Editorial

For Microsoft, Surface success will come down to price, not features

When Microsoft announced its line of Surface tablets on June 18, there was one key area where it appeared the general tech community was let down: no pricing information was revealed. Microsoft revealed most important information regarding the tablets’ specifications as well as general release dates (Oct. 26 for the Windows RT version; the Windows 8 version will follow in about three months after), yet pricing was nowhere to be seen.

Since Microsoft’s announcement, however, Google announced and released the first Google-branded tablet, the Nexus 7 (built by Asus), and Amazon has announced new versions of its Kindle Fire tablet. While the fact these announcements were made wasn’t surprising, the pricing information for these new Android-powered tablets is extremely important.

Amazon has dropped the price of its original 7-inch Kindle Fire with improved components to start at just $159, while the 8.9-inch Kindle Fire HD begins at $299. The 7-inch Kindle Fire HD, meanwhile, starts at $199, the same price the original Kindle Fire used to sell for. Google’s Nexus 7 tablet also starts at $199.


Amazon's Kindle Fire HD pricing information left little room for error for Microsoft's Surface pricing.

By comparison, the most recent iPad model begins at $499. With the exception of a slightly larger screen, its specifications aren’t much different than the 8.9-inch Kindle Fire HD; in fact, the Kindle Fire HD bests the iPad in many areas, such as processor speed.

It’s clear Android manufacturers haven’t been able to elbow their way into the tablet space when compared to Apple’s iPad. The Kindle Fire is the most popular non-iPad tablet on the market, and even its market share pales in comparison to the iPad. Apple’s tablets maintain a 68.3 percent global share of the tablet market, according to statistics released July 25, followed by Android-powered tablets at 29.3 percent. At Thursday’s Kindle event, Amazon founder Jeff Bezos said the Kindle Fire accounts for about 22 of that 29.3 percent.

Windows-powered devices, meanwhile, account for less than two percent of the tablet market. Of course Microsoft hasn’t made much of an attempt to gain market share in the tablet space until it announced Windows 8 and Windows RT, however.

But if there’s one thing Google and Amazon’s announcements and pricing information revealed, it’s that they’re both willing to race to the bottom, in terms of pricing, to take on Apple. At the same time, Google and Amazon have also put Microsoft in a tough position.


Microsoft's Surface line faces tough competition in the tablet market, especially in terms of pricing.

When the Surface tablets were announced, Microsoft didn’t say anything about pricing beyond that they’d be “competitive.” Because of the Nexus 7 and Kindle Fire’s pricing, “competitive” just became very different than what it was when the Surface tablets were first announced.

That’s not to say Microsoft wasn’t acutely aware of the changing tablet landscape. Google had already announced it would be holding a press conference before the Surface tablets were announced, and rumors of Amazon making a Kindle Fire-related announcement were already swirling around the Internet.

While Microsoft may have made the tech community mad by not announcing pricing, it did leave itself some room for changes before the release of Surface on Oct. 26. The problem now is how competitive can Microsoft afford to be.

On one hand, the similarly sized iPad 2 begins at $399. But even though the Nexus 7 and Kindle Fire HD are smaller than Surface, they have very similar specifications – in some ways even outclassing Surface. Surface is powered by an NVIDIA Tegra system on a chip, although it’s not currently known what version of Tegra will power the tablet. The quad-core Tegra 3 is NVIDIA’s current version, which also powers the Nexus 7. It’s possible Microsoft’s partnered with NVIDIA to get a more powerful version in the Surface tablet, although that seems unlikely without an announcement from NVIDIA.

So where does Surface’s pricing come in at? That’s hard to say. Though the iPad 2 starts at $399, that’s for a 16GB version; Surface, by comparison, comes in 32GB and 64GB variants. The 32GB, 8.9-inch Kindle Fire HD begins at $369.

