RIM should “Be Bold” and give away the BlackBerry PlayBook for free

As rumours of RIM’s Co-CEOS being replaced as Board of Directors Co-Chairmen heat up, the price of the BlackBerry PlayBook tablet has cooled. Until February 4th, consumers can purchase all-three different PlayBook models for $299, which would save them $300 on the 32GB model and $400 on the 64GB model.

RIM’s apparent strategy is to sell through as much PlayBook inventory as possible in advance of their PlayBook OS 2.0 update and lay the groundwork for BlackBerry 10 (RIM has previously said that apps built for the BlackBerry PlayBook tablet will also run on BlackBerry 10). But half-measures like modest price cuts won’t help RIM in 2012. They have to follow their own advice and be bold.

Crunching the numbers

Let’s run through some numbers quickly to set context. The below numbers reflect the number of BlackBerry PlayBook tablets shipped in 2011*:

    – 150,000 units in fiscal Q3 (PDF)
    – 200,000 units in fiscal Q2 (PDF)
    – 500,000 units in fiscal Q1 (PDF)

*Remember that shipped does not mean sold, and RIM’s fiscal year is offset from the calendar year.

That’s less than a million BlackBerry PlayBook tablets shipped in 2011, with diminishing returns each quarter. These results seem more dire when compared to Apple’s most recent financial statement, which shows they sold 11.2 million iPads in Q4. Apple’s strong 2011 holiday sales will likely lead them to surpass that number this quarter.

But comparing the PlayBook, or any other tablet, to the iPad in this way is unfair. Amazon has been the only company able to make a slight dent in Apple’s market share, by selling a tablet less than half the price of the iPad. More on this in a minute.

A better company to look to is HP, which had an interesting tablet experience in 2011. After putting a bullet in the head of WebOS, HP placed the poorly performing TouchPad on fire sale, dropping the price of the month-old tablet to $100 (and $150 for the 32 GB model). What happened? HP sold out, quickly. The company never released exact sales numbers, but the best estimates based upon HP’s initial order from its Taiwanese contract manufacturer, Compal, place the total number of TouchPads sold somewhere between 500,000 and one million units.

So, one million people lined up to purchase a tablet that had been canned after one month of availability, running an OS no longer supported by its manufacturer. At a bargain bin price, HP was able to sell as many or more units of a dead tablet than RIM sold BlackBerry PlayBooks over the course of a year.

Just because you build it, doesn’t mean they’ll come

But the BlackBerry PlayBook is not a dead tablet. Ignoring my obvious bias (full disclosure: I worked at RIM from 2009-2011. It was fun.), bloggers and ‘real people‘ like the BlackBerry PlayBook. They’ll like it even more when the PlayBook OS 2.0 software update brings native email, contacts, and calendar functionality in February. And RIM is not abandoning their QNX-based OS; they’re betting the company on BlackBerry 10.

Let’s go back to Apple and Amazon for a minute. Their success has shown that in the mobile space, ecosystems win. Apple paired the robust iOS development community and their endless number of apps with its dominant walled garden of multimedia services (music, movies, television, e-books, etc.) to transform what would otherwise be a blank slate into the multifunctional iPad. Amazon, which features its own potent multimedia and retail services, completed the ecosystem equation by leveraging the Android development community and (some) of their 400,000 Android apps. Even then, Amazon is selling the Kindle Fire below cost to gain traction, knowing they can make the money back on services revenue.

Obviously, RIM doesn’t have a combined apps and multimedia services offering to compete with Apple or Amazon for customers’ attention. No company does, not even Google (yet, although it’s certainly trying). And it will be difficult for RIM to get developers or multimedia content providers to sign on without having an installed base big enough to justify the investment. So how do they break through the ecosystem paradox? By incentivizing its growth.

Be bold!

With the HP TouchPad, consumers were incentivized to buy a dead product with no future, because $100 is a low risk investment. RIM has a product and an OS platform with the potential for a bright future, but its current price cuts are not going to sell enough units to get them there. They need to go all the way. RIM should give away a 16GB PlayBook with every BlackBerry smartphone purchase. Or sell the 32GB and 64GB models for $100 and $150, respectively, but turn that payment into an automatic credit for a BlackBerry 7 (or BlackBerry 10) smartphone. Or do both.

Doing so could quickly double, or triple, the amount of people willing to advocate their new 7-inch tablet to friends and family. Rapid growth in the PlayBook installed base could force developers to rethink merely porting their Android apps in favor of getting the jump on native app development for BlackBerry 10. It could also make it easier to get Hulu, Netflix, and every other content provider to commit support. More apps and more popular services means more happy customers. It means an ecosystem.

At the very least, it would give the company something close to positive momentum. RIM should spare nothing in making consumers an offer they can’t refuse on hardware to ensure the future viability of the BlackBerry 10 platform. Come on, RIM, it’s 2012. Be bold.

