(Well, you've got to admit, that's not something you'll be reading on most other weblogs today.)
Ten hours after the Apple iPad announcement, my overall reaction is that the product wasn't necessarily better or worse than I expected, but it was definitely different.
I expected an upsized extension to the iPod Touch, with a focus on watching videos, browsing, and playing games. The device can certainly do all of that, but Apple spent a huge amount of time demonstrating features I didn't expect -- e-mail management, productivity applications, and typing with the on-screen keyboard.
I know many of you think those are just checkoff items, and you may be right. We're all trying to read Apple's strategic intentions from a single product announcement, and that's hard to do. But here's how I view it: I believe Apple is serious when it spends five minutes demonstrating a feature, and I believe they actually said what they meant to say during the announcement. Specifically:
--Apple's identity is as a mobile device company.
--Netbooks suck and Apple can do something better.
--It's amazingly comfortable and easy to type on a touch screen.
(I'm not sure I agree with the last one, by the way, but we're talking about what Apple believes, and Steve sold the onscreen keyboard thing hard.)
If they really believe all of those things, then the iPad starts to look like Apple's idea of the next logical stage in the evolution of personal computing. It takes everything Apple learned from iPod and iPhone and applies that to a redesign of the low-end personal computer. It's Apple's vision of the netpad done right -- not a PC accessory, but a lightweight portable device that can replace the PC for many basic usages. The idea wouldn't be to kill the PC outright, but to nudge it toward the workstation space, in the process gradually eating away at the market share of Windows.
Yes, I believe killing Windows is still very high on Steve's personal to-do list. Always.
If you start from that assumption, a lot of the other things Apple said today make more sense. Why did they spend a year rewriting iWork for the tablet? Because you need an office suite in order to displace a PC (you don't need it for a media tablet). Why price that suite at just ten bucks a module? Because that profoundly screws up the pricing for Office on netbooks (the only way Microsoft can match that pricing is to destroy the value of its cash cow).
Why didn't we get a more comprehensive media store? I was expecting an entertainment tablet, and so I thought there would be a much more aggressive push for third party media developers. Apple did create the iBooks store, but they don't seem to be reaching out to individual authors the way I expected. And other media (video and animation) remains in iTunes rather than getting its own purchasing experience. To me, the iPad feels more like a netbook replacement that also does books, rather than a media tablet that also does spreadsheets.
Will it work?
If Apple's plan really is to displace netbooks, it faces some interesting challenges. One of the greatest appeals of a netbook is that it is a fully functional Windows notebook computer (cramped and awkward, but fully functional). Computer users have historically been very resistant to compromising on some core features. Will they accept a netbook that doesn't have a physical keyboard or a hard drive, and that can't run Flash and Java? And as Chris Dunphy (link) asked me today, will Apple give iPad applications more freedom to multitask than they have on the iPhone?
I don't know. And so I really don't know how the product will sell.
It doesn't help that the marketing for the iPad feels muddled. Apple's website tonight reads, "Our most advanced technology in a magical and revolutionary device at an unbelievable price." Ugh, it's a big bag of features. As I asked in my pre-launch post yesterday, who is it for and what problem does it solve? The question hasn't been answered crisply.
At least Apple got the base price of the product right. It's still above what I think most consumers will pay for a tablet, but Apple's within the realm of believability, and over time I hope the price will come down further. If it does, and if Apple markets it strongly, the product may be able to find its own market.
Meanwhile, I'm sure the iPad will have an important impact on some other companies. Namely...
Nokia: Step your game up. Several years ago, Nokia said it was re-creating itself as a computer company. Now Apple says it has re-created itself as a mobile company. Not just a mobile company, but supposedly the world's biggest mobile device company as measured by revenue. Whether that statistic is actually meaningful or something Apple manipulated through clever accounting, it must have driven the Nokia management team nuts -- which was undoubtedly Apple's intent.
Now Nokia has to decide whether it wants to compete with Apple in yet another product category, at a time when it already seems a bit overwhelmed. It's a very tough decision. (And please don't tell me the N900 is an iPad competitor. It's too small.)