It’s unlikely Microsoft will release Surface at the absurdly low $199 price point that was previously rumored, but if Microsoft remains true to its word, it will be hard to release the 32GB Surface at a price point of more than $399. And if Microsoft really wants to make a dent, it’ll have to be competitive Google and Amazon’s recently announced smaller tablets as well.

Microsoft’s running out of time to announce pricing information before the Oct. 26 launch date. It’d be surprising if that information wasn’t released before the end of the month. But just how surprising will that pricing information be?

Report a problem with article
Previous Story

New Nook tablet rumored; could it run on Windows 8?

Next Story

Weekend Poll: Will you be buying a new Nokia Lumia?

54 Comments

Commenting is disabled on this article.

$399 would be too much for the RT version. I think it would have to come in at $299 at the most (32Gb). $249 and it'd be a surefire hit.
The Pro version with the HD screen can't really be any more than $499

I disagree, I think they are going for a niche market so it will be features over price. Let the other OEMs battle it out in that segment.

The same way that the "success" of a toys is measured--how many did you sell? Never really known was how many of those sales were really used--as opposed to ending up in the attic, garage, basement, given away, or just plain tossed.

Surface looks good and brings in a healthy competition to the market. The low pricing will drive tablet prices down which is the main aim here.

Surface RT will probably end up being slightly cheaper than the current iPad, while the Pro version is going to be significantly higher.

microsoft office was the only reason i really liked the surface rt, but since it will make its way to the ipad, why bother.

windows phone has some horrid apps, you might get a great tablet but no apps means most ppl wont buy - business users dont mean jack as can be seen in RIM or Palm

peacemf said,
microsoft office was the only reason i really liked the surface rt, but since it will make its way to the ipad, why bother.

windows phone has some horrid apps, you might get a great tablet but no apps means most ppl wont buy - business users dont mean jack as can be seen in RIM or Palm


I am sure you wont get all Office features on the iPad

Riva said,

I am sure you wont get all Office features on the iPad

true but i dont really use all the features, just the basic stuff, fonts, colours

peacemf said,
microsoft office was the only reason i really liked the surface rt, but since it will make its way to the ipad, why bother.

windows phone has some horrid apps, you might get a great tablet but no apps means most ppl wont buy - business users dont mean jack as can be seen in RIM or Palm

No one wants to makes good apps for 4%(few million) of the market (Wp7).

But things will be different for win8 and RT as MS sells abt 350 million new windows devices every yr. So by the end of nxt yr you will have 350 million Windows 8 and Rt devices and As u can build one app and put it across win8 , winRT and with very slight modifications also get it running on WP8 , i see a huge potential as a developer on this platform over the nxt yr .

It's a premium product with full access to the file system and comes with MS office. It won't be cheap and it should not be cheap. The surface is for people who need to do real computing, it is not a toy and it is not just for consumption like all the other tablets its being compared to.

That may be true for the Surface Pro, but the RT is targeted right at the iPad market and so should be competitive there. While Kindle may be cheaper it's largely a US market device and so is of little consequence IMO. While the original Kindle is big here in the UK there's no real presence for the Fire.

iPad and iPhone (and iPod) share the same OS, they are basically the same device in a different form factor, but Windows Phone, Surface and Windows 8 desktop/laptop devices all share the same code base while the API model is optimized for the form factor which will prove to be a much better way of going about this. This will become apparent next year when Apple follows this model and announce they will now make OS X available across all their devices as they merging their full line-up into one OS. It will be a breakthrough innovation that you can develop an app for the Mac and it will magically also work on iPad/Phone/Pod..

MS will have to undercut everyone, a lot.. For 1 main reason. The apps. Apple and Android have them and MS is playing catch up in that department. People will pay more for the iPad because they have all the apps available now. Not promises of an app in the future. I would love to get a Surface, but my iPad plays Netflix, HBO Go Watch ESPN and the various games.

I also dont buy the argument that MS really doesnt want to sell alot of Surfaces to protect their partners. They are a company that takes pride in themselves, do you think they want the Surface to go on the list with the likes of the Kin and Zune (altho I have 3 and loved them) ?

