much in common. The PlayBook has far higher quality hardware, and an easier to use UI. By pricing it at the same costs as these tablets it signals to consumers that the cost of tablets should be based on their screen size. Amazon has kept their bill of materials down by not including cameras, Bluetooth, Bezel controls, and hardware buttons and can break even at a lower price then RIM because of this.

The goal of a loss leader is to make the difference up in other revenue, but there is little chance of RIM doing so with the PlayBook. While RIM does take a 30% cut on all apps that are sold, after you account for credit card fees and the hosting and bandwidth costs of actually providing the store, RIM is not making much money from AppWorld. They are also not getting any revenue from the wireless carriers for the PlayBook. For RIM’s phones they are paid per subscriber for providing BIS/BES services, but because the PlayBook is Wi-Fi only they do not collect any revenue for this. (Is this why the PlayBook still doesn’t support BIS email?)

The only benefit that I can see is that it increases, the number of users on BBX, and therefore increases the benefit to developers on the platform. Hopefully to the point of attracting more and more developers by the launch of BBX phones next year. While there is benefit to RIM in launching their BBX phones with an ecosystem already in place, at some point a company needs their products to generate profits.

37 total comments on this postSubmit your comment!
  1. I wish RIMM would ditch the tablet and concentrate on their phones and make them with a larger screen. My eyes are getting old looking at these 2.4 inch screen.s

    • You’re missing the bigger picture. The OS on the tablet is the same OS that will be on the phones so basically they are concentrating on them and using the tablet to perfect the OS and work out bugs (minus obvious UI changes that will be required).

    • that is what I said all along. Kill the PB and concentrate on smartphone. that is what is making RIMM money. Fire the guy who came up with the sh*tty Android player cuz it is wasting money getting it to work.

  2. The upside is a) exposure and getting the device/OS into more hands as mentioned and b) getting rid of about 800,000 PlayBooks in stock that were going nowhere.

  3. Eric, I have to respectfully disagree with this post.

    The Playbook’s purpose in life has gone through a massive shift in the last 8 months.

    You state that the $199.99 price make consumers think it is the same quality as the Kindle Fire and the life… I disagree.

    I think consumers are educated enough, as are sales people in GENERAL, that they will know the Playbook is FAR SUPERIOR to the Kindle Fire. They consumer just needs to look at the specs and cameras to see that!! I frequently crap on the basic consumer, but, I will give them enough credit to realize the Playbook is far superior to the Fire…moving on…

    I think you are vastly diminishing the value of the Playbook as a loss leader.

    RIM is a company that desperately NEEDS BBX phones to succeed. Getting 1-2 million Playbooks into the market will be HUGE to the success of BBX phones in many ways.

    You mentioned the app catalogue.. that is HUGE… Alec Saunders has confirmed multiple times that essentially EVERY Playbook app will be directly ported to the first BBX phones. Thats HUGE. What first gen product has launched with a full catalogue? I can’t think of any. The BBX phones have a chance of doing this, ONLY because of the Playbook.

    Yes you are right.. RIM cannot keep selling the Playbook at a loss for the next 10 years, but, for the next 6 months.. they can take it. Until BBX phones hit the market, they need to get as many Playbooks in the system as possible

    I consider the Playbook an investment into the NEXT 10 years of RIM.

    RIM is playing the long game here. If dropping 500 million means they stay alive and rebound.. its a drop in the bucket. 500 Million is nothing compared to the potential growth and market recapture they could POTENTIALLY do with BBX phones

    • Absolutely! The PlayBook has been a proving ground to refine and develop QNX OS for future BBX phones. This PlayBook price drop is just what RIMM needed to get the attention of the consumer, so they can see what a great tablet the PlayBook is. And once the major OS upgrades and 4G PlayBook versions arrive, there will be an greater demand for the PlayBook. 2012 will be the year RIMM comes back!

    • “Alec Saunders has confirmed multiple times that essentially EVERY Playbook app will be directly ported to the first BBX phones. Thats HUGE. What first gen product has launched with a full catalogue?”

      You’ll be left with the same problem that Android had when launching their tablets. Most apps that were built with the PlayBook in mind (not the ones that were ported from phones and that just waste tons of space and add unnecessary navigation, etc.) will have to be redesigned to work on the smaller screens. Buttons will have to be made larger, you’ll be able to fit less information on screen, etc. That can be quite some work depending on the app.
      The smartphone market being larger means that more devs will probably port their apps.

  4. Exactly what Brian says: RIM is priming the BBX app ecosystem. Why do you think they gave away Playbooks at the last DevCon? The Playbook is the BBX platform, here, today, right now. When the first BBX phone comes out, it will benefit from a platform already heavily tested by a large user base, with a ready app marketplace.

