iPad mini = iPod Nano. It’ s mp3 players all over again. With Android as no-name alternative and Microsoft Surface Zune

Staska  By on 24 Oct 12

Looking at the evolution of things in tablet market, it is amazing how similar they are to the development of mp3 player/digital music market.

Apple wasn’t the first to invent an mp3 player. It only was the first one to understand what digital/portable music is about. Putting a huge chunk of your music library on the device to always have it with you. Great user interface for “navigating content” – finding and playing any song you own and getting rid of complicated stuff. With enough battery life to last you a day. And with easy and cheap way to buy any song you want.

Hence came the iTunes and iPod, and Apple ran away with digital music market. Both in devices and services.

After mp3 player market, largely created by iPod, exploded, there came the countless competitors trying improve on it. There were cheaper mp3 players, there were more functional mp3 players. Some had bigger hard drives, some used flash memory. Some came with FM radios, others added video playback. Big player, a household name in consumer electronics, the inventor of a portable music player concept with its own music/entertainment empire –Sony – got involved. Then PC software juggernaut – Microsoft – came out with Zune. They never made a dent.

More than a decade after its creation, iPod still dominates digital music player market and iTunes is the biggest music store in U.S. All through that time Apple was calmly watching its competitors fight for scraps with array of useful and not so useful features and technologies to improve on iPod. And when the right technology and market demand got there – Apple came out with iPod version of its own, and brought all competitor efforts to naught. iPod Nano, video iPod, iPod Shuffle, iPod Touch…

Some may say it was Apple losing its innovator chops, and following competitors instead of creating new markets, as they do now with iPad mini. But all I see is the company with enough confidence in itself not to pay much attention to market noise and knee jerk competitor moves. With enough self-awareness to understand that it may never be able to go after every nook and cranny of the marketplace. And not to care about it. Being sure enough to take its time, to find a way to leave rivals in the dust where it matters most to Apple and its customers.

And here we go again with tablets and iPad mini.

Apple didn’t invent a tablet. Microsoft was there a decade before. Nokia 770 Maemo based Internet tablet came out in 2005. One of the first Android tablets – Archos 5 – was announced months before iPad.

And yet, it was Apple who finally figured out what the tablet computing is all about, and ran away with the market. With interface just right for the user needs – like on iPod. And with ecosystem/content offering in the form of App Store. A service much more defensible than iTunes were in 2001, and which no rival will be able to best anytime soon.

It’s been 2.5 years since the first iPad shipped. Apple sold more than 100 million of them already. With much more formidable and determined competitors than anything iPod faced in its first three years of existence. Yet, we are still waiting for any competitor to make a dent in iPad’s dominance. Google has been trying it with Honeycomb, ICS, Jelly Bean, myriads of OEMs and now Nexus 7, without much luck. Amazon has a bunch of low-priced Kindle Fires lined-up, moved a few million of them, never really mattered to anyone except Google. Microsoft is coming out with its Zune like effort called Surface…

And Apple comes out with an iPad mini and update to iPad 3, kneecapping all the competitor efforts before they even get underway. Who cares how cheap Amazon Kindles are, or how low Google brings Nexus 7 price down next week? iPad mini at $329 is an answer to at least 50% of potential customers who were looking for cheaper and more portable  tablet. And, with 4th generation iPad – Apple just made all Google’s upcoming tablet spec and performance gain claims sound like a joke. With Microsoft Surface looking nowhere near as good as it looked just yesterday.

Are all high-tech device markets where Apple decides to play hard are gonna end up this way? It certainly looks so, today.

We may have been fooled by rapid Android gains in smartphones. But that was a very special case. There really is no true competition in a huge and most lucrative part of mobile phone/smartphone market. It is controlled only by a handful of carriers. Who, much more often than not, decide who will win and who will fail. And hardly anywhere that market power is as strong as in the U.S., where you don’t get an option for a cheaper post paid plan, even if you pay a full price for a device elsewhere.

Apple is an exception to that rule. They created a truly revolutionary highly desirable device in iPhone, that hardly any carrier could refuse to have and subsidize. And when, because of exclusivity contracts, those carriers that didn’t have one, started bleeding best customers to those who had iPhone – they had to create an alternative. And Google was very lucky to have it, at the right time. With a huge kickstart from carriers they’ve first got a foothold, and now are where they are.

Apple is also not without fault here, be it due to carrier subsidies, or limited manufacturing capacities in early iPhone days, I have no idea. But they’ve got a really lucrative business arrangement in smartphones. The one with huge margins, and which, in just 5 years, accounts for half of their profits. And they do not seem to be ready to step up their game, for now.

