Surface RT for $199? Dream not likely to come true

Surface RT for 9? Dream not likely to come trueEarlier this week the web was all agog over an Engadget report that the new Microsoft Surface RT could start at $199 when it comes out on Oct. 26. Our own Josh Pollard even wrote up a piece here on The DMZ wondering if it indeed could be a reality (go ahead, read his piece, I’ll wait).

I hate to be the guy who breaks up the party, but to paraphrase Clark W. Griswold: If I woke up with my head sewn to the carpet, I wouldn’t be any more surprised that I would if the Surface RT came to market at $199.

Beyond this rumor simply not passing the smell test (just like the $1000 rumor that started with a Swedish site earlier in the summer didn’t, either), there’s other reasons the $199 dream is not likely to be realized.

Josh rightly points out that undercutting OEMs on price to that degree would challenge an already strained relationship (though the degree to which those relationships have been strained by the announcement of the Surface line has been WAY overblown in my opinion). But Surface RT pricing will be about well more than OEMs.

First, history tells us that brand new hardware is always most expensive at launch. iPhones, iPads, Xbox (both first gen and 360), all saw their highest retail prices at market debut. Remember how expensive the PS3 originally was?

There’s a reason for that. The costs related to producing a brand new device need to be recouped, and that can’t happen at bargain basement prices, even if Microsoft decided to subsidize the Surface RT as many people have posited.

Elsewhere, Ars Technica wonders could Microsoft release a $199 Surface RT? They rightly answer yes, but that the folks at Redmond probably shouldn’t.

No doubt a company the size of Microsoft could absorb a loss tied to the new hardware. But Windows 8 is a HUGE play for the tech giant, and Surface tablets are expected to be the top-of-the-line delivery vehicles for the new OS. Even though a cheap price-point might get a few more devices out in the wild, it wouldn’t deliver the right message about the hardware and the OS it runs.

Apple has done an amazing job of portraying their wares as high-end, premium, and worth paying extra for. You’ll never see a top MacBook Pro compete with an Ultrabook on price. Microsoft certainly doesn’t have the cache to charge Apple-like premiums, but they need to ensure that consumers feel they’re getting a premium device when they buy Surface tablets. A $199 price would damage the Surface brand by lumping it in with hordes of low-cost, low performance Android devices.

Despite the notion that Microsoft is coming after Apple with the Surface tablets and Windows 8, before it can even think of banging on the doors of Cupertino’s castle, it needs to get past the Android tablets living in the shadow of the iPad’s walled city. Even though competing with Apple is the end goal, make no mistake, the initial launch of Windows RT will be judged on its ability to draw people away from Android tablets. Any infringement on the iPad will be a bonus in the early going.

Sure, the Nexus 7 is $199 and has gotten good reviews. And Nooks and Kindles can be had for less than that. But Surface isn’t trying to replace a reader or a mini-tab. It’s going after the 10-inch Android tablet market. And that market doesn’t play in the $199 waters.

The Verge today reported on a comment from Lenovo’s North American head who said that Windows RT tablets would likely start in the $300 price range at “very aggressive price points”. Even that seems low, considering the iPad starts at $499 and most 10-inch Android tablets worth even considering start right around $300.

My bet? Microsoft will look to take root in that middle area. Well south of the $499 iPad, but north of the cheapest Android competitors. I’d expect Surface RT to start around $349.

That price would allow Microsoft to set the market for Windows RT tablets (also coming from Lenovo, Dell, Asus and Samsung on the Oct. 26 launch) and create competition for Android tablets that does not exist today. The savings over the cheapest iPad would also bleed off some Apple sales.

The $199 Surface RT is a fun dream. I’d happily put a picture of myself eating my hat here on The DMZ if it comes true. Sadly, I just don’t see any way it’s possible. It’s important, however, to come to that realization now before the cost officially gets announced, because even at $349 or $399, the Surface RT looks to be an incredible bargain, if it lives up to the hype. Hopefully Microsoft will end the speculation sooner than later.