About the author

Douglas Soltys

Douglas is the former Editor-In-Chief of Inside BlackBerry, BlackBerry Cool, and QuicklyBored, which he launched as a mobile gaming industry site. His knowledge of mobile and social media led him to a job at RIM (BlackBerry), where he got to travel the world and do lots of cool things. He is often left-handed, but rarely sinister.

  • The one point of contention I have here is that it’s not difficult for RIM to get content partners in the media space to sign on to a distribution deal (even with a limited number of PlayBooks in market) provided that RIM builds the distribution infrastructure and interface. Content providers will always accept incremental revenue from secure sources — especially when they don’t have to do any more work than sign a templated deal (i.e. the same one they have with Apple on iTunes). It’s not “snap your fingers” easy to get them all on-board but it’s far from hard.

  • I would say that giving away free PlayBooks makes a lot of sense if the goal is to grow the smartphone subscriber base. I’m not sure it’s a good strategy in terms of getting more apps and content partners. I think those groups can be attracted by making the platform an easy port for those companies. Simply lower the development time and barriers to entry to as close to zero as possible.

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  • Guest

    Well written article and enjoyed reading it. I think you have a point in terms of how best to speed up adaptation of the PlayBook. This strategy is also being used by Samsung in Canada with Rogers and Telus. Buy two Android phone and get a 10.1 Samsung Tablet or sign up for Telus TV and get a free Samsung Tablet. So I think you are correct that RIM should look to employ a similar strategy as it seems to be win-win. The only downside is the lose in revenue but like Samsung did perhaps you make the consumer have to purchase two phones to obtain a free PlayBook.

    Personally, I do not think RIM is in that much trouble when it comes to the tablet race. I find it extremely frustrating to get actual numbers of other manufacturers numbers. We all know that Apple is a head of the game and regardless of how you may feel about the company consumers are saying yes with their wallet. So when you speak of tablet market consumers still only think of an Ipad. Well played in by Apple in terms of Porters first move advantage. 

    I think all the Android manufacturers are in the exact same boat as RIM when it comes to tablet. Only benefit they seem to have is they can hide behind the large success of an operating system that powers their tablet. Try looking up exact shipments for any Android manufacturer and you start to see what I’m referring to. All the talk about the success of the Kindle Fire…..yet not publicly release number. Only a statement that says sales are up for Kindle. Oh well that’s nice of Amazon……I guess they must be referring to their Kindle Fire and not their entire tablets that all carry the name Kindle in it. I think RIM is in the same position they find themselves in terms of in the smartphone race…….3rd place behind Samsung. Yes, HTC moves up and down that position but I think most of us would agree its Apple, Samsung, and RIM. 

    I think much of RIM’s problem is the perception of the generally public. There seems to be a disconnect or miss-communication of their story or brand. Consumers don’t know what their story is and BBM seems to be the only positive consumers attribute to RIM. The product is much more than that but that’s not on the consumer to figure out, that’s for a company to communicate that story. Focus on telling the consumers the story or RIM and BlackBerry and stop trying to be better than Apple. RIM needs to take the advice every parent tells their kid. Be you and stop trying to please everyone……..but that’s just my two cents worth of thoughts. 

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  • Thanks for the great reply! You points are well taken.

    One thing that I would note is that this isn’t just about RIM’s position in the tablet space, but their position overall with smartphones. BlackBerry is swiftly losing NA smartphone marketshare and their BB 10 phones aren’t coming until the later part of 2012. They need every foundational brick in place for a smooth landing, and as I said in the post, more PlayBooks = more PlayBook apps = more BB 10 apps to entice consumers.

  • When it comes to music/movie partners like Universal and such, I would agree, although it will take a long time for any RIM run music/movie store to catch up to iTunes. However, because these stores are not yet part of an integrated ecosystem, there’s less appeal to buy in there, unlike Apple for example with iCloud or just generally having good media syncing across their phones/tablets/laptops.

    But what about Netflix? Hulu? Or major apps like Angry Birds or Instagram? I think there is a lot of historical evidence to show that these have not been easy wins for RIM.

  • Jfranche

    I disagree. RIM should get every corporate user up to the latest BlackBerry (Bold 9900?) As quickly and easily as possible. Give them away to corporate shops with 100+ devices. Offer BackBerry upgrade migration services to ease the IT dept pain of swapping out devices and data. And make sure that ever user gets setup with a BlackBerry I.D. And AppWorld on their device. Do this 3 million times in 3 months. It will keep the waves of corporate users from all jumping to iPhone and will buy time. There are vice presidents out there with blue curves that are going to make the iPhone call before RIM has a chance to rebound.

  • Jennifer

    The relationship of hardware upgrade of a business executive’s device is facilitated through the wireless carriers who own the business account with the respective employer. Example: Rogers providing BlackBerry service to PriceWaterhouseCoopers’ employees. Corporations that have executives on older units like you mention (i.e. 8310 or 8900 etc) are either penny pinching in general, have mandated a hardware upgrade lapse policy (i.e. once every 3 years) or are looking to move their business to another wireless carrier at the end of their term. (Once they move they will upgrade the base of employees to new devices from the new carrier.) 