Is Kindle in trouble? Not yet. The Amazon Kindle vs. iPad competition is going to be very interesting. My first reflex was to say that Kindle is in trouble -- iPad is a much more capable device, and the convergence advocates will tell you that a general-purpose tablet will eat a single-purpose e-reader. But Kindle is half the price of the iPad, even less when you factor in the cost of 3G for the iPad plus a service plan. Plus its screen, although only black and white, produces less eyestrain than a backlit LCD display. I don't think Kindle takes a big hit in the near term. In the long term, I am worried about Amazon's ability to compete with general-purpose tablets, but maybe Amazon's goal is to own the bookstore rather than the book reader. In that case, they should make sure the Kindle app works really well on the iPad.
The one thing I'm sure Amazon should not do is attempt to compete with Apple in the general-purpose tablet business. That's like challenging the Australian national rugby team to a drinking match.
The mobile operators: Pay attention to your pricing plans. I think this will be one of the most interesting floats in the iPad parade. Apple is now making its second attempt to bypass the subsidy model used by the operators. If Apple had been willing to bundle a two-year wireless contract with the iPad, it probably could have gotten the device subsidized down to about $299 or $350. But the downside would have been a $60 or higher monthly service plan, with soft caps on the amount of video someone could browse. It will be interesting to see how customers react to Apple's choice, especially when other companies sell subsidized net tablets for very low initial prices. In the phone market, Apple had to give in and accept the subsidy. We'll see if history repeats itself.
It will also be interesting to see how AT&T makes out with the revenue from iPad subscribers. At first glance, $30 a month for unlimited data sounds like a bad deal for AT&T. But keep in mind that data plans usually include several hundred dollars for the subsidy; the operator supposedly doesn't even turn a profit until sometime in the second year. With these plans, AT&T makes money from day one. So it may be able to make a better profit than you'd expect. Still, it seems a bit odd for a company with a network as congested as AT&T's to be adding a device designed to stream high-quality video from the web.
PC application developers: Pain. If the iPad really is Apple's vision of the future of personal computing, it's an ugly world for today's PC application developers. By pricing the pieces of iWork at $9.99 each, Apple has effectively created a price ceiling for major productivity applications. How many PC app companies can make money at that price per unit? And remember, that's the ceiling. It's time to start rethinking your business model...
No matter how well the iPad sells, it's a very interesting experiment worthy of the Apple brand, and I'm sure it'll drive a legion of imitators from Asia. I wish we had a few more hardware companies like Apple who were willing to mix up the market like this; innovation would move a lot faster.
(Well, you've got to admit, that's not something you'll be reading on most other weblogs today.)
Chris Dunphy (link) and I were 2/3 of the competitive team when we worked together at Palm. We did a chat session this evening watching a replay of the iPad announcement. With Chris's permission, here it is. This won't be of interest to all readers, but I thought some of you might like to see the raw reactions of two geeks watching Apple perform...
Michael Mace: Thought of the day -- this might be Steve's last major new product category launch. Probably is, even if he lives to be 90. Not many more categories for him to attack.
Chris Dunphy: There is still room for an iCar....
Michael Mace: ;-)
Chris Dunphy: That is one old-school industry that is crying out to be reinvented too. It could use his touch.
Chris Dunphy: Steve is looking good.
Chris Dunphy: Largest mobile devices company in the world now.
Michael Mace: Nokia will hate that.
Michael Mace: Entertainment device, as expected.
Chris Dunphy: Netbooks aren't better at anything. *laugh*
Michael Mace: Looks like you'd expect.
Michael Mace: Gee, Steve, the first thing you say is that you can CHANGE THE BACKGROUND PHOTO???? Who cares?
Chris Dunphy: Bigger frame around the screen that I expected.
Michael Mace: Need room for your thumbs to hold it.
Chris Dunphy: I notice it has an appstore. Of course.
Michael Mace: Of course. So far no surprises at all.
