Why the tablet isn’t a sure thing

David Braue
21 January, 2010
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Like everybody, I’ve been eager to see whether Apple gives in to the pressure of the world’s expectations and actually releases its tablet device next week, or whether it tricks us all by announcing nothing more than a few software upgrades and giving a knowing wink that says “stay tuned”.

Since that probably wouldn’t go over too well with the punters (or the analysts, who have been whipped into an equally fierce frenzy by all of this excitement) let us for a moment accept that the iNote, iTab or whatever is set to be launched on January 27th and we all go dizzy with excitement, as per usual. Heck, a Cult of Mac survey has found one-fifth of respondents will buy the tablet sight-unseen, and 59% more are likely to buy it pending pricing or other details.

Buying the tablet and using it, however, are two different things. Once the initial excitement dies down, however, the product is going to face some very significant obstacles – significant enough that I’d go out on a limb to say that the success of the device, which has whipped up more hype than anything since the iPhone’s release three years ago, is far from guaranteed. Not that it’s going to be a failure mind you, but that hype-driven estimates such as those suggesting the device could sell 10 million units in its first year sound a bit rich, on the balance.

Sure, the device is certain to be cool – but with pricing speculated to sit near the $1000 mark, it’s not exactly going to be sitting in cheap-as-chips territory. Apple’s tablet has clearly been designed as a detour around the threat posed by low-cost netbooks, which threatened to erode its profit margins.

However, one of the really nice things about Amazon’s Kindle, which remains the e-reader to beat, is that it has been priced below that magic sub-$300 psychological barrier, where it is no longer seen as a luxury item and is instead seen as an appropriate gift, even for one’s mother. Laugh if you want, but this sort of consideration plays big with mass-market shoppers.

Apple may well lower this cost through some creative packaging – using iPhone-like contracts to offer the device free in exchange for a long-term commitment. It may also tap into the advertising software into which it has invested not-insignificant money over the past year, generating advertising revenues for content providers to offset license costs and provide a sort of subsidy for the devices themselves.

Whatever it does, Apple is going to have to get the pricing right or risk leaving its new baby languishing in the too-expensive purgatory that has eroded the mass-market credentials of otherwise-worthwhile products like the Segway and the Mac Pro.

The really big question mark in this equation is content. While the tablet may provide more than enough capabilities in terms of displaying both digital and paper-equivalent content, if it’s just an interactive Web browser it’s going to die a horrible and quick death: there are already too many ways to browse the Web already. For the iTablet to succeed, it’s going to require a sustainable differentiator.

Book publishing is the most obvious example, and one that has enjoyed some success on the Kindle already. Book publishers would, seemingly, relish the easier distribution of a digital target platform that is in widespread-enough use to justify ceding some of their traditional control over distribution. But will they? After all, publishers have been among those attacking Google over its plans to digitise America’s libraries; they’re not exactly falling over themselves to join the digital age, so much as being dragged into it by Google’s inevitability.

For smaller publishers, or independent authors, the iSlate could be a Godsend because it will enable distribution of their works through a new channel that will let them reach untold millions without having to deal with a real dead-tree publisher. Ditto independent magazine publishers, or even major publishers seeking a new structure for the massive volumes of intellectual property contained in their archives and the heads of their writers.

Since it already has the distribution mechanism in place, all Apple has to do is work out the licensing terms with its publishing partners – and, in the case of Australian customers, make sure these rights have parallels that don’t ensure we and the other 6.3 billion potential non-US customers of the device don’t end up with a pale imitation of the full US store, as with HD content through the iTunes Store.

Perhaps the biggest problem here, however, is that for once Apple is not defining a new category of product: e-books have been around for years, and even though they have been a bit kludgy to buy and use, they have their charms. Amazon perfected the always-connected downloadable model that Apple is certain to transfer to 3G in its new device, but unlike what it did with the iPod and iPhone, Apple isn’t necessarily creating a new product category; much of the tablet’s inbuilt customer base has probably already bought one e-reader. This means Apple will need to differentiate from the Kindle, and in meaningful ways rather than simply being a Kindle-plus, to really realise its potential.

The tablet may seem like a natural target for upselling by Apple, but they’re going to need some convincing to part with their hard-earned on a second dedicated device. Although some suspect we’re being slowly weaned off of physical keyboards, for now the tablet is such a break with computing convention that it’s hard to imagine it giving conventional notebooks a run for its money; as a content reader, its success or failure will be determined by Apple’s ability to be an advocate for its customers’ content desires – and, by extension, its ability to drag publishers to the table and extract favourable licensing terms from them.

Without these deals, the tablet, no matter how gorgeous, risks a slide into niche irrelevance: it is, after all, competing with the iPhone rather than the MacBook Pro. Fanboys will buy the tablet by the thousands, but Apple is in the atypical position of having to beat expectations rather than creating them where there were none. That Steve Jobs will have a well-refined spiel ready on the 27th, I have no doubt; that the device will sell quickly and well, I also accept. But in the long term, proof of its relevance truly will be in the pudding.

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