The Engadget piece seems to argue that Amazon and Google are engaging in predatory pricing when it really boils down to the fact that Apple and Google are trying to fight the iPad's market incumbency.
Let's look back a decade for a moment. i.e. The iPod.
Apple made the iPod good. Then they made the iPod cheap. Nobody could compete. Could companies like Diamond or iRiver have made better devices if they didn't have to compete with cheap iPod's? Almost certainly. Once Apple diversified the iPod line into the extremophile niches other mp3 player manufacturers were clinging to it was game over. Complete and utter dominance. Now almost nobody buys iPod's because everybody's phone can do the same job.
Apple knew that the key to maintaining dominance was to drive down prices faster than the competition without compromising quality. By offering premium devices at prices that are just barely above that of inferior devices Apple made the iPod a no-brainer purchase for consumers. They did this so well that it was only Apple themselves who finally obsoleted the iPod with the iPhone. They've tried to do the same thing with the tablet and have arguably built up some degree of incumbency with the iPad. Low-margin pricing on the Nexus 7 and Kindle's can be seen as attempts by Google and Amazon to fight Apple's tablet incumbency before they're locked out of the market completely.
Let's face it, if Amazon or Google tried to sell their tablets at the same price as Apple's offerings they'd never catch up. Even if they were of exactly equal quality, Apple's is the proven product because it's been around longer. If Google and Amazon made poorer quality tablets and sold them cheap, but with decent profit margins, they'd wind up like Diamond and iRiver. Only their ability to sell at low-margin and profit from ads/media sales gives Google and Amazon the edge they need to compete with Apple and have any hope of catching up.
The end result of this is a three-way battle for tablet superiority where there would have only been one choice: the iPad. Oh, and now Microsoft is throwing their hat into the ring too... Quite frankly, I think the next few years are going to be very kind to tablet-fans, and that's partly in thanks to "predatory" pricing.
Let's look back a decade for a moment. i.e. The iPod.
Apple made the iPod good. Then they made the iPod cheap. Nobody could compete. Could companies like Diamond or iRiver have made better devices if they didn't have to compete with cheap iPod's? Almost certainly. Once Apple diversified the iPod line into the extremophile niches other mp3 player manufacturers were clinging to it was game over. Complete and utter dominance. Now almost nobody buys iPod's because everybody's phone can do the same job.
Apple knew that the key to maintaining dominance was to drive down prices faster than the competition without compromising quality. By offering premium devices at prices that are just barely above that of inferior devices Apple made the iPod a no-brainer purchase for consumers. They did this so well that it was only Apple themselves who finally obsoleted the iPod with the iPhone. They've tried to do the same thing with the tablet and have arguably built up some degree of incumbency with the iPad. Low-margin pricing on the Nexus 7 and Kindle's can be seen as attempts by Google and Amazon to fight Apple's tablet incumbency before they're locked out of the market completely.
Let's face it, if Amazon or Google tried to sell their tablets at the same price as Apple's offerings they'd never catch up. Even if they were of exactly equal quality, Apple's is the proven product because it's been around longer. If Google and Amazon made poorer quality tablets and sold them cheap, but with decent profit margins, they'd wind up like Diamond and iRiver. Only their ability to sell at low-margin and profit from ads/media sales gives Google and Amazon the edge they need to compete with Apple and have any hope of catching up.
The end result of this is a three-way battle for tablet superiority where there would have only been one choice: the iPad. Oh, and now Microsoft is throwing their hat into the ring too... Quite frankly, I think the next few years are going to be very kind to tablet-fans, and that's partly in thanks to "predatory" pricing.