Chris Dunphy: The UI looks gorgeous. But again, not a surprise.
Chris Dunphy: If the two-hand typing experience feels good, that will be very nice.
Michael Mace: I am waiting for some sort of paint/draw app...
Michael Mace: Steve is holding back on the big stuff.
Chris Dunphy: Make the news scarce.
Michael Mace: So far the announcement is underwhelming, but I think he is setting us up.
Chris Dunphy: On the other hand... Fewer features, nail the experience is the Apple way.
Chris Dunphy: I am lusting.
Michael Mace: If you weren't, Steve would have utterly failed.
Chris Dunphy: I am guessing it will use the same iPhone / iPod cable to sync / charge. If so - it will be the perfect front-passenger-seat device for while we are nomadic.
Michael Mace: Ahhh, nice!
Chris Dunphy: Particularly once TomTom or Magellan optimizes a navigation app for it. Wow.
Michael Mace: Good point.
Chris Dunphy: I wonder how long until someone comes out with a dash mount....
Michael Mace: You should do it. That could be your new company.
Michael Mace: But beware the lawsuits for distracted driving.
Chris Dunphy: HD playback - screen must be at least 720p?
Michael Mace: Weight is okay, but a bit heavy for reading comfortably.
Chris Dunphy: Custom silicon.
Michael Mace: Woah, their own processor. Wow!
Chris Dunphy: Their own CPU. Sweet.
Chris Dunphy: 64GB of flash. Nice.
Michael Mace: The first part of the announcement that shocked me. I expected their own support chips, but not the CPU.
Michael Mace: Ten hours of battery life is also killer, if it's real.
Michael Mace: That is the payoff for the custom silicon, I believe.
Chris Dunphy: Accelerometer and Compass... But what about GPS?
Michael Mace: Good point.
Chris Dunphy: No camera.
Chris Dunphy: No videoconferencing.
Michael Mace: Bummer.
Chris Dunphy: Ah, AppStore time.
Michael Mace: It's not an info pad, not at all.
Michael Mace: Pixal doubling. Sound familiar?
Chris Dunphy: 100% app combatibilty is a win for the developers.
Michael Mace: Yes, the app compat is critical.
Chris Dunphy: Developers will love this. Great for showing off.
Michael Mace: Nice how the app base gets leveraged to move them into new markets.
Chris Dunphy: New SDK out today. No waiting.
Michael Mace: Microsoft gets lapped today.
Chris Dunphy: Users do NOT need to re-buy their iPhone apps either. Sync and go.
Chris Dunphy: That is hugely appealing - it makes software an investment, not disposable.
Michael Mace: Nice point!
Michael Mace: Apple makes users happy by giving away additional copies of developer apps (being a cynic).
Chris Dunphy: With Palm - if you bought a new device, you often had to shed your old apps. I was trying to fix that....
Michael Mace: Yeah, and those Palm apps were in the same device category. Very bad to break stuff.
Chris Dunphy: Over the past year I have gotten into the habit of reading all my news via the New York Times iPhone app - in bed every morning when I wake up. This so fits the usage model I have for how I want to consume news...
Michael Mace: Nice. Will you still do it when they start charging?
Chris Dunphy: I think so... Depends on the price, and on what else is free.
Michael Mace: Nice, a painting app.
Chris Dunphy: That it syncs between iPhone and iPad is key too.
Chris Dunphy: I am still wondering at the screen resolution. An iPhone pixel doubled is just 640x960. That isn't great.
Michael Mace: They may be doing more than doubling. It would be hard to tell on a projected screen.
Chris Dunphy: It looks like when it is doubled there is still a black frame too.
Michael Mace: Now the beef.
Chris Dunphy: The print world gets reinvented.
Chris Dunphy: "Stand on Amazon's shoulders"
Michael Mace: Or on their faces.
Chris Dunphy: Either way - crushing them.
Chris Dunphy: Cherie: "I might actually get into reading books again."
Chris Dunphy: Indeed. I feel the same.
