Editorial

Surface RT pricing will tell us how confident Microsoft is about Windows 8

It's an exciting time to be following Microsoft as the company is in the process of unifying its products with the Metro design language and is once again pushing boundaries with a new user interface. Admittedly, Microsoft once again finds itself late to the party as Apple has already delivered on this cross-functionality and while Microsoft did have this ability, it was not implemented in a way that encouraged the consumer to invoke interoperability on their devices.

This all changes with Metro and Windows 8 as Microsoft is finally bringing all of its platforms full circle with interoperability. What we are finally seeing is Microsoft taking advantage of its wide selection of products and making them work together in a way that promotes the ecosystem for the consumer and one of the key plays in to this arena will be Microsoft's own Surface tablet.

Microsoft is building two versions of the Surface tablet, the Windows 8 RT variant and the Windows 8 Surface which will have price points for different markets. For the sake of this argument, we will take a look at the lower priced product, the RT version of the Surface tablet.

The tablet market has tons of competitors but only one who leads the pack. The iPad is the undisputed champion of the tablet market and Microsoft will be going head-to-head with Apple in this arena but there are other tablets such as the Samsung Galaxy Tab 10.1, Google Nexus 7, and many more who Microsoft must best. While the Nexus 7 will be in a smaller class of devices, it does have one trait that you can not ignore, it costs $199.99. There are also rumors that Apple will be entering the 7in class market too, but that is only a rumor at this point.

With Apple's iPad coming in at $499.99 for the new iPad, the price point has been set for Microsoft. But the problem is that Apple has years of marketing already in place and Apple has the name brand the consumers want, so if Microsoft competes at the same price point, it will be a tough sell.

Beyond the obvious, here is where it gets interesting. Microsoft has already shown that it is willing to subsidize hardware, take a look at the Xbox and Xbox 360. Microsoft is willing to lose money upfront because they know that you will buy games and accessories that will feed the company royalties to offset their cost of the hardware.

Now, knowing that Microsoft has the ability to subsidize hardware, they could potentially subsidize the cost of the RT tablet. There have been rumors that Microsoft is targeting the $500 price point but they could drive the price even lower, if they are confident you will buy apps.

Microsoft takes a cut of every application sold through its marketplace, a cut that could offset the price of the hardware. The question that Microsoft will face is how many applications will the average consumer purchase? Seeing as the marketplace is not nearly as full as Apple's App store and that some are free applications too, the expected revenue from these purchases is hard to forecast. Additionally, if Microsoft expects the marketplace to explode with popularity once it hits retail shelves, they could hedge the price with expectation that over the lifetime of the product, they will recoup their costs.

If Microsoft is confident that the Surface will sell and that consumers will buy apps, they could subsidize the hardware to get it down to an extremely attractive price point, say $399.99 or even lower to help move units, gain market share and cast the product in the best light possible.

But it all comes down to how confident is Microsoft with Windows 8 and how likely are you to buy apps. Microsoft will certainly try to promote that Office comes on the tablet to help justify its price, but at the end of the day, consumers want the upfront price to be as low as possible, especially if you are only looking for a casual couch surfing tablet.

If they are true believers, we will see the Surface RT at an attractive price-point as Microsoft works to penetrate the market with a low cost subsidy with the expectations you will purchase lots of apps, if they are on the fence, well, don't expect Surface RT to be any lower than the iPad, at best.

Report a problem with article
Previous Story

AT&T launches its own shared data plan

Next Story

What is "SkyDrive Pro"?

46 Comments

Commenting is disabled on this article.

if the RT version (which is what I am thinking about) isnt in the $399 range I'll be surprised. there's no way they can have the same price point as the iPad. Let's face it, just having hardware by Microsoft will turn people away. Pricing will be one of the main reason someone will consider it.

Josh_LosAltosHills said,
Let's face it, just having hardware by Microsoft will turn people away. Pricing will be one of the main reason someone will consider it.

How so? Its the OS people will consider and the looks, the hardware it self looks amazing and the software is what we all know and use daily

derekaw said,
What is the back made of? Plastic or metal or something else? What is the kickstand made of?
supposed to be some sort of vapor magnesieum structure thats light but rigid

It really matters not. There's so much more to be "smoked by" Windows 8 RT in this category than the Windows Phone 7.5 to other mobile phone platforms to justify everything within reason. What's there to worry?

Honestly, I'd like to see Microsoft come out as the luxury brand. Make it $580, for the base model and it comes with a voucher for a cover. Let the oems duke it out with apple for the low end.

