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.
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.