Hardware Finally Is Free (Almost)

It was just last month that I wrote the post Hardware Wants To Be Free as a response to something that Simon Dumenco wrote at Advertising Age. His premise was that a free netbook as a come-on to a subscription-based content service (whether video or e-book) might be the savior of media. I extended the concept, suggesting that the marginal cost of hardware is plummeting so quickly that soon much of hardware sales would be so cheap that computers of various types would become giveaways. Well, it looks as though we’ve just about arrived, with Best Buy and Spring partnering to offer “a Compaq-branded HP Mini 110c netbook for only 99 cents when you sign a two-year data contract.”

That didn’t take long now, did it? But if you think about it, this makes perfect sense. According to The Toy Box at ZDNet, the regular price for the machine is $389. Clearly the 99 cent price is a gimmick — I’d be surprised if someone hadn’t tested it doing better and getting more consumer attention than free. But, really, a buck for a computer is virtually the same as nothing. And it shouldn’t be surprising. At just under $390 at retail, what are the cost of goods to manufacture? Half of that? That would make it about the same price to make as an iPhone 3GS. The thing is, prices of full computers, especially as companies move to the all-in-one designs that put the computing works into the monitor, are going to continue to slide, and the costs now are at the point where giveaways as premiums, just like cell phones, make sense. I wonder how long it will be before telecom carriers ask people to sign up for three years instead of the usual two to get both a netbook and a handset.

Illustration via stock.xchng user ba1969, standard site license.