This article is an expansion of Jason Perlow’s arguments from our ZDNet Great Debate: Are $200 Tablets a Game Changer?
In 2010, Apple set off the “Big Bang” for the tablet industry, by introducing the iPad. While the consumer electronics giant did not create the tablet, they created the entire model for which all tablets must have today: an App store as well as cloud-based services to back it up.
However, at an entry point of $500, the iPad (and other full size Android tablets that followed) cannot ever be the “People’s Tablet”.
While cheaper than most desktops and laptops, iPad is still too expensive to stay the market leader. There is still a huge untapped market to fill for people that don’t own a tablet at all and would prefer to spend considerably less money on a digital convergence device.
I see a number of parallels between the evolution of the automotive industry and what is happening now in digital convergence.
In the early 1930s, Germany and the rest of the world was in the midst of a global economic depression — not unlike what the world is going through now. At the time, the automobile industry in that country was largely composed of luxury vehicles, and your average family could never afford such a car.
In 1933, shortly after becoming chancellor of Germany, Adolf Hitler commissioned a state-sponsored program to produce a small automobile that was capable of transporting two adults and two children at 60MPH, and priced at a very affordable 990 Reichmark, about the price of a motorcycle.
At the time, a typical weekly salary in the economically depressed nation was 32 Reichsmark. To finance production, a special savings program was put into place which enabled families to set aside 5RM per week.
Over 330,000 families eventually entered the program. The first cars were produced in 1937-1939, using almost entirely slave labor.
The car, dubbed “Volkswagen“, literally meaning “People’s Car” in German, did not actually see mass production until after 1945, when the war had ended and the country had to rebuild its industrial infrastructure after Hitler’s desire for world domination nearly destroyed his nation and his people.
But for nearly 70 years, up until 2003, the iconic “Beetle” produced by the company and designed by legendary automotive engineer Ferdinand Porsche would become the most mass-produced car model in all of history, with over 21,000,000 coming off assembly lines all over the world, and became a critical component in re-establishing Germany’s industrial economy and transforming into the economic power that exists today.
Amazon’s Kindle Fire, in my opinion, is destined to become the “Volkswagen” of digital convergence devices.
But why now? There were 7″ tablets before, and none of them took to consumers in volume. Not like what we’ve seen with the iPad.
There are a number of reasons why previous rivals to the iPad failed. The most important of all of these being price and overall value. The first 7″ Galaxy Tab and Android Honeycomb Tablets, the BlackBerry PlayBook and the HP TouchPad were all priced way too high after Apple set the bar at $500 for their entry-level model iPad.
Apple had the superior ecosystem for content and Apps as well industry leading design, component integration and build quality that none of these competitors could come even close to matching at the prices they were selling at. When you’re coming in as the underdog, pricing your product at $450-$550 doesn’t make a lot of sense, and I think that resonated with consumers.
And what of Barnes & Noble’s offering, the NOOKTablet?
I concede that NOOKTablet’s increased RAM, larger built-in storage and SD expansion may prove to be useful for a small subset of users.
However, ultimately I believe that based on Amazon’s superior ability to leverage the supply chain, strong partnerships in retail as well as their ability to monetize the ecosystem for a tablet which is being sold for very close to or less than margin will prove the company to be too difficult an adversary for B&N.
Unlike Amazon, B&N lacks the strong app and ecosystem and content cloud with the exception of a comparable e-book library.
While I think the NOOKTablet will have a reasonably sized following, particularly among hackers and tinkerers that will wish to “root” the device and install alternative ROMs on it, ultimately B&N cannot make a business model out of hackers and tinkerers.
Barnes & Noble needs to monetize its platform with a compelling app ecosystem as well as with paid content delivery in order to make up its margins on the device costs, which have to be razor thin.
The Amazon Kindle Fire, however, will be successful for all the reasons the B&N NOOKTablet will have problems.
One could argue that there’s nothing particularly impressive about the Kindle Fire hardware. It’s a pretty pedestrian dual-core, 7″ tablet with a fairly standard 1024×600 IPS screen with no storage expandability, no Bluetooth, no GPS as well as no cameras or other frills that its 10.1″ Android cousins such as the Motorola XOOM or the Samsung Galaxy Tab have.
After all, the B&N NOOKColor even bests it with twice the amount of RAM, double the internal storage and an SD expansion slot.
But let’s put this in perspective. The iPad 2 also is a somewhat lacking piece of hardware if you compare it to something like a 10.1″ Motorola XOOM or a Samsung Galaxy Tab.
It has no expansion whatsoever, it cannot output to standard HDMI ports without an overpriced accessory or AirPlay on an Apple TV (which works only questionably in my experience when viewing HD content).
iPad 2’s cameras are mediocre when compared with competing devices, its Wi-Fi radio is anemic and has about half of the RAM of the competition.
But it still manages to be the most popular tablet around. Why? A fantastic industrial design and excellent marketing, but also largely because of the strength of the App and content ecosystem. And this is why I believe Amazon is going to sell millions upon millions of Kindle Fires in 2012.
[Next: Why Kindle Fire will utterly consume the tablet market]»
