Apple Tries Riding the Price Avalanche

(MoneyWatch)  There's a great Shawn Colvin tune called "Riding Shotgun Down the Avalanche," and that continues to be the path Apple seems to be taking. I've been largely addressing this in terms of the Mac, but the trend is rearing its head in pretty much every area of the company's business.

We saw it last week during the iPod even where Apple largely flubbed its marketing, which was unusual for the company. Most attention was on the lack of a video camera in the iPod touch, and apparently the market disappointment was the result of a last-minute decision to pull the feature, though the chances of hearing officially what it happened are slim. But it was clear that iPod prices were plunging, in some cases by 30 percent. One reason why might be that Microsoft and Sony have been making strides in the category. Late, of course, but it's like a confluence of unfortunate circumstances that makes Apple have to reexamine its value proposition, having learned that a smart campaign run by a competitor can do some damage if it targets that value perception weakness. (And for those who want to claim that the Microsoft ads did nothing to Apple, I'll counter that Apple would never had tried answering them if the results weren't painful.) By dropping the price, Apple reestablishes the value proposition and makes its offerings more competitive.

You can see the same dynamics in Apple TV. The 160GB model just received a $100 price haircut to arrive at $229 and the 40GB, which used to go for this price, is now banished to whatever metaphysical land takes obsolete product variants. But as David Carnoy wrote, you have to wonder why Apple didn't just take it to the "magic" $199 price and try to make it move. And this might highlight a problem Apple is going to have. It's tough to for a premium price player to admit that it has to get into the trenches with everyone else. That's a Sony type problem. Unless management out in Cupertino can come to grips with their new market reality, Apple could find that instead of riding shotgun, it's under the avalanche.

Image via Flickr user Ai@ce, CC 2.0.