Based on everyone's logic, heck why doesn't MS just hand them out for free, which is essentially what people are asking when they say the price should be $199 or even $299.

This IS a premium product, 10.6" screen, magnesium body, USB, HDMI, Office built in, SC card slot etc.

My hunch is $499 for the 32GB and $599 for the 64 GB, and it comes with the cover. That way they undercut Apple by about $150-200.

If they had displays that could compete with Retina, I'd agree. But without a high density display, they either need to keep prices low or they'll look overpriced.

grking said,
Based on everyone's logic, heck why doesn't MS just hand them out for free, which is essentially what people are asking when they say the price should be $199 or even $299.

This IS a premium product, 10.6" screen, magnesium body, USB, HDMI, Office built in, SC card slot etc.

My hunch is $499 for the 32GB and $599 for the 64 GB, and it comes with the cover. That way they undercut Apple by about $150-200.


That actually wasn't the logic in my article. I called the rumored $199 price "absurdly low" and said it'd be hard to release the 32GB Surface for more than $399 and be competitive.

As Brody said, the display is now a big issue. The Kindle Fire HD has a much better, albeit smaller display, than Surface. So that aspect kind of evens out.

I'm going to take a guess here and say the base Surface model with 32GB and without one of the covers will start at $299. You have to remember that they'll also make some off of the covers, so who knows how much that will add to the final price of the device?

I just love all the writers on tech sites continuing to compare Windows 8 Tablets to iPads/Android tablets. Even on WinRT you're talking a full OS. Granted you can't run x86 apps, but you have access to the entire filesystem etc. etc.

There is no comparison. Surface on the other hand will be blindingly amazing. I'm assuming that of course. I can't imagine MS won't make them compelling.

I myself will be buying an RT at launch. If it delivers a couple of Intel devices will be in my hands in Jan.

Maybe Microsoft will price Surface high enough that it won't compete on price with hardware partner. If Surface is priced at something that people would pick it over what Dell, HP and the others are pricing their machines, it could make things even more complicated for Microsoft and its partners.

KevinN206 said,
So maybe Microsoft didn't release price because they wanted to know what the market price will be later in October?

That was mentioned in the article

Here's the point I think people keep missing. Microsoft does NOT want the Surface to be super successful. If it did, it would subsidize the hell out of it to get it into the hands of as many people as possible. The fact that they are only going to sell it in their own stores and online proves the opposite. But that doesn't really matter. This is a war of ecosystems, not devices. If someone buys the Sony Vaio Duo 11 instead of the Surface, Microsoft doesn't care. Or if they get the Samsung Ativ Tab, or HP Envy x2, or Lenovo Yoga. As long as it's running a Microsoft OS, they win.

I think Microsoft will position the Surface as a premium product. It'll keep partners happy, won't lose Microsoft money, and those with a disposable income can buy a high-end product that will last. The nice thing about having a multi-partner strategy is you don't have to fill all market segment price points on your own (which is why Android proliferates like bunny rabbits).

dagamer34 said,
Here's the point I think people keep missing. Microsoft does NOT want the Surface to be super successful. If it did, it would subsidize the hell out of it to get it into the hands of as many people as possible. The fact that they are only going to sell it in their own stores and online proves the opposite. But that doesn't really matter. This is a war of ecosystems, not devices. If someone buys the Sony Vaio Duo 11 instead of the Surface, Microsoft doesn't care. Or if they get the Samsung Ativ Tab, or HP Envy x2, or Lenovo Yoga. As long as it's running a Microsoft OS, they win.

I think Microsoft will position the Surface as a premium product. It'll keep partners happy, won't lose Microsoft money, and those with a disposable income can buy a high-end product that will last. The nice thing about having a multi-partner strategy is you don't have to fill all market segment price points on your own (which is why Android proliferates like bunny rabbits).