Chris Dunphy: The iPad is a Kindle killer. It is also Kindle compatible - thanks to the iPhone Kindle app. I wonder if Amazon regrets that now??
Michael Mace: No, they want to run the bookstore for everyone. If anything, they should have been pushing the app harder.
Chris Dunphy: True.
Michael Mace: The key is the terms for the bookstore. Haven't heard that yet.
Michael Mace: It's not a given that Apple's bookstore will be better than Amazon's. They have a long head start.
Michael Mace: The killer vs. Kindle, though, is that you can do both books and other forms of media. What I want to see is the video store.
Chris Dunphy: Yep. And books in color.
Michael Mace: Hmmmmmmm. iWork for the tablet.
Chris Dunphy: They are using ePub as a format for ebooks. Is that open? What is the DRM?
Chris Dunphy: I expected iWork browsing / viewing on the iPad... But if they turn it into a productivity tool....
Michael Mace: Except a tablet pretending to be a PC is a bad PC. Have they rethought the usage paradigm?
Michael Mace: Presentations make more sense than WP and spresdsheet.
Michael Mace: I wonder if it has video out? If so, it could be a really nice presentation device.
Chris Dunphy: This is a great oportunity to break people from the old Word / Excel UI paradigms.
Chris Dunphy: On a tablet, people won't have any expectations of things working a different way.
Chris Dunphy: No filesystem confusion.
Chris Dunphy: If iWork can be done using the SDK.... Imagine what other developers will be able to do. Serious apps indeed.
Michael Mace: Yup.
Michael Mace: If you accept that on-screen keyboard is acceptable, you can make it into a PC.
Chris Dunphy: A PC without the baggage of the past.
Michael Mace: uh-huh.
Chris Dunphy: I wonder if they will let apps out of the sandbox.
Michael Mace: If they want to replace PCs, they need to.
Chris Dunphy: Having every app in a silo is very limiting for more advanced functionality.
Michael Mace: Maybe this is more about killing Windows than about creating a new category.
Michael Mace: How much is Steve a creature of his background and past experiences?
Chris Dunphy: Needs multitasking.... But multitasking done right.
Michael Mace: I mean, really, a spreadsheet for a tablet. The app that lends itself least to a touchscreen.
Chris Dunphy: Though - having a spreadsheet you can interact with on a tablet is huge for people doing work on the go.
Michael Mace: Sure, like Docs to Go.
Chris Dunphy: Even if "work" is just tracking stats in your garden.
Chris Dunphy: With a screen big enough to interact with.
Michael Mace: Not going into the garden with a $700 device.
Chris Dunphy: *laugh*
Michael Mace: If they are looking to kill netbooks, they need productivity apps. Have to replace them.
Chris Dunphy: Live life!
Michael Mace: $9.99 each GUTS the Office business model.
Michael Mace: Charge a bunch for the hardware and give away the apps.
Michael Mace: But also reduces developer incentives to do serious apps.
Chris Dunphy: Connect to a projector...
Michael Mace: This feels more and more like a flanking move to kill the PC.
Chris Dunphy: I wonder if that will work for media playback too.
Chris Dunphy: I can see a 27" desktop version of this.
Michael Mace: Some models with 3G and some without. Okay.
Michael Mace: 250 megs a month? That is a joke for video.
Michael Mace: Unlimited plan for $29 is better, but what is the limit?
Michael Mace: On ATT?? They do not have the bandwidth to handle that.
Michael Mace: Yeah, no wonder they throw in free WiFi.
Michael Mace: No contract = no subsidy.
Chris Dunphy: No subsidy = not carrier locked??
Michael Mace: Unlocked device, nice.
Michael Mace: But you will easily overrun your data plan if you use a lot of video.
Chris Dunphy: $29 for unlimited is cheap.
Chris Dunphy: 250MB is the email and browsing plan.
Michael Mace: But what's the hidden limit? You know there will be one.
Chris Dunphy: $30 is media consumption.
Chris Dunphy: There isn't on the iPhone.
