Tablet makers rethinking things in wake of iPad's low price

Competing tablet makers are reevaluating their pricing strategy in the wake of Apple's iPad announcement, according to a rumor in the Digitimes. The article cites the usual unnamed sources in claiming that companies like ASUS and MSI had expected Apple's iPad to debut at $1,000, and were planning to undercut that price by 20 to 30 percent with their own, presumably Android-based offerings. But with the iPad base model coming in at $499—the price of a decent netbook—the companies are now going to have to compete on something besides price.

Assuming this rumor is true, and it seems completely plausible, then it confirms what a major shift in strategy the iPad is for Apple's business. Apple jealously guards its fat margins, but those margins are almost certainly taking a major hit to get the base model iPad out the door at this price point. This sacrifice is an acknowledgment by Apple that it has to go out and create a market for a device that people don't yet know they need.

The iPad's price is also another sign of just how massive an impact that the netbook has had on the business of computing. If Apple is sacrificing profits to make the iPad an alternative to the netbook as a second or third computer for mass-market use, then Apple can join Intel, Dell, HP, and other PC vendors in the list of companies that have seen their margins suffer due to the netbook's popularity.

How did they get the price so cheap?
The inevitable teardowns haven't been done yet, but even now it's hard to see how Apple will make much, if any, money on the $499 model. This being the case, it's worth considering how the company can afford to launch at this price point.

The first trick that Apple used to keep the cost down is that, as many have pointed out, the iPad left out some key hardware features and will instead charge users a nice markup on accessories designed to give those features back. Specifically, the lack of built-in USB ports and SD card support saved a few dollars per unit, and for a unit that will eventually sell in the tens and possibly of millions, that's real money. And Apple makes even more money if it can sell tens of millions of plastic USB and SD card adapters at a hefty profit.

Apple's second technique for mitigating the impact of that low price is the classic up-sell. The company is charging considerably more for the 3G and/or more storage, with the result that buyers of the higher-end models are pitching in extra money to pay for the low-end model's discount.

Finally, it's likely that Apple sees itself taking a page from the console makers' playbook by making up lost hardware revenues with content sales. Right now, prior to the advent of the HTML5 spec, which will make it much harder for Apple to take a cut of software and content distribution on the platform, Apple can afford to give away the hardware because it's taking a cut of iTunes, App Store, and iBook sales.

As Apple's iPhone OS inevitably begins to lose control of software and content distribution on the iPad to the browser, it's hard to see how it will continue to reduce the price of the device. What seems more likely is that the company will leave its pricing structure largely intact while widening its margins as unit prices decline.

Source: Arstechnica.com

HP gives a few new details on Slate via video

HP last night posted a (rather boring) five-minute video (even the interviewer seems to forget where she is at some points) giving further details about the HP Slate that Steve Ballmer showed off during his keynote at CES 2010. It was first posted on the hpcomputers YouTube channel with the heading "SPECIAL REPORT! The HP Slate." The interviewee is CTO Phil McKinney, who we've seen showing prototypes of HP touch devices before. We've watched the video so that you don't have to (despite its lacking presentation, the details are interesting), but in case you're interested, we've also embedded it below:

The project started five years ago at HP Labs in the UK, germinated by the concept of an e-reader device. HP took its prototypes and put it in the hands of users to get feedback from them. The biggest feedback users gave was that reading was great but they wanted it to do media as well, according to McKinney. As such, HP now believes that consumers are looking for a device that can be used as their "ultimate content consumption experience," McKinney says. It has to be thin and light, somewhere between 4 to 10 inches, and essentially invade the market that is currently dominated by e-readers from Sony and Amazon. Those devices don't have color though, nor can you play back videos, or browse the Internet on them, but McKinney says users want all that in addition to being able to read magazines and books, and that's the problem the slate platform will solve.

When asked, "why now?," McKinney answers that 2010 is "the optimal year for the slate platforms" because now there's "the perfect storm of innovation." There's a convergence of low-cost and low-power processors as well as the touch-aware Windows 7, and that's what will let HP push the slate platform.

"In reality we could have built this device two years ago. We had it ready; we put it on the shelf," McKinney boasts. "[At] that time for us to deliver the device it would have been $1,500, and [it] would have been outrageously expensive. Our target was to get it down to be a mainstream price point, mainstream product, not a niche offering."

So to sum up: you'll be able to get it some time in 2010, it will cost you less than $1,500, and it will run Windows 7.

Source: Arstechnica.com

Why Amazon won't launch its own tablet, but will use Apple's

The Kindle game is up, and Amazon knows it. In 2010, the world plus dog will be hawking an E-Ink-based e-reader, and major distribution and publishing houses like Barnes & Noble, Google, and Hearst will be offering their digital content on everything with a screen. That's why Amazon gave up some royalty money to e-book publishers on Wednesday, and announced a SDK and app store for the Kindle on Thursday.

The former move makes the Kindle Store more attractive to publishers, who will soon have plenty of options for putting their content on e-readers, E-Ink or otherwise. And the latter move will keep the Kindle e-reader fresh and attractive long after Amazon joins Apple at Wednesday's iSlate launch to announce that the Kindle Store is coming to Apple's new tablet, and to every other smartphone and tablet on the market. Forget about Amazon launching its own tablet—this year, the Kindle Store will be everywhere.

