Slashdot Mirror
Why the Tablet Market is Really the iPad Market
Hugh Pickens writes writes "James Kendrick writes that after Apple introduced the iPad, companies shifted gears to go after this undiscovered new tablet market but in spite of the number of players in tablets, no company has discovered the magic bullet to knock the iPad off the top of the tablet heap. 'What's happening to the 7-inch tablet market is what happened to the PC market several times. Big name desktop PC OEMs, realizing that consumers didn't care about megahertz and megabytes — yes, that long ago — turned to a price war in order to keep sales buoyant,' writes Adrian Kingsley-Hughes. 'Price becomes the differentiating factor, and this in turns competition into a race to the bottom.' Historically, when a race to the bottom is dictated by the market, it's more a sign of a lack of a market in general. If enough buyers aren't willing to pay enough for a product to make producers a profit, the market is just not sufficient. Price is a metric that most people know and understand because it's nowhere as ethereal or complicated as CPU power or screen resolution. Given a $199 tablet next to another for $299, the $100 difference in the price tag will catch the eye before anything else. But if price is such an important metric, why is the iPad — with its premium price tag — so popular? Simple, it was the first tablet to go mass market, and cumulative sales of around 85 million gives the iPad credibility in the eye on potential buyers. 'So the problem with the Kindle Fire — and the Nexus 7 — is the same problem that's plagued the PC industry. Deep and extreme price cuts give the makers no wriggle room to innovate,' writes Kingsley-Hughes. 'By driving prices down to this level so rapidly, both Amazon and Google have irrevocably harmed the tablet market by creating unrealistic price expectations.'"
Even the cheap Chinese knock-offs aren't really a race to the bottom, though it would be nice if they were more open to updates the way PC OSes are (update issues are really just an Android problem overall). It really comes down to compare the computing power of this tablet against a $500-700 desktop and a $400-600 laptop. The tablet has 1/10 the processing power and capabilities. The tablet further has a slower input system, though touch / multitouch allows unique interaction. Most of that delta is overcome by the portability, battery life, and custom APIs designed to maximize functional value.
All these factors signal to consumer that the devices should in fact be very inexpensive. For each corresponding major component, CPU, RAM, video, LCD, storage, and battery, a tablets parts cost is roughly 1/6-1/2 the same parts in a sub $500 laptop. Again, more signals to informed consumers that the tablet should be a significantly less expensive device.
There has been no race to the bottom in the PC market. It has entirely been a race to provide products which best balance consumer needs. The fact that for 3 out of 5 consumers, price is the highest priority, should only indicate how much consumers desire computing as a commodity market.
Bear in mind that 30 years ago, this was a balance sheet expense few if any were willing to have on their family or individual budget. You can't have wages stagnate for dozens of years at a time and expect consumers to have a pile of cash to spend on new shiny things they got by without just fine a few years ago.
Apple's success has only been in convincing an affluent class with significant disposable income that a limited use consumption toy is worth $500-900 as a status symbol. The fact is we have a large population of people who earn in the upper 25% income range who think they are average everyday middle class. You should hear the stories mortgage lawyers get from people with an income of $200k / yr wanting federal help to refinance their mortgage. There are 28 million homes in the US with incomes over $90k / yr most of whom think they are middle class (upper 25% to which I previously referred). Perhaps in the limited mercantile sense middle class, but they are not the average for the population.
The other issue the other 75% of the US population (and probably what, 90-95% of the world) see with getting into the various tablet ecosystems is the continual pressure to buy various consumption objects. People hate Pay-Per-View on cable, so why would they want it in their tablets. Some products in those ecosystems can be considered semi-durable goods such as e-books, music, and similar. Other are exceptionally limited disposable goods, such as subscriptions to media, and apps which may or may not continue to work and be updated. Unlike the perception surrounding the PC, where most things you put in the storage device are your property (perception, not EULA), the Walled Gardens destroy this retained value. Even on Craigslist, a used laptop with COA and proper licensing for Windows 7, Office 2010 and other software has greater value in the market than one with no software installed. It has been a particular point I have tried to make on several occasions regarding the resale value and lack of first doctrine rights regarding e-books and their pricing relative to physical copies. As I understand it, the EU is working on establishing first doctrine rights across the board for software and downloaded media, consistent with consumer demand for retained value and ownership.
Fierce price competition is not a sign of no market, it is the ultimate sign of informed capitalism.
Usually the people that complain about too many features in phones and stuff, that I see, are either people getting on in their years or, to be frank, not very bright. I'm not impressed by his arguing because I've seen Apple fanboys argue that sdhc expandability is a bad thing because--get this--it's too complicated. I'm no android fanboy--i think Google really dropped the ball with Nexus 7 defects. It's just clear to me that iOS is made for A lower common denominator, technologically speaking. iOS is perfect for, say, teenage girls that get their computers swapped with crapware and 3 million toolbars in their browser but I would expect a little slashdot savvy on Slashdot.