Elgan: Will tablets soon be free?

How low can tablets go? I think tablet pricing could soon go all the way down to zero

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Meanwhile, back in reality, a little-known Indian company called Lakshmi Access Communications Systems has announced a spicy range of low-price Android tablet lines called Pepper, Paprika, Tamarind and Mirchi. The cheapest of the lot, the 7-inch Magnum Pepper, will reportedly sell for $99. That figure matches the price of China's cheapest 7-inch Android tablets.

(Cheap Indian tablets are for students, apparently. Members of the Indian Parliament are buying themselves Apple iPads and Samsung Galaxy Tabs as part of an effort to reduce paper shuffling.)

This is just the beginning

The industry has discovered that $499 is a popular price only for the iPad. All other companies are struggling to sell tablets at that price.

And as HP has demonstrated, as soon as you can get a tablet into the two-digit range, people will buy them in huge quantities.

There's just one problem: In order to build a tablet that can be sold at a profit at $99, you have to build a piece of junk that nobody wants.

And that's why I believe the next phase for touch tablets will be aggressive subsidies.

The main uses of touch tablets are the consumption of content -- movies, TV shows, e-books, magazines -- and the enjoyment of apps. Because they're wireless mobile devices, they also benefit from mobile broadband data connections.

Because tablets are content- and connectivity-centric, they can be sold like razors, where the razor is dirt cheap, and the real money is in blades.

Over the next two years, I'm predicting all kinds of experiments that will bring high-quality, relatively large-screen touch tablets down into the $99 price range and below -- as long as you commit to buying content or connectivity.

One of the most interesting possibilities is Amazon's forthcoming Android tablet. Amazon's business model with the Kindle is to make the hardware very cheap and the connectivity free -- and then make money selling e-books.

Amazon started out as a bookstore and evolved into an everything store. Maybe it will follow the same path with tablets. It started out offering subsidized e-readers so it could sell electronic books, and now it may be planning to offer subsidized tablets so it can sell everything else.

If Amazon tablet owners buy enough stuff from Amazon, there's no reason for the company to charge them a lot -- or anything at all -- for the hardware. Netcasting mogul Leo Laporte and guests speculate on a recent episode of This Week In Tech that Amazon Prime members could be offered free Kindles, for example. A similar subsidy could be offered for the tablet as well. The reason is that, unlike the Kindle, which can really handle only e-books, an Android tablet could entice people to download e-books, TV shows, movies, music and apps from the Amazon app store. More content could mean more subsidy.

Such an offer would be consistent with Amazon's overall strategy, which is not to be in the business of making consumer electronics, but to use consumer electronics to get people to buy stuff on Amazon.com.

Think of free Android tablets as a way to provide "free shipping" for electronic content.

Tablet makers may also cut more aggressive deals to offer their tablets free with two-year contracts for 3G service. Other possibilities include subsidized tablets with, say, a Netflix contract or an agreement to subscribe to other content for some period of time.

One way or another, it appears that the path to success for iPad competitors is low, low pricing. And the best way to get there is probably aggressive subsidies.

We can soon expect a reasonable selection of pretty good touch tablets priced at $99, or even free.

Mike Elgan writes about technology and tech culture. Contact and learn more about Mike at Elgan.com, or subscribe to his free e-mail newsletter, Mike's List.

Copyright © 2011 IDG Communications, Inc.

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