    • Bingo…

      Think about this.. what would be worse?

      1. The current playbook situation
      2. Launching BBX with NO APP ECOSYSTEM, Developer support or mass OS testing

      I think the answer is clearly #2

  5. As bad as I hate to say it, the success or failure of a product is not it’s hardware specs. It’s about content. The Kindle Fire is getting so much play because of what can be loaded on it. I bought a Nook Color first. And rooted it loaded CM7. It’s a nice little tablet. It has some missing and dated hardware. So I bought on to the Playbook from day 1. Pre-ordered the 64 gig unit. While I love the UI and the superior hardware….. I find myself on the Nook daily. The Playbook sits in it’s charger. The content I get from the Android market just makes it do what I want, when I want it.

    The Playbook has lots of promise. But still after all this time, it’s just promise… no delivery. We were suppose to have email clients within “a few weeks of launch” The Android player “this summer” The e-book function still is pitiful. A few third party apps are getting closer. But still no feature rich e-book clients.

    I wanna love my Playbook. It’s a sweet piece of hardware. It blows all the others away for hardware. But without the software to make it useful, I’m finding it sitting most of the time.

    It’s killing me to keep thinking about a Nook Tablet to get the missing hardware that I know is already in the Playbook. But without the software, it simply stays home.

  6. RIM’s current strategy once again shows that we’re dealing with a slow dinosaur…
    They had plenty of time last Summer to make small modifications to the PlayBook to make a version that is cheaper to manufacture.
    Get rid of the back camera, Bluetooth and some other unnecessary items that people buying a $200 tablet don’t care about.
    It could have been the ‘Curve’ version of the PlayBook. Everybody knows that the Curve is the reason RIM still enjoys some significant market shares outside of the US.

    • ?????

      what in hell are you talking about Ofutur? current strategy is a slow dinosaur?

      Please elaborate!!

      Are you serious? A Curve version of the Playbook??? ?????

      Holy crap you are out of touch

      People don’t care about Bluetooth and cameras?? are you mad??

      They care!! Just not for an additional $300.00

      Ofutur.. again.. you need to look at things from a perspective NOT YOUR OWN.

      The average consumer doesn’t have $500 bucks to drop on a tablet. They want to drop 200-300 bucks instead. The Kindle Fire is going to sell very well because of crazy good advertising and a great price point.

      The Playbook would have sold just as well if RIM took the same approach from the beginning.

      ahhhhhhhhh Ofutur… it won’t sink in.. I am stopping….

      • Samsung was able to come up with a new tablet model within weeks in order to circumvent a ban in Germany. Agile companies adapt and move fast.

        You’ve said it yourself, the Kindle Fire doesn’t have Bluetooth nor a camera and yet it sells very well. People just don’t care. Give them the basics and sell a premium version for people that need more. Hardcore BB fans need Bluetooth because we want to use Bridge, the rest doesn’t care.

        • The problem is that RIM already had (and still has) too much inventory of their current Tablet.

          RIM’s real problem is actually just over production.

          • Depends on how you look at the situation.

            In the end, we will not be able to assess the Playbook’s impact until 1 year from now after BBX phones have been on the market for a while

            Then we can look back at the Playbook and see whether it was worth it

          • I agree, but after having manufactured the initial million, they must have realised that there was a problem.
            Things were different at that time though. That was pre Touchpad fire sale and things might not have been that clear back then in terms of strategy. OS 2.0 was probably still on track, new phones were expected, etc.

        • By the way Otutur, I read that the Kindle Fire is already losing steam, due to consumers are discovering its little more than an e-reader. With the right advertising and the temporary price drop, new OS 2.0 update, consumers will give PlayBook a hard second look.

  7. Seriously? “a new model”

    They slapped on some metal on the outsides

    lol…

    Why are you twisting my words.. do you not process anything?

    I said they DO CARE, but they weigh price over features

    to these consumers… its not worth it to have bluetooth or cameras for an extra $300

    that doesn’t mean they don’t care

    I guarantee also that many of these Kindle Fire users will say to themselves one day… man I wish I had bluetooth… or good stereo speakers…

    • Exactly, some added metal or some removed chips, same difference.

      You said the Fire was selling very well at that price point, without those features…If people cared that much, they wouldn’t buy an inferior product. It would not be worth it for them.

      When these users realise they need a better device, they’ll go shopping again and they will look at what’s available and pick the next Kindle tablet ;) or… the PlayBook, next year, if substantial progress has been made with its ecosystem.

