Now that all the oohs and aahs have been ejaculated over the just launched iPad 2.0 and the new HP TouchPad tablet (based on the WebOS from the Palm acquisition) unveiled a few weeks back, it’s time to look at what lies down the road.
Hard Road Ahead
It’s safe to say that in the next few months as more tablets (including HP TouchPad, Apple iPad 2.0, Blackberry Playbook) come to market, we will see a desperate jostling among the vendors for a share of the American consumer’s wallet.
At current price points, we remain skeptical that tablets are going to sell like gangbusters in other parts of the world.
HP Touchpad Tablet – Coming this Summer
Of the tablets already out there, Apple is the only one that has sold a respectable number of units confounding our initial pessimism.
In 2010, Apple sold nearly 15 million units of its first generation iPads, just nine months into its release.
Samsung, Dell, Motorola Xoom and the rest of the me-toos haven’t even hit 10% of Apple’s sales and are likely struggling already.
Importance of Apps
A digital media device like the iPhone, iPod touch or iPad is no longer merely a device to make phone calls, listen to music like the original iPods were or browse web pages in bed.
These smartphones and tablets today have wider capabilities beyond just mobile telephony and music. You can now access weather reports, play games, take good quality photos, watch Live TV and even watch porn, a favorite preoccupation of Americans. 😉
Hey, there’s even an iPhone app called Baby Shusher to shush crying babies. No kidding.
In short, applications of all sorts drive the digital media market.
Here, Apple, besides being the earliest to capture the public’s imagination and also drive the market has a big advantage with its iTunes music/video store and App Store digital media repository of applications.
Music/video from iTunes and apps from the App Store run on Apple’s iPhone, iPod touch and now the iPad. All the other players are way behind, languishing in an anorexic app wasteland.
There are over a 65,000 dedicated applications for the iPad alone and over a quarter million for the iPhone and iPod touch.
None of the other tablet peddlers have anywhere near these kind of applications, which come in every possible form including games, utilities, entertainment, health, sports and more. We’ll be surprised if they have even a few hundred tablet-specific applications.
Without the ecosystem of applications, a tablet is no more than a web browsing and e-mail checking device, things that you can easily do on a desktop, laptop or even a netbook these days.
Blackberry’s Playbook Coming Soon
Some companies like some people (think Tamil movie superstar Rajinikanth or the ancient queen Cleopatra) have a mysterious hold over the public consciousness.
There’s a mystique, an inexplicable halo or aura around such people or companies.
What Apple or Rajinikanth accomplish, others can’t replicate even if they do the same thing better.
The Apple iPad has already taken hold of the public consciousness and the rest are seen as impostors trying to piggyback on the Tablet wave that the Apple iPad has unleashed.
Other Apple Advantages
Adding to the mystique is Apple’s vaunted reputation for making quality products that are not only sleek, easy to use and are, oh, so cool.
Until the iPhone launched, did you ever see anyone gush over a cellphone.
Then, there’s the powerful Apple marketing machine that’s supported by its expanding network of Apple-owned retail stores in malls across the U.S.
None of the other table vendors have their own direct retail presence in the U.S. and must perforce rely on stores like Best Buy or Walmart with their ill-qualified staff to push their wares to consumers.
So, whether in the apps, first-mover advantage, quality, marketing or mystique, Apple seems to have a tremendous advantage that the competitors lack in the tablet arena.
Tablets – A Fad?
We’re still not completely convinced that tablets are here to say.
Is it just another fad that has captured the digital zeitgeist of the moment or are we seeing the entrenchment of another digital media device along the smartphone, laptop and PC. Who can tell for sure.
If it’s merely a fad driven by buzz and high-powered marketing, it’s unlikely we’ll be reading or writing about tablets 24 months from now.
Massive Losses Coming
Forrester has projected the U.S. tablet market for 2011 at 24.1 million units.
Given the backdrop of the continuing economic recession, high unemployment woes, a plethora of new tablets hitting the market this year, high price-points, limited sales overseas and a dominant Apple, we predict most of the other tablet vendors will be unable to gain traction. Unless their prices are so much lower than that of the Apple iPads.
And so far we’ve seen no indication that the competitors’ prices are lower. Au contraire, they’re sometimes higher.
Launch of a major product like a tablet for a company like HP, Motorola, RIM (Blackberry), Dell, Asus et al costs several hundred million dollars in development, manufacture/outsourcing to a reliable vendor, establishment of a supply chain, advertising and marketing, wooing application developers and support costs.
Given that sales of only 24.1 million units are projected for 2011, we fail to see how any of the tablet vendors save Apple can hope to gain a large installed base, which is a must to retain interest of application developers to build for the platform.
Since the investment on developing and launching a new tablet runs into the hundreds of millions of dollars and with just one or two vendors assured of some success, what is foreordained in the next couple of years is a mighty carnage in this space with the total losses running into the billions of dollars.
Most tablet vendors will have no choice but to shut their tablet businesses in an effort to cut losses.
Price cuts in older iPad models (Apple has just done that) and the wave of used iPads that will hit eBay and Craigslist as iPad 2.0 debuts will only make things worse for the competition.
As vendors find it difficult to move their products off the shelves, we expect to see a bloody price war coming in the second half of this year that could put pressure on Apple and impact its enviable margins.
Apple Debuts iPad 2.0; More Misery for Competition