Surface RT comes in 32 and 64 GB versions. The equivalent iPad goes for 599/699 $
I would expect MSFT to come in at or just below for the RT model (720p screen touch, USB2, Nvidia Tegra3) although the 64GB SSD does not warrant a $100 price difference, more like $50

The Pro comes in at 64 or 128 GB (1080p screen pen/touch, USB3, i5 Ivy Bridge) and I could see these go for 899/999 $

BTW.. Interesting ITX board..
http://www.tgdaily.com/consume...board-surfaces-from-kontron

paulheu said,

The Pro comes in at 64 or 128 GB (1080p screen pen/touch, USB3, i5 Ivy Bridge) and I could see these go for 899/999 $

They already said Pro will be based on most NetBooks so i would say around 1000-1200ish$ (THis is AUD pricing btw so your pretty much spot on for US pricing)

If i decide to follow the brainless wave, i'll get an iPad. Until my brain works, i'll keep my Android-powered-Sony-with-a-reasonable-price tablet.

You could equally argue the price will be high if they are confident, low if they are desperate to sell... after all isn't that how Apple makes money high cost on a high demand product. If people want it, they will pay for it.

lt8480 said,
You could equally argue the price will be high if they are confident, low if they are desperate to sell... after all isn't that how Apple makes money high cost on a high demand product. If people want it, they will pay for it.

The iPad isn't high cost.

lt8480 said,
You could equally argue the price will be high if they are confident, low if they are desperate to sell... after all isn't that how Apple makes money high cost on a high demand product. If people want it, they will pay for it.

That's what I was thinking: if MS is confident on Surface they can price it higher, a low price sounds a lot more like "no one will buy this if we don't sell it cheap".

rfirth said,

No, but the rest of their products are.

Only their Macbook line has the infamous "Apple tax".
But this discussion is about tablets.

ichi said,

That's what I was thinking: if MS is confident on Surface they can price it higher, a low price sounds a lot more like "no one will buy this if we don't sell it cheap".

Well, I won't buy a RT Surface if it isn't cheap, because the Pro Surface has much better hardware, even excluding the CPU, like USB 3.0, more internal storage, and support for 64 gb sd cards. I will definitely buy a Pro, even though I know it's going to be more expensive, but whether or not I ever get an RT will depend greatly on how cheap it is because essentially it'll just be a toy and not something I would want to use for everyday computing.

Edited by Darrian, Jul 19 2012, 8:42am :

I would have thought their pricing would tell us how much money they wanted to make selling the thing.....

Microsoft dont need to be the cheapest for Windows 8 to do well, remember if they subsidise too much it works directly against all their OEM providers who also sell a huge amount of licenses.
I hope its similar to iPad pricing but unlike the ipad you will be able to hopefully buy cheaper win 8 rt tablets from Asus etc and no doubt some might even top the surface in design.

wetworker said,
I'm willing to pay up to 600.00 for a Surface tablet.

That'll defo get you an RT model, not a hope in hell of an x86 model though.

The RT version has to be priced to directly compete with iPad. I say undercut by $100 and toss in some goodies as a promo. Do it Xbox style. You lose money getting into it but it could pay off. Xbox is a force to be reckoned with these days.

laserfloyd said,
The RT version has to be priced to directly compete with iPad. I say undercut by $100 and toss in some goodies as a promo. Do it Xbox style. You lose money getting into it but it could pay off. Xbox is a force to be reckoned with these days.

Well, with a Xbox you to pay a yearly subscription fee even to be able to watch Netflix, which I find ridiculous, but you cannot add subscription charges to a Tablet.

Fritzly said,

Well, with a Xbox you to pay a yearly subscription fee even to be able to watch Netflix, which I find ridiculous, but you cannot add subscription charges to a Tablet.

No, but you could leave that $100 on the price tag and include credit for people to download apps to get them interested.

GreyWolf said,

No, but you could leave that $100 on the price tag and include credit for people to download apps to get them interested.

Yes this could be a possibility although I am not sure if people who are price oriented only would bait it.
Personally I would just advertise something like "The RT version ships with Office free of charge" or something similar; at the same time MS should launch Office for iPad and Android for a X price.......

Microsoft should take a big fat lesson from the $99 HP tablet giveaway. GIVE THEM AWAY, make them as cheap as possible, lose money if you have to. You are this far behind it's time to make it happen. Even if they only give them away cheap for the first month or whatever. This device needs to be solid hardware wise, an stability matters also. We stuck with you this long MS, now give your loyal fans something to be proud of.

jimmyfal said,
Microsoft should take a big fat lesson from the $99 HP tablet giveaway. GIVE THEM AWAY, make them as cheap as possible, lose money if you have to. You are this far behind it's time to make it happen. Even if they only give them away cheap for the first month or whatever. This device needs to be solid hardware wise, an stability matters also. We stuck with you this long MS, now give your loyal fans something to be proud of.