Michael Mace: This will encourage much more video-watching by users.
Michael Mace: I am disappointed -- I expected a media store, not just a bookstore.
Chris Dunphy: "allmost all" - Not 100% compatible?
Michael Mace: Something will break. Always happens.
Michael Mace: Don't want liability.
Chris Dunphy: True
Michael Mace: I think Apple planted the $1,000 price rumor.
Chris Dunphy: Yep
Michael Mace: Ahh, okay, $499 is about right.
Chris Dunphy: $499
Chris Dunphy: Want.
Michael Mace: Bu that will be a stripped model.
Chris Dunphy: True.
Chris Dunphy: How much for 64GB.
Chris Dunphy: Ah - 3G is a lot.
Michael Mace: Yup, no subsidy for the 3G hardware.
Michael Mace: That's okay. They still hit the right price boundary (barely).
Chris Dunphy: 60 days.
Chris Dunphy: I bet there is at least $100 price drop for Christmas.
Michael Mace: Keyboard dock. Yes, this is about killing PCs.
Chris Dunphy: It is cheaper than the iPhone at launch.
Michael Mace: Yeah, and remember they needed to cut the price after they ate through the early adopters.
Chris Dunphy: Yep.
Michael Mace: But this is OK. It's a PC replacement, not a phone.
Chris Dunphy: Same plan this time.
Michael Mace: After all these years, it is still about killing Redmond.
Chris Dunphy: Does the keyboard dock go flat - that is an awkward shape to carry with you...
Michael Mace: You'll get third party stuff like Stowaway.
Michael Mace: They are reinventing the PC around touch. That's what this is.
Michael Mace: I picture Khan on the bridge of the ship, cursing at Kirk. Except Kirk's not getting away.
Michael Mace: To think that Microsoft tried to do this nine years ago, and blew it.
Chris Dunphy: It will be really interesting to dissect the SDK... If the SDK and apps are designed to scale up to higher resolutions, we will know for sure.
Michael Mace: I will be shocked if they are not.
Chris Dunphy: Ryan Block: "Yeah, you know, this video does a pretty good job of putting this stuff in perspective. iPad is pretty amazing — there, I said it."
Michael Mace: Suck-up.
Chris Dunphy: I need to see the video feed.
Michael Mace: He is misreading things about the third category. This isn't -- it's the eventual successor to the PC.
Chris Dunphy: The PC survives.... It just goes back to being a workstation for high end.
Michael Mace: Diminishing market over time.
Michael Mace: Just like laptops are displacing desktops. It's a continuum, but Apple has refreshed the restof the hardware base.
Michael Mace: But the market for PC apps is now officially trashed. The top price for a major app is $9.99
Michael Mace: How does an a big software company survive in that world? They don't.
Chris Dunphy: They keep selling to the workstation crowd that pays big bank.
Michael Mace: Except as a high-end professional app. On PC equivalent of workstations.
Chris Dunphy: A focused announcement - no new laptops, no iPhone OS 4.0....
Michael Mace: Yup. Wise of them, I think.
Chris Dunphy: Some big unanswered questions... Multitaksing? GPS? Filesystem / apps sharing data?
Michael Mace: Yup.
Chris Dunphy: HD video out?
Chris Dunphy: No "one more thing"....
Michael Mace: Bummer.
Chris Dunphy: " The AT&T network access can be purchased -- or canceled -- at any time directly from the iPad."
Chris Dunphy: The network is a big dumb pipe, with an on/off switch.
Chris Dunphy: I wonder if you get billed via iTunes. *laugh*
Michael Mace: Actually, a narrow dumb pipe.
Michael Mace: The wireless network cannot handle what millions of these devices will do to it.
Chris Dunphy: Accelerate WiMax and LTE deployments.
Michael Mace: Not enough.
Chris Dunphy: "I consider not supporting flash a feature, not a bug."
Michael Mace: Was the Flash quote from Steve?
Chris Dunphy: No - me.
