Device prices, self-selection and a Catch 22

One of the many challenges faced by BB10 is that the launch hardware is priced to compete head-on with the iPhone 5 and high-end Android phones, yet the platform lacks the range and depth of apps that those devices can offer. Nokia's Lumia launch faced exactly the same problem 18m ago.

The obvious argument is that these new platforms would do rather better at a lower price point, competing against mid-range Android and the residual featurephone base, where the target customer cares less about apps and the user experience is more differentiated (i.e. the mid-range Android experience is less good than the high-end one).

However, if you only target users that don't care about apps, then your install base will never be an attractive market for developers, and you never will get apps.

This seems to be what is happening with low-end Android tablets. Google (arguably) tried to short-circuit the 'no users therefore no apps therefore no users' issue by selling the Nexus 7 at cost, carrying an effective subsidy in its working capital and making the device cheap enough that people would overlook the lack of apps. It remains to be seen just how many actually sold as a result: the launch quarter sales were a little over 2m, though with limited distribution, and we don't yet know how many were sold over Christmas (though some people have had a guess). Meanwhile the Nexus 7 is not even the cheapest Android tablet on the market - devices at $100 or even lower are to be had, though with very poor performance. (The Kindle Fire is available as well, but that's a rather different proposition, with more going for it than price.)

The challenge with all of these tablets, though, lies in the choice presented to consumers. In effect, they are asked: "would you rather buy this Apple tablet with lots of apps, or save $100 or so and get this black plastic thing with far fewer apps?"

That's a perfectly legitimate question to ask, and Christmas was one big A-B test as to what tablet proposition people actually want. However, what does it tell you if someone says 'I want to save $100 and get the cheap-looking one with no apps'? Are they a good target for any publisher or developer? This is at the root of the staggeringly low engagement on Android tablets that all publishers report - under 5% of what they see on the iPad: self-selection by the users. People who buy cheap tablets are effectively declaring that they value the saving over the apps.

In other words, you can sell to a high-end user and hope that they'll forgive the lack of apps. That's hard, and you won't sell many. Or, you can make a cheap device (setting aside the technical challenges RIM and Nokia faced in actually doing that), which is rather easier to sell with no apps - but then the user base you do get is even less likely to buy apps. Catch 22.