Tablets for Christmas

09Nov12

I remember a Christmas in the late 90s where it seemed like everybody got a mobile phone. This year it’s looking like we’re going to see the tablet equivalent, so I thought I’d do a quick round up of what I’m expecting to see.

The home front

If I include my in-laws then there will be at least three Nexus 7 devices coming for (or before) Christmas. My wife was quite taken by the advertising for the Kindle Fire HD, but when my brother showed her his Nexus 7 she was sold on the Google alternative[1]. I was personally something of a Nexus 7 sceptic when it launched, feeling that the lack of memory and 3G options made it weaker than my existing (original) Galaxy Tab, but both of those issues have now been fixed[2].

For the kids

I got an email from a friend this morning saying he was getting iPad minis for his two daughters (and asking if that made him an Android traitor[3]). This makes sense to me, as iOS still has the lead on games, which is one of the main things that kids use these devices for. I’ve got my own daughter one of the new iPod Touches for exactly the same reason.

Differentiation and market sizing

The iPad has had a good run as the main attraction in the tablet marketplace, but I see this coming to an end. I expect the iOS ecosystem to continue differentiation in two ways:

  1. As a premium product, in the same way that Macs were during the PC era. It’s clear that Apple is still going for a marketing based approach to the devices themselves, with a line up that starts with the iPod Touch, and goes up in size via the iPad Mini to the full size iPad. There’s still big margin in each of these. Google and Amazon on the other hand are going with very thin margins on the devices, so any price differentiation in the line up comes pretty much straight from the bill of materials. This will likely be the area where Apple will continue to differentiate in the long term.
  2. As the preferred gaming platform. Developers in general will go where the numbers are, and whilst iOS has had the lead on sales it’s also been the develop for first platform for games. This is less of an issue for many (older or first time) tablet users who just want to surf the web and read emails and ebooks, but remains a big deal for people that want games, particularly if they’ve already bought a bunch of stuff in the AppStore.

The contrast between the Apple approach and Google/Amazon is on device premium. Apple (at least for now) get to make money on the device and on the rent payer they get in the AppStore, whilst Google and Amazon are clearly willing to give up the device premium to attract rent to their ecosystems. This almost certainly plays out as Android having a major growth spurt into 2013, and it’s then only a matter of time before the balance tilts for gaming etc.

What about Microsoft?

The Surface looks like (yet another) brave try, but the reviews I’m reading suggest that it’s too expensive and the software’s too flaky to justify the price tag. If this really is MS showing their OEMs how it’s supposed to be done then I’m not expecting too much from the rest of the field.

The wider tablet with keyboard category[4] looks to me like a well intentioned attempt to close the gap between tablets and laptops from a functional perspective, but it’s important to look at how people spend their time. If 90% is consumption of content and 9% is curation of  content then that leaves the creation gap at 1%, and 1% does not a healthy market segment make.

Conclusion

This Christmas is going to be the turning point for Android based tablets, and the gaming and enterprise markets will need to react accordingly in the New Year. Apple is going to have a great Christmas too, as they get to double dip by making money on devices as well as content. I fear a bad New Year hangover for MS and anybody getting a product from their stable over the holiday season.

Notes

[1] I had previously suggested that the Nexus 7 might be a better choice than the Kindle Fire HD, but holding one in your hand can make all the difference. In practice the differentiation is less about the devices and more about whether you want a shopping cart from Jeff Bezos or Larry Page parked in front of you.
[2] I use my Galaxy Tab a lot on the train when in the UK, and it’s often my main source of connectivity when I’m in the US (courtesy of the AT&T SIM that came with it) so 3G connectivity is pretty important to me. If I was buying something for myself this Christmas then it would be a 3G version of the Nexus 7. I’m not buying because although the Nexus 7 is all three of better/faster/cheaper the original Galaxy Tab is still perfectly adequate for my needs. There might be some important inferences here for tablet upgrade cycles.
[3] He has been an Android smartphone user since the early days, and more recently got himself an ePad Transformer tablet.
[4] Intel seem to have labelled this ‘Ultrabook Convertible’, though it’s not clear to me that there’s a rigorous base specification for this like there is with the Ultrabook branding. I’ve seen at least 6 different physical approaches illustrated, which suggests to me that nobody has yet figured out what customers actually want.