But to build the ecosystem you need market share right? why would they not want this in as many hands as possible. It is a tough position. Should they make it a premium product which would price it at about the ipad or above and have less market share to make its partners happy or lower and try to get more market share.

Really I think the fault of the partners for not thinking outside the box and trying to do the least amount of work to get a product out. MS put a lot of thought into this product and it stands out from the average tablet.

scumdogmillionaire said,
I hope they're a little bit more expensive than expected so I don't have to jump over peoples heads to get three of them on the 26th!

This.

The surface is never going to take on the Kindle or android device, they operate in the lower end of the market, it will match its pricing with the ipad for the RT version. I think initial price will have a big impact on whether consumers have interest or not, if they hear its the same price as the ipad I think theyll consider it, higher than that and they will likely ignore it unless they are already rocking the MS eco system (WP, xbox, windows 8)

i would buy into the MS ecosystem (upgrade to windows 8 desktop, windows phone,and Tablet) if the surface was $199.... if not... i am ok with apple.... for what i do with it, business wise and personal wise the apple system works perfectly.

I wrote it the other day, and I will do so again. People have been having conniptions over Microsoft not releasing the price of Surface, and Nokia not releasing the price of their WP8 phones. Then Google is praised here for releasing the price of their new tablets. But when Google (Motorola) announced their phone the same day Nokia did, and Google didn't announce a price, nobody said a word - go ahead and read the article here on Neowin about their announcement.

So either we have people really excited about Surface while not really caring that much about the next Google phone, or are just looking for an excuse to bad mouth Win8.

nohone said,
I wrote it the other day, and I will do so again. People have been having conniptions over Microsoft not releasing the price of Surface, and Nokia not releasing the price of their WP8 phones. Then Google is praised here for releasing the price of their new tablets. But when Google (Motorola) announced their phone the same day Nokia did, and Google didn't announce a price, nobody said a word - go ahead and read the article here on Neowin about their announcement.

So either we have people really excited about Surface while not really caring that much about the next Google phone, or are just looking for an excuse to bad mouth Win8.

People don't consider Motorola as Google even though they bought them. The Google phones are the Nexus phones, not the **** that Motorola keeps churning out.

mrp04 said,

People don't consider Motorola as Google even though they bought them. The Google phones are the Nexus phones, not the **** that Motorola keeps churning out.

Doesn't matter what people think - they are part of Google. Using the same logic, I could say that Skype or any other company MS bought is not considered part of the company. But even at that, why are they getting a pass while there are complaints about Nokia (not owned by MS) not announcing release date or price, when Google/Motorola didn't announce a price or date either?

nohone said,
So either we have people really excited about Surface while not really caring that much about the next Google phone, or are just looking for an excuse to bad mouth Win8.

Surface and Lumia are flagship devices for the WP8/W8 OS. In the grand scheme of things the price of the lattest Motorola device won't change anything, while that of Surface tablets and Lumia phones could affect the success of the platform significatively.

Considering it's a "premium" device, I'd say it could run anywhere from 299-399 depending on how much MS wants to make off of it. They're making plenty of money off their other divisions that I could see them releasing it at the $299 price point.

Surface 32GB will either be $399 or $499
64GB will be either $499 or $599

Obviously lower is better, but I think at either price it will sell okay. Remember Surface unlike Kindle or iPad is competing with it's own ecosystem of hardware from partner companies. Microsoft is even intentionally trying to keep Surface sales to a minimum by only selling them through it's Microsoft Stores. This is reminiscent of Google's Nexus program when they only sold Nexus phones through Google directly. They've expanded the Nexus program since then, but Nexus phones still aren't big sellers in the Android phone market. Surface sales will only make up a very small portion of Windows 8 tablet sales, so it doesn't make too much sense to obsess over how Surface does relative to iPad or Kindle.

It's Windows 8 vs. iPad, not Surface vs. iPad that matters.

The problem is that Microsoft has partners to think about. If they price both versions of the surface lower then what their partners can make theirs for they will lose partners to android.