Chris Dunphy: (In a Facebook thread)
Michael Mace: I can't imagine they can keep Flash and Java out now. It'll cripple them as a PC replacement.
Chris Dunphy: I think they will - for at least a year.
Chris Dunphy: Flash and Java = slow and crashy.
Chris Dunphy: And they want to control the runtime. Just like the iPhone.
Chris Dunphy: It is a walled garden still.
Chris Dunphy: Apple is the gatekeeper.
Chris Dunphy: You know - this is going to be head-to-head with Chrome OS.
Chris Dunphy: I can see a future play out just like the phone market.... The iPad dominates the high-end, and Googles Chrome OS powers the army of low-end.
Chris Dunphy: Microsoft is the one who gets left out.
Chris Dunphy: Watching the UI in action.... Nice.
Chris Dunphy: It's running iPhone OS 3.2.
Chris Dunphy: Wow - not even a 4.0 number jump.
Chris Dunphy: I wonder what is coming in 4.0 then. Interesting.
Chris Dunphy: The iPad could get a major upgrade come summer. Right after the competition starts chasing after where they are today.
Michael Mace: It will get harder and harder for them to keep all versions of the OS in sync.
Chris Dunphy: It will work with standard bluetooth keyboards. Score.
Chris Dunphy: Not much to keep in sync if the iPad and iPhone use the same OS.
Chris Dunphy: Good job for them accomplishing that.
Michael Mace: I guess you just have to design for the full range of hardware you'll be running on. It is more to test, though.
Posted by Michael Mace at 11:11 PM Permalink. 0 comments. Click here to read post with comments.
I need some time to think about it, but after listening to the feed of the announcement and chatting with my friend Chris Dunphy, my quick reaction is that the iPad is more like a PC than I expected. That's not necessarily a bad thing. I had been thinking of the tablet as a new, third category of devices focused on content consumption. The content play is in there, but focused on print only rather than video and other forms of media, at least for the moment. But given its features and software, and especially the iWork suite, the iPad is actually more like a low end PC-displacement product: The PC reimagined as a portable, touchscreen device. Content delivery is a part of that rethinking. Nine years after Tablet PC, somebody got it right.
The iWork pricing of $9.99 per module is a knife aimed at Office, and a disturbing precedent for all traditional productivity app companies. If you're in one of those companies, you need to rethink your business model quickly.
I'm not saying the PC is dead (not at all), but it looks like Apple is trying to gradually move up from the smartphone space to chew chunks out of the PC market. So maybe the iPad really is a response to PC netbooks, which is what my Apple alumni friends said a year ago. In some ways the iPad is worse than a netbook, in some ways it's better. I will be very interested to see how it sells against netbooks this fall.
I'll have more to say after I've had some time to digest the announcement. In the meantime, your comments are welcome.
Posted by Michael Mace at 11:57 AM Permalink. 13 comments. Click here to read post with comments.
One of the easiest ways to embarrass yourself online is by making predictions for the record about an unannounced product. You're layering risk on top of risk -- not only might your predictions be wrong, but the information you're basing them on might be wrong as well.
But it's fun so I'm going to do it anyway.
Assuming that Apple actually announces a tablet product on Wednesday, here are four things to watch for...
What does it do, and who is it for? Aside from being cool, the tablet will need to solve some real-world problems for normal people if it's going to be accepted. In my opinion, there are two potential markets for a tablet, based on market research I've done in the past. One market is as an entertainment/browsing/content device, and one is as a business information-management tool (an info pad, a subject I wrote about here).
The worst thing Apple could do is try to target both markets with one device, in my opinion. The customers are not compatible, and they need a different mix of features. You could end up with a tweener that doesn't really delight any one group (can you say Palm Pre?)
Based on press reports, and friends who have links to Apple, it looks like they're going for the entertainment market. I think that's wise -- it's a natural fit with Apple's relatively young, creative image. It also leverages the infrastructure Apple has already created for the iPod.
