By the looks of it, Apple (NASDAQ:AAPL) is putting the finishing touches on high-resolution "Retina" iMacs to be unveiled at its October 16 event. Apple's transition to high-resolution displays throughout its Mac lineup is inevitable, but doing so on such a mature product line presents more engineering challenges than on mobile platforms.
The company began the Mac's shift to Retina back in 2012 with the 15-inch MacBook Pro, but developing the technology for a display that's as large as the iMacs proved to be much more time-intensive. Still, one of the more important strategic questions is how much the Retina all-in-one desktop will cost.
A trip down memory lane
When it comes to high-resolution transitions, mobile and PCs have played out very differently. There are notable implications here that could hint at Apple's pricing strategy for the Retina iMac.
In mobile devices, the premium was effectively absorbed by carriers via subsidies. The iPhone 4 was the first iPhone with a Retina display, yet its subsidized price on contract did not change. That makes adoption a no-brainer for consumers, since the effective cost to them is $0.
However, the same cannot be said for the MacBook Pro's transition to Retina. Apple originally introduced 13-inch and 15-inch models in 2012. The 13-inch model was introduced in October, while the 15-model was shown off in June. At introduction, there was a $400 premium associated with the new models.
Yet, in February 2013 it decided to dramatically cut prices for the 13-inch model by $200 to $300. That means Apple cut prices on the 13-inch model just 4 months after launch, implying that adoption at the initial prices was tepid. That's an important lesson when contemplating where the Retina iMacs may price.
How high can Apple go?
Since Retina is only expected on the 27-inch models, we can disregard 21.5-inch pricing for now. Apple's current stock configurations of the 27-inch iMac start at $1,799 and $1,999. Within the MacBook Pro lineup, there is a $200 premium associated with the Retina models (after the aforementioned price cut). But that $200 gets more than just the Retina display; it also gets a thinner form factor along with standard flash storage.
Assuming that Apple isn't redesigning the iMac or transitioning it to entirely flash-based storage, it seems that a $200 premium would be hard to justify. If Apple wanted to be aggressive, it could simply keep the same price point while strengthening the value proposition. That may not positively impact Mac average selling prices, but it could help drive unit sales and continue Apple's trend of slowly gaining PC market share as the company's unit growth still outpaces global PC unit shipments.
That seems to be the right move to make, as attempting to extract a higher premium would make it a tougher sell, particularly at a time when interest in desktops continues to decline. Apple stopped disclosing its desktop and portable mix in 2012, but in the last quarter that it did report (fiscal Q4 2012), 80% of Mac units were laptops.
How much would you pay for a Retina iMac?