But the last 2 other (truly free and competitive ) markets Apple went for show, that they can be much more nimble and fast than anyone else. In fact – in those markets created by Apple and were they really play hardball, with no impediments – no one’s even able to touch them for years.

So no matter what Microsoft gains, or what Google or Amazon does, I’m pretty sure we will still be talking about 50% iPad market share in 2015.

[Update: My collegue Hillel Fuld strongly disagrees with me about iPad mini and thinks that it was a very stupid thing to do. Check out his post here: Apple iPad Mini: We’re Desperate and We Know it ]

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  • Stocklone

    Everybody else remember when all the tablets were running a unique proprietary OS? Or when Google and Amazon weren’t involved at all? Or when the Surface had 7 apps total and shared no commonalities with any other Microsoft devices? Yeah, me either. This is article is a huge stretch.

  • http://www.staska.net Staska

    This article is an opinion and a forecast.

    Maybe even a stretch. Except for that fact that for about two years all other forecasts, proclaiming rapid demise of iPad dominance (there were plenty of them) were dead wrong.

    iPad has been around for about 30 months now.

    Google has been heavily involved with tablets for 20-24 months. Depending of whether you consider the first Samsung Galaxy Tab (official Android device) or the first Honeycomb tablet as a start. They were supposed to start destroying iPads market share within a year. Didn’t happen.

    Nexus 7 has now been shipping for more than 3 months. There’s little to no evidence that its sales are strong. Confirmed indirectly by Google’s silence about NX7 sales during earnings CC last week. If rumors that Google will lower NX7 prices further on Oct. 29th are correct – this will be further confirmation of poor sales.

    There’s also no evidence that Kindle Fire was able to sustain sales momentum beyond the first Christmas quarter after launch.

    None of them were able to dent iPad’s market share in all this time. (Google for almost two years now, Amazon for a year). Oh, and, Blackberry Playbook? . HP Touchpad? Those were supposed to be iPad killers too.

    Microsoft? They talk a good game and they have their PC Windows near monopoly. So what? There’s still a big open question how much legacy Windows will help with Metro style apps. Tons of assumptions and projections, with little evidence to support them.

    Looking at iPad’s competitive landscape, what’s so different now from a year ago?

    We have two competitors with a record of failure (GOOG, AMZN) giving it another try.

    And we have one more competitor (MSFT) with oodles of cash, a record of failure of going against Apple in music/devices, a decade of failures in consumer internet services (MSN, search), a decade of failures in smartphones (Windows Mobile, Windows Phone). And one tentative 21st century success – Xbox. Also giving it another try of going against Apple in a new/emerging market Apple currently owns with a vastly superior ecosystem.

    And we now have Apple matching the only form factor competition was able to come up with (7″) to create the first miniscule foothold in tablet market. And we have Apple seemingly doubling the rate of development in a much more popular, lucrative and important 10″ tablet market (iPad 3->4).

    Apple’s chances of keeping iPad dominance for the next few years look pretty good to me.

  • Nicko

    @Stocklone:disqus BURN!!!!!!

  • Stocklone

    2010, Apple owned 85% of the marketshare. They dropped to 50%. You can spin that as a victory if you like. I don’t mind.

    You say their is no evidence of Amazon or Google doing well, then where exactly did that 35% go to? Did it magically vanish into thin air? Sucked into a black hole? Fall down a well?

    Really? Honeycomb is relevant to this discussion how? A rushed product that Matias had to cut corners everywhere to launch on time with an incredibly overpriced Xoom. With JB you are really starting to see the impact of having an absolutely brilliant designer in charge of Android. It is only going to get more and more refined in the future under his direction. It’s not an accident that that JB is as good as it is. It’s not an accident that Google now has well defined design standards that companies are embracing. This has to be scary as hell for Apple.

    Feel free to bring up Android not having enough tablet optimized apps. I will absolutely agree with you. It’s incredibly annoying using a phone optimized app on a 10″ screen. I’m hoping design standards will clear this mess up but it was an absolute mistake for Google to be so nonchalant in the beginning. Like I said, they have a mess to clean up.

    MS is completely unknown at this point because of the high pricing. But they will give it a much bigger push and better support than the Zune.
    If Apple released a $250 iPad Mini I would say everyone else is screwed. They might as well pack up shop. A $330 tablet does nothing but give Apple users an excuse to buy another tablet cause they are tired of holding their heavy iPad and wouldn’t be caught dead with Android. People who were looking at the $199 tablets are still looking at the $199 tablets.