Windows 8 isn't exactly... but an affordable tablet could be.

Thinking that there will be a lowered cost because Microsoft will make money from the store to offset the price is not a good idea.

Apple claimed last month that they have paid out $5 billion to developers. Since developers get 70%, that means that $7.14 billion in total sales have been made on the app store (I assume this includes iAd money). Apple has received $2.14 billion. Apple also said there is about 310 million devices sold in total. This means that Apple has received a total of $6.90/device. To expect a Surface device to be substantially lower by $50-$100 because of the store, not going to happen. I expect there to be more Win8 devices to be sold than iOS devices sold, and by extension more store purchases. But it will not be enough to make up for a substantial price decrease.

To Neowin: don't put links to tags but to articles please. I was wondering what are the differences between the regular and the RT versions and I was taken to a list of articles, none indicated that will respond my question. Just a suggestion for the sake of informavorism

Just for the record.. The RT version is Metro only, the Pro is Metro and Desktop (Windows 8 RT, Windows 8 Pro)

BugX said,
Just for the record.. The RT version is Metro only, the Pro is Metro and Desktop (Windows 8 RT, Windows 8 Pro)

No it isn't. The RT version supports both metro start screen and the desktop mode. RT comes with Office 2013 but doesn't support ANY x86 applications.

djdanster said,

No it isn't. The RT version supports both metro start screen and the desktop mode. RT comes with Office 2013 but doesn't support ANY x86 applications.

Desktop support for file management and Office 2013, but no other app unless is somehow supports ARM too? Seems a bit confusing for the consumer.

rahvii said,
Seems a bit confusing for the consumer.

Not really. To the consumer the ONLY difference is you can't install legacy applications or programs meant for x86/full computers. Most won't notice since it still has Office.

dtboos said,

Not really. To the consumer the ONLY difference is you can't install legacy applications or programs meant for x86/full computers. Most won't notice since it still has Office.


It is when "legacy" means every application ever on Windows

rahvii said,

It is when "legacy" means every application ever on Windows

Sorry not every app ever, but I don't think the majority of windows users know the difference between x86 and x64 or ARM, and then again still most of the apps, even the ones released today are being made on 32bit versions (at least the simple ones)

bdsams said,
What are you not able to understand?

Considering he didn't read it I would say English...

Clearly does not know what an Editorial is...

MS could come in under $499 but without one of the covers. It sounds like you get those on their own since they've said you can mix and match. Thus they can drop the price of the surface itself a bit and make up the difference on the touch and type covers.

I think the base SurfaceRT will be $399 + whatever the covers cost because people will want to get one of those as well. In the end it could add up to be close to the $499 iPad, guess we'll have to wait and see.

GP007 said,
MS could come in under $499 but without one of the covers. It sounds like you get those on their own since they've said you can mix and match. Thus they can drop the price of the surface itself a bit and make up the difference on the touch and type covers.

I think the base SurfaceRT will be $399 + whatever the covers cost because people will want to get one of those as well. In the end it could add up to be close to the $499 iPad, guess we'll have to wait and see.

Microsoft has Apple as an example for purchasing the covers afterward, so they have an excuse to sell them separately. Plus, the two covers (thick keyboard versus the 3 mm one) are so widely different that it would require a ton of different bundles to fit everyone's needs given the color range.

I expect the Surface RT to come in to match the iPad. That's either $499 or $599 considering that the base unit has 32 GB of space, plus the cost of a cover. Any more and they will have trouble justifying it to consumers. I'd honestly be surprised if it were any less. It would be smart of them to charge less to undercut Apple, but I've never known Microsoft to be good at marketing, nor do we know if they even can do that without taking a loss on each unit.

I'm sure Microsoft isn't blind or deaf. They know that there will be stormy seas for adoption in the desktop market (and, I'm sure they don't care that much, business just finished upgrading to Windows 7 so they wouldn't upgrade to 8 anyway). What they are concerned about is adoption on tablets, and in that respect they are - and should be - super confident.

In other words, headline should read "Surface RT pricing will tell us how confident Microsoft is about Windows 8 tablets"

billyea said,
I'm sure Microsoft isn't blind or deaf. They know that there will be stormy seas for adoption in the desktop market (and, I'm sure they don't care that much, business just finished upgrading to Windows 7 so they wouldn't upgrade to 8 anyway). What they are concerned about is adoption on tablets, and in that respect they are - and should be - super confident.

In other words, headline should read "Surface RT pricing will tell us how confident Microsoft is about Windows 8 tablets"

I agree, but the only factor I think that plays into the surface pricing is how much they want to pressure their OEM partners. But by them limiting it to sales from their own stores (retail and online iirc) then that could offset any undercutting MS might do vs their OEM partners.