Is a 7-inch iPad right for Apple?
The arrival of Google’s Nexus 7 tablet has turned up the heat underneath rumors that Apple will announce its own 7 inch tablet in time for holiday shopping this fall.
A smaller iPad seemed far-fetched. Steve Jobs famously joked against small tablets, insisting that they needed to ship with sandpaper to narrow down the tips of the user’s fingers, so that the buttons would be operable.
Well, that was before the iPad became a monster hit. Other companies want in on this game and they see the iPad’s notebook-scale price and size as Apple’s weak points. Consumers have already reacted strongly to Amazon’s Kindle Fire tablet.
Apple CEO Tim Cook was asked about lower-priced tablets such as the Fire during the company’s first-quarter earnings call this year. Officially, he sees them as limited-function devices that don’t compete with the iPad.
But they do infringe on Apple’s turf. If their functions are limited to movies, music, games, books and magazines — which work just fine in a smaller form factor and benefit from added portability — Apple might see the value in blunting the momentum by providing an more affordable, portable iPad that keeps tablet users buying that content from Apple.
You mustn’t forget, though, that Apple makes its money from hardware sales and not iTunes content. Google and Amazon are the exact opposite. The Fire serves to make the process of buying digital content and tangible goods from Amazon as frictionless as possible. Even so, analysts believe that the company spends about $160 to manufacture each $199 device. Teardowns of the Nexus 7 are preliminary, but Google’s profit appears to be a razor-thin $15, indicating that they’re in this for either market share or in hopes that the device will deliver additional revenue through content sales, or ad delivery.
Apple might get into the scrum, but not before they navigate through a few pieces of internal resistance.
First, they’d only bother with a 7-inch iPad if they knew they could make their usual fat profit margins on every device sold. Inside the Apple campus, “Never get involved in a war about the lowest priced product” has the same cultural resonance as the phrase “don’t stick your tongue into a light socket.” It’s death. They’ll point to the current sagging revenues of once-great PC companies to underscore the point.
If Apple can’t make good money on each unit, it might be just as wise for them to wait and see if the 7-inch Android tablet market implodes on its own. The Fire appears to be profitable, but it isn’t really a tablet. It’s a Kindle at heart. Google, by selling an honest-to-God 7-inch tablet at near-cost, is making it much harder for other companies to jump in and build a thriving, diverse market. They might be stifling the very vibrancy that allowed the current Android handset market to flourish. Without that thriving market, developers won’t feel much incentive to build tailor-made apps for Android tablets . . . and it’s the lack of software that’s left the whole Android tablet market stumbling in circles near the starting line, two years on.
Apple would need to rally developer support for this new 7-inch tablet. They kickstarted the iPad by allowing it to run iPhone apps, which the iPad scaled up 2x to fill the screen. Scaling down existing iPad apps for a 7-inch tablet would technically work (there’s more than enough resolution in a modern 7-inch display) but I seriously doubt Apple would even consider going there. The UI would be way too small. So a whole new category of iOS apps would need to be created.
That’s not such a terribly big problem. For most apps, it’d be a problem of visual redesign rather than one of architectural re-engineering. It’s going to take the developer community some time to get fully tooled up for a new iPad, though. If Apple is actually planning on a fall release, they gave up on an opportunity to introduce the device (or even at least a digital simulation) at their annual developers’ conference last month. There’ve been reports, however, that Apple has ditched its long-standing static paradigm of user interface design and replaced it with a new set of tools that allows a UI to automatically rearrange itself to suit screens of arbitrary size.
Finally, what would Apple call this new tablet? Would they dare to call it an iPad? Naming it the iPad Mini (for example) would send an interesting message to consumers: “This less-expensive device fits in your back pocket. And it can handle all of the same tasks as the pricier one that requires you to carry a big purse wherever you go.”
The obvious Pro: people want the iPad. Stick the word “iPad” on a cheese sandwich and it’ll become the third best-selling tablet computer on the market, albeit a melty one.
Apple could decide to call a 7” tablet an “iPod Touch.” The Touch is currently the “iPhone without any of the phone bits,” popular as a gaming and media device. That name would send the message that this small and pocketable thing is meant for entertainment, not productivity.
Final problem: the $399 iPad 2. I believe Apple’s longterm strategy includes keeping a budget configuration of the previous year’s iPad on the price list at a lower price. Apple could price a 7-inch iPad above a $199 Nexus 7 by successfully pitching their device as a premium product. They still couldn’t price it so high that there was more than a phone or a cable bill’s worth of distance between it and the Nexus, nor between it and last year’s iPad. They could get away with charging $249, but $299 would present issues.
Remember that all of these 7-inch tablets are also competing against $100 Kindle e-ink readers, strangely enough. We might think of iPads as full-fledged computers, but to a great percentage of consumers, the $499 latest-generation iPad is just an overpriced ebook device. Give ’em a book reader with a Facebook app and a color screen and they’re happy to keep the extra $300 in their pockets.
It should come as no surprise to anybody that Apple has already built a 7-inch iPad. The sense or absurdity of a product doesn’t revel itself until it can be poked and prodded and played with for real. Whether Apple would actually bring it to market is a complicated question. To an outsider’s perception, Apple should be eager to own as much of the multitouch “post PC device” market as it possibly can. Consumers have shown interest in affordable, limited 7-inch tablets. A 7-inch iPad would let Apple stick their hands in that till, as well as pour mercury into the water supply of all of the Android devices drinking downstream.
Nonetheless, Apple has $100 billion under its mattress. They don’t need to rush into anything. Also, as quaint as this may sound, a desire to only make truly great products is part of Apple’s cultural makeup.
The challenge Apple faces with such a device is that a 7-inch iPad or iPod Touch would need to compete against the value and the utility and the presence and the legacy of the 10-inch iPad. That’s way more intimidating than trying to sweep away any dirt-cheap Android tablet.