Microsoft Is Betting the Farm on the Surface Tablet

Michael K. Campbell explains why Microsoft's Surface tablet is all about price

Although I'm eager to get my hands on a Microsoft Surface tablet I'm very curious to see how much one will cost me. The way I see it, a Surface tablet better not cost too much or all bets are off -- not just for the Surface tablet, but for the entire platform.

Surface Tablets Look Very Compelling

I was immediately smitten when Microsoft unveiled its Surface tablet in June. The built-in keyboard and the potential for on-board USB connectivity was an immediate draw for me. What floored me almost more than the specs for these new tablets was how well Microsoft managed to keep everything about the Surface tablet completely under wraps until its official debut.

When I noticed that Microsoft repeatedly avoided direct details about the tablet's cost, availability, and battery life, the skeptic in me couldn't help but wonder if I was seeing the birth of yet another disastrous and overhyped failure from Microsoft that would share Origami's fate. When initial rumors emerged that the Surface tablet pricing would start at $1,000, I was aghast and couldn't believe that Microsoft would be so stupid as to sell these tablets at such a high price. Happily, it turned out that these rumors were complete fabrications.

Fast forward to today: Microsoft still hasn't released official pricing information for the Surface tablet, and a host of new rumors are swirling around saying that Surface pricing will start at $199 for the ARM/RT hardware and cost roughly $200 to $300 more for the Intel or Pro tablets. Personally, I love those rumors, but only because I hope that they're true.

Surface: It's All about the Price

But the way I see it, the Surface tablet is all about the price. Currently the iPad clocks in at around $500 for bare-bones models, and some of the more advanced models stretch into the $800 range. Apple also has a well-stocked App Store with gobs and gobs of applications, and the company has also done a great job of marketing the iPad so that typical consumers who buy a Surface are potentially going to look like second-class citizens or wannabes when they intermingle among their "beautiful" friends with "some device from Microsoft." As such, if Microsoft wants to get enough consumer adoption of the Surface to draw in significant developer interest to make the platform viable, then Microsoft is going to have to make sure that the Surface ships with a very attractive price.

As tempting as it might be to think that businesses might help drive Surface adoption, it doesn't look like that will happen. First, businesses look completely poised to skip migration to Windows 8, and it looks like Microsoft is effectively banking on that trend by focusing Windows 8 solely on consumers. Second, although some businesses might adopt Surface tablets, the reality is that loading custom applications into these tablets looks to be less than ideal, given the planned constraints that Microsoft's app market, the Windows Store, will impose.

Consequently, it goes without saying that the Surface appears to be primarily targeted toward consumers. However, consumers aren't going to be interested in a Microsoft tablet if it's not aggressively priced against the iPad and similar tablet offerings that are available in today's market. This is especially true when you consider how confusing it will be for typical consumers that even though the Surface RT tablet runs Windows, they won't be able to load any of their apps onto these devices. Because of this, price has to be a compelling feature, or I don't see typical consumers being too receptive.

Surface is a Big Gamble—Thanks to Windows 8

In addition to the fact that Windows 8 looks poised to alienate businesses and power users, which is a big gamble in and of itself, Microsoft's obsession with catching up to Apple has resulted in Microsoft taking a huge gamble with the Surface tablet. For example, there's the potential for love-loss with Microsoft's traditional allies: PC manufacturers. Although the reality is that many of these manufacturers weren't exactly monogamous (i.e., many of them have been selling Linux and Android devices for a while), Microsoft did effectively tell consumers that the reason that Windows hasn't taken off on tablets wasn't really the company's fault, but it was instead the vendors' fault. And that's likely not going to go over too well.

Likewise, the closed and proprietary nature of the Windows Store (another key aspect of how the Surface tablet will work) has ruffled a few feathers and has parts of the gaming industry worried as well.

Subsidize or Die

As I see it, the Surface really boils down to one thing: price. Either pricing needs to be so compelling (especially with the initial RT versions) that consumers rush out and buy Surface tablets in droves, or Microsoft will have gambled and lost, and the only ones left with these tablets in the end will be a few disgruntled fanboys like me who took a risk on Surface -- and lost.

As such, I think that Microsoft has no choice other than to subsidize the Surface in hopes of driving adoption. Otherwise, all the risks and problems for the Surface tablet come with too high of a price and not enough benefit in the long run.

Finally, if anyone is thinking that I'm nuts for assuming that Microsoft should subsidize the Surface tablet, then it's worth remembering that Microsoft's semi-recent and strategic purchase of Skype weighed in at a whopping $8.5 billion—or roughly $28 per every man, woman, and child in the United States (by way of ethno-centric comparison). As such, if Microsoft is going to bet on the Surface, and it certainly looks like that's what they're doing, then it stands to reason they'd be dumb to not completely "bet the farm" and subsidize these tablets as a means to help to drive adoption.

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