3 Responses to “Tablets for Christmas”

  1. Hullo mate. Good to meet you yesterday!

    A few thoughts:
    1) I also have an (’10) iPod Touch (aka iPad Nano) for much the same reason – to play games, keep my oar in with the iOS ecosystem and to do my bit to dilute AAPL’s gross margins! :-p
    2) Great to see GOOG finally pushing android tablets to their their price advantage for a spin with the N7 and N10. I do wonder if its damned if the do/don’t though – if they don’t sell they don’t sell. If they do sell they either cannibalise the other android guys or force them to lower prices and hit margin. Volume of course may compensate but on paper that does not a happy ecosystem make! (wonder how much Asus makes on an N7 sold at retail once Dixons has their cut?)
    3) I really think AAPL’s hardware-driven model massively handicaps them in the long term. The only way they can make serious money is device sales (given App Store revs are small and they have no search/ad monitisation engine). This locks them into the premium hardware model and gives them little flexibility vs. eco-system-mongers like Kindle Fire.
    4) Does your daughter read your blog? I hope not!

    PS cheers for the FC thing. I’ve stuck myself down for the event!

    • I’m pretty sure she doesn’t read this (yet), though I may have to be more careful in the not too distant future. The same goes for my wife and mother in law.

  2. 3 Richard Hopkins

    If you’re still keeping tabs on the in-laws, you can chalk up another tablet arriving this Christmas, as I took a trip into the city center on Tuesday night to pick up a 4th gen iPad.

    I’d spent a week or so giving longing sideways looks at a Nexus 10, but in the end it came down to several factors:

    1. What I need right now – I’m working on a project that in the first instance is deploying on iOS devices and didn’t have a tablet to test on. This was really the driving factor, and would probably have been enough even without the comments below.

    2. Content/media licensing deals – Google and amazon haven’t really set out their stalls in Japan yet. Yes, we’ve had Android for a while, but if you want to do something as simple as purchasing an mp3 music track, you can forget it unless you’re going through iTunes. This is especially pertinent at the moment given the draconian new law (up 2 years behind bars) that was introduced here last month to crack down on p2p piracy. Suddenly, paying for music has become a much more attractive option again, at the very least until it becomes clear how strictly it’s going to be enforced. I would predict that even with a concerted effort, we’re looking at a year before either of the two new kids on the block really get themselves in shape to offer the same selection of music, movies, apps, books and other content that Apple already has in place.

    3. Heavy prior investment in the Apple ecosystem – It pains me to think of myself as Tim Cook’s bitch, but I live in a household where we have a Mac Pro, 2 Apple TVs, 2 iPhones and my main laptop is for daily use is a MacBook Pro. This also means I have a great deal of universal apps that don’t need repurchasing. It just doesn’t make sense at the moment to surrender all the interoperability that adding another iOS device will provide, simply to buy into another vendors product that “could be good in about a year from now” (see 2).

    4. The spouse factor – My wife, who previously expressed no interest in tablets (having previous had no interest in smartphones before becoming addicted to her iPhone 4S) has already spent an entire evening sitting playing with it. She’s not particularly tech savvy, but with her existing iOS familiarity it fits the ‘no further instruction required’ criteria nicely.

    5. Raw performance – I was slightly surprised to see the considerable lead over the Nexus 10 that the iPad 4th gen enjoys in early gpu benchmarks. This can only lend weight to your argument of it being the gaming device of choice. Something I still enjoy from time to time. (http://www.anandtech.com/show/6426/ipad-4-gpu-performance-analyzed-powervr-sgx-554mp4-under-the-hood)

    I agree with your general view that Apple are slowly losing their dominance, but until things change here in Japan, they’re still the rational choice if your budget is flexible enough. By the time I come to upgrade in the future though, things might be different.


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