      • not true at all

        you need to learn some basic economics

        consumers will always way features versus what it costs to have those features

        The average consumer will choose the Playbook over the Kindle Fire anyday if both are at $199.99

        Its just that there are milliions of people stupider than the average consumer who will buy the Kindle Fire with NO research..

        • Even at the same price point, I’m not sure the average consumer will pick the PlayBook over the Fire. He’s led to believe that the Fire will deliver more value.
          And not all iSheeps are stupid, people have different needs and some value simplicity and content over features

  8. The commentary on RIM taking the hit on current PB so that BBX gets into more public hands and thus raises interest from the market and devs is spot on. This will drive content creation and interest accordingly creating a positive perception of BBX.

    They are sitting on a massive inventory which needs to be cleared. Additionally there is speculation that RIM are planning on ‘relaunching’ PB with OS 2.0 pre-installed and that means they’d ideally like to clear existing PB with 1.0 off the channel.

    The BBX phones are apparently going to have the same resolution and aspect ratio as the PB so the apps dev push out now will in principle ‘just work’.

    RIM did rush then PB out and their approach to phones has been a bit ADD but they have themselves stated BBX is their future and the PB is a long term commitment for them.

    I received a playbook for my birthday and much prefer it’s form factor and BBX OS over the iPad 2 that I later won in a competition. The playbook badly needs apps though as I’m pretty much using it as an extension of my BB and for writing docs with word to go and syncing with files & folders to Dropbox when I’m on the move. The iPad 2 gets used as my alternative to a laptop when I’m at home and work simply because of the better selection of apps. I can model processes and workflows with inshort and touchdraw. I can keep track of my projects with scrumpad pro. I can prototype with imockups (and soon adobe proto!). I can create web content with Touchdraw, procreate and gusto. I can do my documents and EDIT presentations with quickoffice hd, pages and keynote. RIM actually OWN Dataviz and the PB is meant to be a business grade tablet! Where the hell is the featured office suite! You cant even buy one!

    I really want these types of workflows and apps on the PB! I have analogues but theyre clunky. Litepad and LiteFTP being a case in point. But for that to happen more people need to have BBX to attract devs so RIM will have to take a hit to build the catalogue and drive the ecosystem. But it’s a smart move when competing against a giant with a very mature platform and app ecosystem.

    • I’m with you on apps and it’s a bit of a chicken and eggs problem . It’s worth porting a service that is succesful on other platforms and it can generate additional revenue, but it’s a risk to create something new on the PlayBook unless you price the apps significantly higher.

      Regarding your comment on apps that just work, it’s not true. An app made to look good on a 7″ screen will not “just work” on a 4″ screen. Things will be too small.

      • Well I did say ‘in principle’. There’s also an element of how QNX/BBX will scale apps and whether the major push from RIM to devs will be based on NDK and webworks as opposed to adobe air.

        Yes the app situation will always be chicken and egg and there is a great post on here about the gold mine that is QNX app world right now. The reality is that RIM will need a decent catalogue in place for BBX to stand a chance so I see them sticking with it (and me with my PB!).

        Regarding your comment about app pricing, a good example is shareplus on PB is £30 and on iPad £10! That’s a joke considering what little competition there is in that segment.

  9. RIM should just give away the PlayBook. Hardware being superior or not… Every other tablet out there has the apps I would use a tablet for.

  10. RIM should just give these away for free. I paid $300 bucks for a 16GB PlayBook, and I use it to browse the web… that would be all. I’d rather use the web, than it’s FB app. It doesn’t have a twitter app or Hulu or Netflix. I use my Nook Tablet for that.

    Basically my PlayBook looks nice, allows me to web browse on the go while bridged to my Bold without having to buy an additional plan. The Bluetooth on it to connect to speakers or my laptop is useless. And if there is GPS, it does not work… Poynt looks great, but never knows where I am (I always have to input address).

    Games might be cool on it, but I really wanted to use this for streaming media. I should’ve just waited until February. I regret my purchase every day.

    I have been an avid BlackBerry person for years.

  11. I tested the playbook on sale at Best Buy and found it slow and difficult to use. Even the sales guy couldn’t seem to make it respond as advertised. At 199 it has a lot of features that could be OK in the future, but if they raise the price back up to 500 it’s a dead duck.

  12. What they PlayBook needs right now is USEFUL Apps like Skype, OoVoO, Google Talk, an ACTUAL voice guided GPS, etc… It also needs USEFUL accessories such as a Dock that ACTAULLY has HDMI out and a Full size SD card slot other than the USB to Sync. To this day, there STILL isn’t a Dock out there with HDMI. One of the things that made Apple popular was its accessories and that’s what RIM needs to make more cool looking ones. I say copy some off Apple if need be. I know it’d be cool to have that dongle that has an SD card slot apple has!

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