One of the easiest ways to embarrass yourself online is by making predictions for the record about an unannounced product. You're layering risk on top of risk -- not only might your predictions be wrong, but the information you're basing them on might be wrong as well.
But it's fun so I'm going to do it anyway.
Assuming that Apple actually announces a tablet product on Wednesday, here are four things to watch for...
What does it do, and who is it for? Aside from being cool, the tablet will need to solve some real-world problems for normal people if it's going to be accepted. In my opinion, there are two potential markets for a tablet, based on market research I've done in the past. One market is as an entertainment/browsing/content device, and one is as a business information-management tool (an info pad, a subject I wrote about http://bpcyclingteam.blogspot.com /2006/05/desperately-seeking-info-pad.html">here).
The worst thing Apple could do is try to target both markets with one device, in my opinion. The customers are not compatible, and they need a different mix of features. You could end up with a tweener that doesn't really delight any one group (can you say Palm Pre?)
Based on press reports, and friends who have links to Apple, it looks like they're going for the entertainment market. I think that's wise -- it's a natural fit with Apple's relatively young, creative image. It also leverages the infrastructure Apple has already created for the iPod.
Watch the infrastructure. Another problem Apple could solve is a major malfunction in the market for content products (magazines, books, short stories, video, etc). Content creators today have a couple of choices -- give their stuff away online, or pump their materials through a traditional distribution system that absorbs 85% or more of the revenue on overhead, distribution, printing costs, mailing, etc. Either way, creators often get shockingly little reward for their hard work.
What creators need is a system that will let them bypass the current distribution system entirely, selling directly to consumers and pocketing most of the revenue themselves. They could actually charge less money per copy, sell in smaller quantities, and still make more profit.
Apple could create that billing and distribution system. Or it could create a system that attempts to reinforce the power of today's content middlemen. The key question will be how easy it is for a content creator to sell something through Apple directly, and how big their revenue cut is. If Apple shares 70% or more of revenue, and lets anyone create their own content, the floodgates will begin to open.
This could have an enormous impact on the content industries. Ultimately it would give much more power to content creators, at the expense of publishers and other middlemen. And it would enable consumers to get a wider variety of entertainment and information than they can today. (I wrote about some of the possibilities http://bpcyclingteam.blogspot.com /2006/05/removing-middleman-part-3-books.html">here. That article is old now, but the situation has barely changed in the meantime.)
So, even though I am intensely interested in the Apple tablet's technology, I am even more interested in the business model around it. That's where the real revolution could happen, in my opinion.
Ignore the first 100 days' sales. A company of Apple's stature is almost always able to drive significant sales in the first three months of availability, especially when creating a new category product. There are enough fans and early adopters to virtually guarantee a sales spike early on. The big question is what happens after the enthusiasts have bought.
Remember, the original Macintosh 128 was quickly snapped up by about 70,000 drooling enthusiasts (including me!). We bought even though the computer had ridiculously little memory and almost no software. Picture a word processor that can't create a document longer than 10 pages. I paid $2,500 for that! After the first three months, Mac sales flattened, and didn't recover until Apple fixed the shortcomings of the product.
So I expect a sales explosion in the first three months. In fact, if there isn't one, the product is in deep trouble (see Apple TV). But even if it sells out at first, that doesn't mean much until we see at least six months of sales data. Preferably nine.
Price is a huge unknown. Here's the story I heard from my Apple alumni friends: There is a gap in Apple's product line. Apple has the iPhone and iPod Touch at around $300, and it has the iMac and MacBook at about $1,000. It needs something in the middle, and the tablet is expected to fill that gap.
The price point I heard from my friends was about $600. Lately the price rumors have gone higher, and I don't know what to think about that. Could be true, could be wrong, could be Apple leaking a fake price so they could "surprise" people with something lower. All I know is that at $1,000 they are in conflict with the low-end Macs, and at $300 they are in conflict with the iPhone, and my friends are adamant that they won't do either.
But even if the price is around $600, I think there is a problem: In all the market research I've done on mobile devices, the latent demand for a tablet device is centered at prices of $199-$399. You can skim a very small percent of the users at $499, but even that is a stretch. A price of $600 or higher is way beyond the comfort zone of most potential customers for a tablet, no matter how great the device is.
It scares me on Apple's behalf. You can get into deep trouble when you design a product around your business needs rather than the customer's feature needs. You start rationalizing things: "We know we ought to sell it for $300, but that doesn't work for us, so we add a bunch of extra features that ought to be worth $300 more, and we plan a big marketing campaign, and we convince ourselves that the product is so special that people will feel compelled to open up their wallets. It's just a couple hundred dollars more, after all..."
Nonsense. Some products have natural price points, and it's very hard to change them. Great marketing and great features get you a 10-20% premium, not 100%.
So watch the price on Wednesday. If it's in the $300-400 range, I am very comfortable with Apple's chances. If it's over $600, I will be very interested to see what special magic Apple has put into the product. I think they'd need features on the order of burning bushes and loaves-and-fishes in order to sustain a price of $600 or more in the long run.
But for the record, I'd be delighted to have Apple prove me wrong.
Reckless speculation about the Apple tablet
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