The Kindle hardware gets an SDK and a fighting chance

"Amazon announced that it is inviting software developers to build and upload active content that will be available in the Kindle Store later this year," the company said in a press release on Thursday. "The new Kindle Development Kit gives developers access to programming interfaces, tools and documentation to build active content for Kindle."

As examples of "active content," Amazon mentions word games, restaurant guides, and puzzles. EA Mobile, the division of Electronic Arts that does games for smartphones, is jumping on-board, but it's not clear what they have in mind for the platform. ("You're in a maze of twisty passages, all alike"?)

The fact that EA Mobile is involved has led some to speculate that Amazon will announce a non-E-Ink-based, tablet-style device that can accomodate video and will compete with Apple's upcoming iSlate. Specifically, the WSJ report on the announcement includes speculation from a Forrester analyst that Amazon is readying an iSlate competitor.

This is extremely unlikely for two reasons: 1) an Amazon-branded media tablet would be just one of a number of Wi-Fi-only tablets that are launching this year, and 2) Barnes & Noble's e-book store will be on everything with a screen by the end of the year, so Amazon will end up following suit by rolling out the Kindle store to all of the aforementioned tablets, including Apple's iSlate.

But before I elaborate, let's be clear on one thing: the Kindle Developer Kit announcement is quite explicit that Amazon is planning app store for the existing Kindle:

The Kindle Development Kit enables developers to build active content that leverages Kindle's unique combination of seamless and invisible 3G wireless delivery over Amazon Whispernet, high-resolution electronic paper display that looks and reads like real paper, and long battery life of seven days with wireless activated.

So at some point soon, the Kindle will get apps that are designed specifically for the existing, E-Ink-based hardware.

And the Kindle is just the first such E-Ink device to get an app store. There will be others, because the hardware race that's going on in e-reader application processors will ensure that there's plenty of computing horsepower to push the software on these devices quite a bit further.

An Amazon tablet would be a me-too, Wi-Fi-only device

Before talking about why Amazon will launch and iSlate Kindle Store, let's talk about why they won't put out a competing tablet of their own.

When the Kindle launched, a huge part of its success was that you don't have to sign a wireless service contract with it. Whispernet's bandwidth is pre-paid and all-you-can-eat.

This pricing model will continue to work on the current Kindle even after it gets an app store, because the E-Ink display's combination of low resolution and glacial refresh rate ensures that the bandwidth load that any app can put on Whispernet will remain very low. Sprint and Amazon have no worries that Kindle games will suck up Whispernet bandwidth, because the display essentially acts as a giant bandwidth bottleneck. So Whispernet's all-you-can-eat model is safe.

This would not be true of an Amazon-branded tablet. An Amazon media tablet would have to either rely on Wi-Fi, or come with a more traditional 3G service bundle that would severely limit its appeal. And given that it would be a media device, the price of 3G bandwidth for it would be high.

So, an Amazon tablet would be yet another large-screen, Wi-Fi-based, portable media player, of the type that everyone and their uncle is bringing to market this year. And unless Amazon has a skunkworks tablet OS project that can compete with whatever Apple will put on the iSlate, the company will be stuck using a Linux or Windows flavor, just like all of the other tablet vendors (e.g., HP, Dell, and Lenovo on Windows 7, or any number of Chinese OEMs on Android) who have established hardware brands and way more experience in tweaking existing software to make an integrated device.

The only way to differentiate such an otherwise generic tablet would be for Amazon to make it the exclusive platform for the Kindle Store. The reason that such a thing won't happen brings me to my next point.

B&N and Google Books are on everything, so Amazon will follow

At CES, every random E-Ink reader company had a big sign up advertising that Barnes & Noble and Google Books are available on their platform. Hearst is doing a similar thing with its Skiff project, where the Skiff-branded reader will be but one way to access Skiff content. These media powerhouses will be joined by an army of small, "social publishing" startups like Scribd, FastPencil, Copia, etc., all of whom want their content store to be on as many platforms as possible.

As the company's somewhat rudimentary iPhone Kindle app shows, Amazon will eventually put its Kindle store on everything with a screen. Either that, or Amazon will be left hawking a me-too tablet to a customer base that is migrating to Barnes & Noble and other distributors and publishers. Given that Amazon just bought e-book reader software maker Lexcycle, it's much more likely that the company plans to put the coders to work on bringing the Kindle Store to many different smartphones and tablets that it is that they'll launch their own tablet.

The end result is that this Kindle Developer Kit announcement is way to keep the Kindle hardware fresh and relevant while Amazon pursues opportunities in the media tablet market that will take off this year.

The only way that Amazon doesn't end up on iSlate is if Apple locks them out so that it can have the content market on the device all to itself. That's within the realm of possibility, but Amazon will still put the Kindle Store on competing Windows 7 and Linux tablets, better enabling the latter to compete against Apple.

Ultimately, the Kindle has done its job for Amazon, so it's time to move on. E-Ink is no longer the novelty it once was, and publishers are looking to reach as many devices with their content as possible. Amazon's recent decision to give up more Kindle revenue to publishers is a recognition of the fact that its vise grip on them is now broken. In 2010, publishers have alternatives, and Amazon's Kindle platform, as huge and important as it was, is no longer calling the shots.

Source: Arstechnica.com