Netpliance’s 4X Price Hike - Will It Spell Boom or Doom?
29, 2000 [Source: Netpliance press release]
Netpliance, Inc. has announced i-opener 2001, the next generation service
for Internet appliances. As part of the new service package, i-opener
customers will be able to alert one another and chat live for the first
time with iChime Direct Messaging using an i-opener Internet appliance.
to its features such as always-on automatic updates and the simple email-waiting
light, the new iChime feature will allow i-opener members anywhere to
find and alert each other, then begin communicating instantly.
new applications and features include:
- The i-opener
CommunityCenter, where members meet each other in a safe environment
to discuss issues of interest.
- The i-opener
FamilyRoom, where members can interact, share news and organize events
with family and friends in a simple forum.
- The i-opener
- Up to
four (4) e-mail accounts per membership.
with current instant messaging approaches is that there is no way to 'ring'
the person you want to converse with. Netpliance's patent-pending iChime
Direct Messaging allows a member to ring another member at the press of
a button," said Netpliance Chairman and CEO John McHale. "Beyond the cornerstone
of simplicity, the new iChime service gives members the best way to communicate
instantly with other members, taking the guesswork and frustration out
of instant messaging."
Direct Messaging Service, included in i-opener 2001, provides virtually
free 'long distance ' service, allowing members to alert and communicate
with each other instantly," McHale said.
The new features
come as part of the new i-opener Membership Program, which invites consumers
to become i-opener members by purchasing an i-opener 2001 membership kit
for $399 and paying a monthly subscription fee of $21.95 with no long-term
service commitments or contracts. The i-opener promotional offer of $99
ended June 30, and Netpliance began accepting orders for i-opener 2001
memberships starting July 1, with the new kits and new capabilities to
be available in the fall of this year
The new Membership
Program will offer a community of common users, unlimited support, software
maintenance and a monthly newsletter. To support its customer base, Netpliance
will automatically enroll existing subscribers into the Membership Program
and make i-opener 2001 available to them as a free charter member benefit.
We suspect that Netpliance may be cutting its own throat by this move.
Although they have a growing subscriber base (currently estimated at 20,000+),
much of this was based on an "introductory" price of $99 for the "i-Opener"
(as compared to the formerly "official" price of $199). We do understand
the concept of charging more to increase profitability. But, based on
Netpliance's own comments earlier this year, demand is "inelastic" above
$199, so we don't understand how doubling the high-end price is an effective
long-term strategy. (Refer to TEC Note "Internet/Information
Appliances"). For a start-up without a large subscriber base, increasing
market share through a price increase is a counter-intuitive strategy.
America Online, with a subscriber base roughly 1000 times the size of
Netpliance's, is probably not too worried.
recent availability of Oracle Chairman Larry Ellison's "New Internet Computer"
(NIC), with more features (except no monitor), the freedom to choose your
own ISP (including the NIC's own free ISP), and no required subscription
charges, probably spells big trouble for Netpliance.
expect that Netpliance will last until early next year. By that time,
the Gateway/AOL appliance will be out, the first MSN Web Companions should
be out, and other large manufacturers should be scoring with their appliances.
We do not believe the i-opener provides sufficient functionality to compete
adequately against any reasonably featured, AOL-focused appliance.
As we have stated before, the i-Opener series is consumer-focused, not
business focused. At $99, its limited-functionality focus was at least
cheap enough for the less wealthy - those who hadn't already purchased
a PC, and probably couldn't afford one. At $399, plus an additional $21.95
per month (required), it no longer falls into the "great deal" category.
Given the price pressure from Ellison's NIC, as well as product pressure
from Gateway/AOL and MSN Web Companions, we expect Netpliance will rethink
their pricing strategy.
users will find little use for this, even with the "improved functionality",
and should stick with a mainstream PC (with Internet access), or a more
flexible appliance if money is exceptionally tight. The added negative
is the (in our opinion) cloudy corporate future, which might mean a dead-end