The Disruptive Business Model that Could Change the Tablet Market | PCMag.com
One of the most interesting things about the tablet market these days—besides the fact that Apple basically owns it—is that in the very near future, I believe there will be two very different business models that will drive tablets into the broader consumer market.
The first model, the one Apple uses today, is very traditional. In this case, Apple makes the iPad and then sells it through its retail stores, its online store, and various third-party resellers like Best Buy and Target. If the iPad has a 4G modem in it, it is also available through carriers like AT&T and Verizon. Samsung and other Android vendors also use this business model and whenWindows 8 tablets come out, most of them will sell those tablets in a similar way.
A second business model, called subsidization, is also unfolding and is already in use by the carriers to sell cell phones. Apple, for example, sells an iPhone to the carriers for somewhere around $600 but they in turn only charge the customer $200. They basically subsidize the upfront cost of the phone and earn back this cost by tying a user to a two-year service contract to amortize their cost of the iPhone to Apple. In fact, carriers have been using this subsidization model to sell phones for a long time and when the iPad came out, some customers expected the carriers to subsidize the iPad similarly. That did not happen, however, and customers basically buy the iPad at full retail price.