Android News

Behind the Motorola Xoom pricing: Too many cooks in the kitchen?

March 9, 2011 | by Michael Heller

Android News

Xoom

The Xoom is a fantastic piece of hardware, and Honeycomb is a great OS. I don’t think there are many out there who would argue with either of those statements. The reviews of the Xoom and Honeycomb are all fairly glowing, but all share the same caveat: the price is too high. I’ve made the argument that although the price is high, it is still competitive relative to what the Xoom offers. However, no one ever breaks down the multiple SKUs of the iPad when comparing to the Xoom. The iPad has options for a variety of budgets. The Xoom is, without a doubt, a high-end machine, and is aimed at a high-end market. The question is: who is responsible for this? Three big companies came together to make this tablet a reality, and all three have a hand in how it came to be the first official Android tablet.

Verizon

Verizon most likely had no real involvement in the design of the device, but they certainly had a hand in the marketing, display, software, and 4G upgrade fiasco. Mostly, though, Verizon’s hand is what guided the data plan and subsidy options for the Xoom. And, I wouldn’t be surprised at all if it was Verizon that caused the delay in a WiFi-only model of the Xoom, because they knew that a WiFi-only model would cannibalize their data plan sales.

If you were to get any number of Android phones from Verizon, you could sign up for a $30 unlimited data plan, and use the WiFi hotspot feature to power your Xoom. However, that option would also require that you pay the full $800 for the Xoom, because the WiFi-only option mysteriously isn’t available just yet. If you want in on the $200 subsidy, you have to sign a 2-year data contract on top of any smartphone contract you may have. And, if all you want is data, you’re going to have to pay for it, since the cheapest plan is $20 for a mere 1 GB of data and range up to $80 for 10 GB. That’s a far cry from $30 for unlimited, so that subsidy just doesn’t seem worth it.

The problem is that Verizon loves to think they can overcharge customers because their service is so good. They don’t consider that it’s their voice service that is really good, not their data, which AT&T constantly beats in speed tests. Since the Xoom doesn’t use voice, it makes no sense why consumers allow Verizon to set the pricing as they have. The only reason that makes sense is that those outside of major metropolitan areas don’t have any other choice when it comes to high speed mobile data, so Verizon has an effective monopoly.

Motorola & Google

Motorola and Google worked together on this tablet, that much is obvious from Andy Rubin showing it off 4 months ago, the month long exclusive it has been afforded as the only Honeycomb tablet, and by the fact that the bootloader is fully unlockable/relockable, which is completely against Motorola’s history. What isn’t clear is whether it was Motorola or Google behind the decision to offer only a high-end option.

Not offering a WiFi-only version at launch makes sense when you weigh Verizon’s impact on the situation. However, Motorola still could have offered a cheaper option with a smaller hard drive, just like Samsung plans with the upcoming Galaxy Tab 10.1. The Xoom has an SD card slot (which will be functional at some point), so offering only a 32 GB option doesn’t make sense. There easily could have been a 16 GB variant offered, which could have been priced at $699 for the 3G, and ~$500 for the WiFi-only.

Although it has been the cheaper Android phones pushing growth, Google wants to set standards in the ecosystem just as it did with the Nexus One. Google wants to set the tone for the tablets to come with the Xoom, so the minimum to compete would be a dual-core processor, front and rear cameras, HDMI out, etc. The trouble is that this may also set the standard for single SKU tablets, which could limit the number of competitors in the $500 range. Google is always touting the choice inherent in the Android ecosystem, so it seems strange that they would allow the first true tablet to be devoid of choice.

Overall, there were just too many factors pushing on the Xoom launch and someone dropped the ball. It’s a great combination of hardware and software, but the price point is going to scare off quite a lot of potential users right now. It’s not the end of the world, because the wave of Honeycomb tablets hasn’t really started, but it’s not the big opener that Google needed. Google has been good about taking away all of the talking points that Apple can use against them, but any time Apple has valid reasons to call your product “too expensive”, that is a red flag that shouldn’t be ignored.