How much would Apple sell an iPad mini for?

At an event earlier this week, Apple introduced the iPhone 5 and a brand new iPod touch. Both devices have a the same 4″ screen and add to the top end of their respective Apple product lines.

But, if the rumors are true — and we believe they are — Apple also has an upcoming “iPad mini” device in the works. So what do the prices of the iPhone 5, current iPad and new iPod touch tell us about where Apple might place the iPad mini in its cost lineup?

Right off the bat I’m going to remove the iPhone from the equation. The iPhone is a subsidized gadget that fulfills a completely different need than the iPad. So lets talk about the new iPod touch and the iPad more specifically.

As early as 2009, Tim Cook has been talking about Apple’s plans to make sure it fills the pricing gaps in its lineup. “We have a plan that keeps us leaders in the iPhone space,” said Cook, talking just before the release of the iPhone 3GS. “We’ll make sure we don’t leave a price umbrella for people.”

In a recent article Ryan Jones did a good job summarizing how Apple would have to plug this gap. “In order to eliminate the pricing umbrella,” he writes, “Apple needs to serve the $199 to $399 price range.”

Now, the iPad 2 already hits that $399 price point, but lets get a better picture of how the lineup sits as of now before we go further:

• iPod touch 16GB (4th gen) $199
• iPod touch 32GB (4th gen) $249
• iPod touch 32GB $299
• iPod touch 64GB $399
• iPad 2 $399
• iPad $499

There are more iPads, of course, but that’s the relevant slice of Apple’s products when it comes to price point.

From what I’ve heard, and what some smart people have conjectured, the iPad mini is very likely going to be an iPad 2, just smaller. A 7.85″ screen at non-retina 163 ppi resolution (the same PPI as the iPhone 3GS) and very much the same inside as well. I thought that was the end of it, frankly, but I’ve recently heard Retina display talk pop up again as well.

So, to play devil’s advocate, let’s set two prices for the iPad mini. These could be presented simultaneously or perhaps only one will be chosen, either way the prices seem right to me:

• iPad mini with Retina display $349
• iPad mini with standard display $249

Either of those prices would slip underneath Apple’s current $400 pricing overhang and be very salable.  And they would also leave room for LTE variants. Without a Retina display, it could very well hit a $199 price point, but I just don’t see that it’s necessary. It will be slightly larger than the Nexus 7 and Kindle Fire HD, but slightly lower resolution than Amazon’s tablet.

But Apple has never played the spec game, so I don’t think the nitty gritty will affect the pricing too much. It’s just whether or not Apple sees Google or Amazon as a threat that it needs to counter with an agressively priced tablet. I’ve found the Kindle Fire HD to be a very good conduit for Amazon’s content, but that content is very limited in regional availability, so it won’t really be a factor in the worldwide market, where the iPad already sells well.

Could Apple sell an iPad mini at $199? Sure. But I don’t think they have to, and I think it knows that.

John Gruber thinks that the iPad mini will be super thin and light, and I think that’s a safe bet.
I thought this supercut of all of just the adjectives Apple uses to talk about the iPhone was pretty telling. Here’s the bit that covers today’s announcement:

Apple has always used the words ‘fast’ and ‘thin’ to describe its products, but you can see how much it accelerates in today’s announcement if you watch the whole thing. Thinner and lighter has always been Apple’s goal, as it removes the stuff around the screen. And that goal will be adressed in spades with the iPad mini.

Some people might object to pricing the iPad mini at $249 because the new iPod touch is $299, but those are really products aimed at two different segments of the market. The iPod touch is a gaming and messaging device used primarily by teens. I’ve heard some absolutely insane statistics about usage of the iPod touch in the 15-18 demographic, where kids essentially use it as their phone that texts and does ‘calls’ over networks like Viber.

The iPad mini, by comparison, is a device to be used while lounging and reading or watching movies. Yes, it’s more portable, but it’s not throw-in-your-pocket small. This is a different product and the price could very well overlap with the iPod touch and it wouldn’t matter a hill of beans to Apple or the market.

There is also the possibility that the iPad mini could come in and replace the iPad 2, creating a bit more breathing room between a $349 Retina iPad mini and the $499 iPad. Remember that Apple isn’t obsessed with hitting every price point, that’s not how they do business. Yes, they don’t want to leave room for competitors to undercut their pillar businesses, but it’s not an ‘every price’ situation.

As Cook said when he addressed the issue of expanding the iPhone or iPad lines at the All Things D conference earlier this year:

Our North Star is to make the best product. Our objective isn’t to make this design for this kind of price point or to make the design for this schedule or line up other things or have X number of phones.

It’s to build the best.

…

We didn’t sit around the iPod and say “we need a $49 model.” It was “we could have a pretty cool model called the Shuffle.” Whenever we can do some fantastic models and they’re at different price points, that’s great.

So whatever pricing choices Apple makes regarding the iPad mini, it could very well be about protecting itself from competition on the outside, but it won’t be about cannibalizing the sales of its own products, which it has proven itself willing to do if it’s the one to benefit. And it won’t be about  shipping something at every $50 increment.

Instead, it will simply be about shipping the thinnest, lightest tablet it can at a price aggressive enough to head would-be contenders off at the pass.