  • Mark Ranson

    1) iPads are great products and wonderfully marketed
    2) After reinventing the tablet market and dominating it market share is plumeting and now below 50%, especially in Europe.
    3) The fact that they chose to use the LAST GENERATION iPad processor and screen and yet still charge $329+ is in keeping with their “fleece the customer” strategy for max profit which is why share price is so high.
    4) Unless they innovate to something very new in the next 2 years I see them becaoming an also ran much like the Apple desktop and laptops which never broke 10% share worldwide.

    Great product just WAY overpriced and a continuing example of the corporate greed here in the US that caused much of the recession we are in.

  • http://www.staska.net Staska

    iPad market share dropped to 50% Where did you get those numbers? Last I checked, big analyst house consensus for Q2 2012 – the latest numbers available so far, iPad marketshare was at or near 70%.

    According to iSupply: http://bgr.com/2012/08/14/ipad-market-share-all-time-high/

    IDC: http://techcrunch.com/2012/08/02/idc-apples-ipad-grew-q2-tablet-share-to-68-as-it-braces-for-windows-8-amazon-and-nexus-competition/

    Strategy Analytics: http://www.engadget.com/2012/07/25/strategy-analytics-ipad-keeps-riding-high-in-q2-tablet-market/

    And that 85% marketshare on a total of ~5 million tablets shipped in 2010 is no benchmark. Of course it will come down gradually a some certain lower level. My argument in this article was was that Apple will keep at least 50% iPad marketshare at least until 2015. 15% drop in 2.5 previous years figures quite nicely in this thesis.

    As for bringing up Honeycomb – of course its relevant for this discussion. Looking back is always 20/20 and things seem obvious. And, looking back – there’s always an excuse why Android failed in tablets so far. Honeycomb was not ready. ICS was not polished enough. I wonder what will we be saying about Jelly Bean this time next year.

    Because looking forward – the next version is always the one that will fix Android and will make tablet sales explode. Just go back and read fan posts, analysis and even Google’s own spin. It’s the same every time, they always need an excuse afterwards, and they always have a shiny new version just below the horizon, that will fix things. Because this time it’s really different… This time we almost finished cleaning the mess up…

  • http://www.staska.net Staska

    Where the heck are you getting that “plummeting marketshare” 50% number? iPad’s marketshare was at or near 70% in Q2 2012. Read my reply to Stocklone for links to the data. Or just Google it

  • Stocklone

    “the next version is always the one that will fix Android and will make tablet sales explode” – never Android was going to explode. I never even said it was going to be like the phone market. I said it’s not going to be a repeat of the mp3 market. It’s going to land somewhere between the phone market and mp3 market. I’ve been saying that since the Xoom was shown off in January of 2011. Not that hard to figure out.

    http://www.engadget.com/2012/10/02/pew-research-center-tablet-ownership-report/

    And there’s your link you couldn’t look up yourself for whatever reason. 52%. I guess I exaggerated a little bit.

    I’m sorry you don’t have as much faith in Matias as I do. The man is a genius and will be the main reason Android stays successful instead of bursting into flames. Android has finally hit a refinement mode and is done with the reinvent mode it’s been stuck on since day 1. I’m not sure sure why you can’t see this but you are entitled to your opinion.

    “Just go back and read fan posts, analysis and even Google’s own spin. It’s the same every time, they always need an excuse afterwards, and they always have a shiny new version just below the horizon, that will fix things.”

    I could not agree more with this statement. I have gone back and looked at old posts. And it is laughable what people were defending back then. GB menu system is horrible. And I am sick and tired of this crap of we’ll fix it in the next version. Been dealing with NVAS (next version of android syndrome) since 2009. Incredibly aggravating. And I was all set to leave Android behind for WP8 or BB10. At one point I even stopped recommending Android phones. I’ve actually gotten into several arguments with Android fanboys. Hell, I’ve even defended the freaking iPhone because Google’s app data backup is crap compared to what Apple is doing with iCloud. Any fanDroid that says doing a binary backup to your sd card after hacking your bootloader is ok for the average consumer is utterly f*****g clueless. I made my sister buy an iPhone 4S in the spring. I even paid for her AppleCare out of my own pocket. Perfect phone for her. I won’t let her buy anything else but Apple in the future. But JB has completely restored my faith in Google. I’m not in some far off fantasy land here. I’m far from being a fanboy. There will be no repeat of the mp3 market. That time has come and gone and it won’t happen again.

    If you want to reply a year from now and say I told you so, feel free. I look forward to it.

    Also, if you find out the 52% is absolutely incorrect. I would like to know that too. I would hate to be spreading false data around.

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