I think they would lose more money by losing partners then if people do not buy the surface.

A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

I would.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

I think the Surface is 'RT' and not '8'.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

If I wanted the full OS i'd buy a laptop.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

Out of curiosity, what do you think makes Windows RT more of an operating system than Android or iOS?

Majesticmerc said,

Out of curiosity, what do you think makes Windows RT more of an operating system than Android or iOS?


Because it has notepad.exe and mspaint.exe in hilariously gimped desktop mode.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

I do not think the average consumer cares. First they call tablets Ipads....even i hear it at my sons school when talking about the nexus7. they will call it an ipad. Sadly it is the industry and consumer standard.

Majesticmerc said,

Out of curiosity, what do you think makes Windows RT more of an operating system than Android or iOS?

have you not been paying attention? ios and android are phone OSs adapted to tablets. windows RT/8 is a COMPUTER OS adapted to tablets.

external monitor, full mouse and keyboard support, usb peripherals, split screen multitasking, desktop IE10, full office... it goes on and on

moloko said,

I do not think the average consumer cares. First they call tablets Ipads....even i hear it at my sons school when talking about the nexus7. they will call it an ipad. Sadly it is the industry and consumer standard.

I remember some news that some people returning Galaxy Tabs because they thought it was an iPad.
Truth hurts, I guess..

luiscamino said,

have you not been paying attention? ios and android are phone OSs adapted to tablets. windows RT/8 is a COMPUTER OS adapted to tablets.

external monitor, full mouse and keyboard support, usb peripherals, split screen multitasking, desktop IE10, full office... it goes on and on

So OK, they're two different approaches to the same problem, but that doesn't make the others LESS of an OS than Windows just because it's also used on the desktop.

By that logic, SUSE Linux is much more of a desktop operating system than Windows because the SUSE Enterprise Edition was used on IBM Watson.

Regarding your points, I don't really see how Windows is more of an OS just because it has a different feature set (BTW, Android at least has most of the things you described). Android has plenty of things that Windows RT doesn't too (e.g. Home/Start screen gadgets, more customisation), but I wouldn't call Android "more of an OS", because it's not, it's just a different approach. That was my point to the OP.

McKay said,
A lot of people here would be willing to fork out more for a full OS, but I wonder if the average consumer would.

Except that the Windows RT version won't be "a full OS" as you put it. It won't run any existing Windows Applications, including dotNET ones that aren't rewritten to integrate with Metro. In fact, as it stands, Android and iOS are much fuller OS's than Windows RT due to their expansive application base, feature set, and popularity.

If you're talking about the x86 surface, sure you'll be able to run existing desktop applications on it, but have you tried using touch with the Windows desktop? It's horrible. And of course let's not forget, you'll be paying through the roof for the x86 version, probably 1k+.

But don't let the realities of the situation cloud your fantasy

luiscamino said,

have you not been paying attention? ios and android are phone OSs adapted to tablets. windows RT/8 is a COMPUTER OS adapted to tablets.

external monitor, full mouse and keyboard support, usb peripherals, split screen multitasking, desktop IE10, full office... it goes on and on

I can't speak for iOS, but Android has full keyboard support as well as many usb peripherals. And honestly, who includes IE in a pros list lol. Office I couldn't care a less about. There are plenty of office applications for Android and iOS.

I'd like to see you go on and on because there's nothing there that makes surface attractive in anyway considering what it's missing - Applications. It has virtually none. There are no home screens, just a massive list of squares. Where are the animated wallpapers? Where are the games like modern combat 3? Sorry, but the surface is doa, and that's without knowing the pricing.

luiscamino said,

have you not been paying attention? ios and android are phone OSs adapted to tablets. windows RT/8 is a COMPUTER OS adapted to tablets.

external monitor, full mouse and keyboard support, usb peripherals, split screen multitasking, desktop IE10, full office... it goes on and on

You don't seem to know what the difference is between "RT" and "8". There will be no 'desktop' to speak of in "RT".