Watch the infrastructure. Another problem Apple could solve is a major malfunction in the market for content products (magazines, books, short stories, video, etc). Content creators today have a couple of choices -- give their stuff away online, or pump their materials through a traditional distribution system that absorbs 85% or more of the revenue on overhead, distribution, printing costs, mailing, etc. Either way, creators often get shockingly little reward for their hard work.
What creators need is a system that will let them bypass the current distribution system entirely, selling directly to consumers and pocketing most of the revenue themselves. They could actually charge less money per copy, sell in smaller quantities, and still make more profit.
Apple could create that billing and distribution system. Or it could create a system that attempts to reinforce the power of today's content middlemen. The key question will be how easy it is for a content creator to sell something through Apple directly, and how big their revenue cut is. If Apple shares 70% or more of revenue, and lets anyone create their own content, the floodgates will begin to open.
This could have an enormous impact on the content industries. Ultimately it would give much more power to content creators, at the expense of publishers and other middlemen. And it would enable consumers to get a wider variety of entertainment and information than they can today. (I wrote about some of the possibilities here. That article is old now, but the situation has barely changed in the meantime.)
So, even though I am intensely interested in the Apple tablet's technology, I am even more interested in the business model around it. That's where the real revolution could happen, in my opinion.
Ignore the first 100 days' sales. A company of Apple's stature is almost always able to drive significant sales in the first three months of availability, especially when creating a new category product. There are enough fans and early adopters to virtually guarantee a sales spike early on. The big question is what happens after the enthusiasts have bought.
Remember, the original Macintosh 128 was quickly snapped up by about 70,000 drooling enthusiasts (including me!). We bought even though the computer had ridiculously little memory and almost no software. Picture a word processor that can't create a document longer than 10 pages. I paid $2,500 for that! After the first three months, Mac sales flattened, and didn't recover until Apple fixed the shortcomings of the product.
So I expect a sales explosion in the first three months. In fact, if there isn't one, the product is in deep trouble (see Apple TV). But even if it sells out at first, that doesn't mean much until we see at least six months of sales data. Preferably nine.
Price is a huge unknown. Here's the story I heard from my Apple alumni friends: There is a gap in Apple's product line. Apple has the iPhone and iPod Touch at around $300, and it has the iMac and MacBook at about $1,000. It needs something in the middle, and the tablet is expected to fill that gap.
The price point I heard from my friends was about $600. Lately the price rumors have gone higher, and I don't know what to think about that. Could be true, could be wrong, could be Apple leaking a fake price so they could "surprise" people with something lower. All I know is that at $1,000 they are in conflict with the low-end Macs, and at $300 they are in conflict with the iPhone, and my friends are adamant that they won't do either.
But even if the price is around $600, I think there is a problem: In all the market research I've done on mobile devices, the latent demand for a tablet device is centered at prices of $199-$399. You can skim a very small percent of the users at $499, but even that is a stretch. A price of $600 or higher is way beyond the comfort zone of most potential customers for a tablet, no matter how great the device is.
It scares me on Apple's behalf. You can get into deep trouble when you design a product around your business needs rather than the customer's feature needs. You start rationalizing things: "We know we ought to sell it for $300, but that doesn't work for us, so we add a bunch of extra features that ought to be worth $300 more, and we plan a big marketing campaign, and we convince ourselves that the product is so special that people will feel compelled to open up their wallets. It's just a couple hundred dollars more, after all..."
Nonsense. Some products have natural price points, and it's very hard to change them. Great marketing and great features get you a 10-20% premium, not 100%.
So watch the price on Wednesday. If it's in the $300-400 range, I am very comfortable with Apple's chances. If it's over $600, I will be very interested to see what special magic Apple has put into the product. I think they'd need features on the order of burning bushes and loaves-and-fishes in order to sustain a price of $600 or more in the long run.
But for the record, I'd be delighted to have Apple prove me wrong.
Posted by Michael Mace at 8:08 PM Permalink. 7 comments. Click here to read post with comments.
