- Between them, Apple and Amazon have defined the tablet market with two completely different business models.
- Apple sells the content at 0% margin in order to make money on the hardware while Amazon sells the device at 0% gross margin (I believe) in order to make money on the content.
- This has created a market with all the volume at the high end or at the low end and very little in the middle.
- Android’s relatively puny depredations (outside Amazon) upon this market have had no real impact and unless something radical happens are likely to disappear altogether as handset makers realise the futility of trying to compete with no real content.
- I see Microsoft coming in over the top with devices that are far more functional than an iPad (Windows 8 is a proper OS) and thereby justifying the premium that will be charged for those devices.
- The advent of the iPad mini is likely to throw a spanner in the works and disrupt the fragile status quo that has descended upon the market in recent months.
- The rumour mill has the device with a 7 inch (retina presumably) screen but everything will depend on price.
- Estimates have a 7” WiFi-enabled, 16GB iPad Mini at $299 which would still leave Apple with fat margins.
- This compares with the Nexus 7 at $159 and the Kindle Fire HD at $199 and the regular version at $159.
- The Nexus 7 offers very little when compared to these two as there is no decent integrated, easy to use content offering unlike both Apple and Amazon.
- Hence, in my considerations, I relegate the Nexus 7 to an irrelevance.
- The big question is what will the iPad mini do to the fledging Amazon experience?
- A lot will depend on Amazon’s response but my gut says that the Amazon tablet experience is not yet well enough rooted in the hearts and minds of the users to offer much defence.
- Consequently the only real defence it is likely to have is price, as the equivalent specification is still likely to be $100 or some 33% below that of Apple.
- Apple is unlikely to be able to go much below that price without hurting its gross margins but at the same time, the brand and desirability of Apple is compelling. It may not need to.
- I think that the vast majority of the users in that price bracket have yet to decide which system to go for and a $299 price tag, the App Store and iTunes might just tip the balance in Apple’s favour
- Windows on Arm will be too late into this price bracket to have an impact (if it ever gets there) and as such I can see a repeat of what happened with iPod happening in the tablet market.
- The biggest long-term loser will be Amazon who could see its incursion into the portable eco-system war crushed before it really gets off the ground.
- That is likely to take some of the lustre off its chunky PER ratio.
Tech Newsround – GOOG, MSF ...
26 April 2024