    In my opinion, it is unlikely that BlackBerry would ever implement a tactic like you suggest, handing out free devices. This will skip over the wireless carrier’s business relationship. A massive piece in the telecommunications puzzle.  As an example for a company like Rogers, handing out devices to 1000’s of employees is revenue on their books. 

    Moreover, it would mess up the whole system for wireless carriers, hurting their churn numbers (indicator of lost cx’s and locked in revenue.) As now, those employees that would be able to move to another carrier instantly with their new unlocked device. Churn is the next important metric next to ARPU. It’s a sensitive subject for any wireless carrier. 

    There is a lot of ‘I’ll scratch your back, if you scratch mine’ that takes place in the telecommunications business. Especially in the realm of vendor/customer management. In particular, what that means in terms of dollars and shareholder metric impact. A lot of that back scratching is big corporations employing thousands of people choosing X carrier as their preferred corporate service. I don’t think RIM is in a position (or would want to) upset that relationship. (Canadian wireless carriers are the closest thing RIM has to family in this business.) You just don’t mess with someone’s bread and butter- and for telco’s that’s ARPU and Churn. 

    As for iPhone, corporations can call up Apple down in Cupertino California until they’re blue in the face. There is a reason even business executives that work at Rogers, Bell and Telus (even AT&T) don’t hand out iPhones to their employees as standard issue. Apple doesn’t cut anybody (no matter who you are) any deals. No matter how bad a 8310 may look, no corporation in their right mind (try to post shirking Opex numbers in this economy) is going to start making orders for iPhones at $300-$600/unit to be trendy. 

  • Anonymous

    Sorry, I should have logged in with my account. I also should have added just to be clear with my rebuttal:

    The overall argument of giving away PlayBooks (a device) doesn’t conflict with my statements above. RIM has only marketed a WiFi model. Giving away these devices free will in no way impact revenue, churn and ARPU for wireless carriers. In fact (to emphasize) what you’re missing from Douglas’ whole argument is that giving away the PlayBook for free: This will help bridge/stabilize/regenerate the enterprise (executives) market. Ultimately, protecting the existing base on BlackBerry smartphones in what has become a tablet crazed consumer world. Plus most VP’s get really frustrated with iPhones lol… no QWERTY KEYBOARD! Let’s not forget that iPhone ‘Auto correct blunders’ are super bad for business. 

  • It’s not that much work to create a digital media store. You don’t have to even spend more than 1 day on a requirements list. The list is: all the iTunes features. Content ingestion is trivial so getting the entire Universal (for example) catalog that’s available is not a long process. 

    While I don’t (often) pay multiple times for the same piece of content on multiple platforms, many people do and it’s a feature more people have personally complained to me about their PlayBook lacking than email (as most are ok with web-based email as they’re light email users). The PlayBook is a better device (or just as good) for video than the iPad but it needs the store so it’s easy for people to get the content.

  • … also, giving away hardware isn’t productive unless you give it away to people who are interested and financially capable of buying content. The massive number of Indonesian BlackBerry users is not a benefit for most mobile application developers as they don’t have the means to spend enough money on apps to make a difference in monetization of the platform. 

    Likewise, if you give away PlayBooks to people in North America who are not interested in playing games or using apps on the device, it also doesn’t advantage developers. Like it or not, selling more devices (even for a lower price point) is MUCH better for developers than random free giveaways.

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  • Love the article Douglas! I think RIM does need to do something to get the ball rolling downhill instead of uphill. I use my PlayBook every day to be honest, it sits beside my computer and is very quick at hand. A meeting comes or a question is asked I just pick up my device that does not have to be locked because of RIMs smart thinking that Corporate information is protected inside the device. I have delivered 4 PlayBook devices to other people in my origination that 1 week later I have asked them how they are liking it and the response I get is “This thing is awesome!” and this came from 2 hardcore Mac users. So I do believe like you mention Douglas if you could just get this into their hands for cheep or free they would realize the power and usefulness of the device. Now keep in mind there are some people that just have zero use for a PlayBook or an iPad so no matter what they just would not spend the money on one, but the thought of free could persuade a purchase of an iPhone or Android to a BlackBerry even if they gave it away as a gift.

    The one thing that I think RIM needs to do and I know I have talked to you about this before Douglas is listen to its users. Not just listen and nod but take good ideas and push them through the pipe. As many smart people are working for RIM there are millions not working for them and use their device daily. I have so many ideas that I see Apple implementing and Microsoft Phone that I tried to tell RIM 5 years ago and I just bang my head on the desk and ask, “Why is no one listening to us?” There is no way to communicate with the origination and unless you have someone on the inside then your ideas go on forums or blogs that never are read by RIM.

    I hope RIM keeps the momentum going and realizes for every 1 person that complains about their device there are 100 of us that are content and love the device. People only make noise when they are unhappy so don’t take negative news as the state of affairs like the media does!

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