I wish I knew the inside story on Google's recent confrontation with the Chinese government. At first Google's announcement looked like a principled, well thought-out stand in a long behind-the-scenes dispute (link). But as more details have emerged, it has started to look as if Google didn't think through the consequences outside of its core search business. In the mobile market, those consequences could be significant. Here's why...
Google's Android OS has been gaining enormous support among mobile operators and handset vendors because it was viewed as the most feasible alternative to total domination by Apple. All of the other OS options had nasty baggage -- Microsoft was viewed as both controlling and unable to create demand, Symbian was seen as Nokia's pet, and the other flavors of Linux were all below critical mass.
In contrast, Google seemed technically competent, vendor-neutral, and capable of attracting users. (By the way, it says something about Apple's growing power in the mobile industry that a company as controlling as Google was seen as the safe partner; it's kind of like cozying up to a kodiak bear to escape a tiger.)
Google's dispute in China damages its image as a safe partner. A phone announcement in China involving Motorola, Samsung, and China Unicom has now been delayed because of the dispute, and it's not clear when it will be rescheduled. The public story on the delay is that Google demanded it (link), but I'm not sure I believe that. China Unicom is basically owned by the Chinese government, and I wouldn't be surprised if the delay was forced by them as a way to punish Google.
Either way, picture how this must feel to Motorola and Samsung. They have nothing to do with the dispute, but now they're trapped between Google and the Chinese government. That wouldn't be a big deal if we were talking about, say, the Cambodian phone market (no offense, Cambodia), but Samsung and Motorola both view China as a critical growth market. They can't afford to be pushed out of it.
Even aside from the political fears, real economic damage has already been done. Google's actions have delayed the imminent release of some major licensees' devices. Unless you have worked in a handset company, it's hard to understand how utterly unacceptable that is to them. Product launches are planned many months in advance, and are coordinated down to the day. Samsung and Motorola both have phone inventory waiting to be sold. There's cash tied up in that inventory, salespeople can't make their quotas, advertising was probably planned that now has to be rescheduled at additional cost, and so on. Plus, both companies now lose ground to competitors selling other devices. Most phones have a short lifetime anyway, so sales lost now probably can't be made up later. If you were a Motorola employee and you caused that sort of disruption, you'd probably get fired. But Motorola can't fire its OS supplier.
At least not immediately.
Because of problems like this, Google is now talking hopefully about retaining its business unit in China even if it closes down its search engine there (link). That raises the question of why Google threatened to completely pull out of China in the first place. If I were an official in the Chinese government, I'd view this flip-flop as a sign of vulnerability, and would be tempted to systematically go after targets like Android in an effort to put more pressure on Google. But for the moment the government appears to be moving cautiously, perhaps to avoid creating sympathy for Google.
Maybe in a week Google and the Chinese government will have come up with a neat, face-saving resolution to the whole problem. But even in that best-case scenario, Google's image as a supplier to the mobile industry has been damaged. The company has shown that its search business is more important to it (and more top-of-mind) than its mobile OS. Mobile operators outside of China won't care about this, but the handset vendors will. Some of them are based in China, and almost all manufacture there and sell into that market. Who's to say that Google won't end up in another dispute in China in another year? Add in Google's decision to start making its own phones in competition with licensees, and it now looks like a much less reliable OS supplier than it was six months ago.
To a Chinese phone company, relying on Android must now feel extremely uncomfortable. I bet Samsung went ballistic in private; it is completely intolerant of a supplier who's interested in anything other than making Samsung rich. I'd expect Samsung to put more emphasis on its other OS options in the future. And somewhere at Motorola, a harried executive is probably rolling his or her eyes and starting work on evaluating alternative smartphone operating systems, yet again.
The question is what alternative they'd choose. There's speculation that the LiMO alliance may be strengthened (link), and I could picture Chinese officials eventually trying to create a home-grown OS standard, just as they did in 3G (link). But the most straightforward alternative is Symbian, and I suspect it may get a quiet second look in many places -- although for the handset companies, that would feel like fleeing a tiger and a bear in order to hug an anaconda.