A recent post by DigiTimes says that some mainstream PC manufacturers may be losing interest in tablets, and are instead turning their attention to Ultrabooks. While I believe it is still early, this could be an indication that the tablet market as manifested by the iPad may be going the way of the MP3 player: lots of choice, but one overwhelming platform that dominates it. What would make this different from the PC market, which is dominated by Windows? There are two key differences.
One Is A Platform, The Other Is A Product
The first is that Windows is an operating system, and you can buy it on a wide variety of machines, including desktops, notebooks, netbooks, ultrabooks and servers. You have a choice of hardware implementation and hardware vendor. The iPad, like the iPod, is available from one company, and comes in a very limited number of configurations. Currently, the only options for the iPad are the amount of storage and whether it is 3G or WiFi only. But you can only buy an iPad from Apple. The iPod was (and is) the same way. The first few generations of iPod only varied in terms of how much storage they had. Later, Apple did broaden the line, adding the Nano and Shuffle, and briefly offering a Mini. But with a limited lineup, Apple was able to dominate the MP3 player market, holding 85% of the hard drive-based space and 80% of all MP3 players (hard drive or flash-based).
So, while it is seemingly accurate to say the Microsoft dominates the PC market with Windows, what Microsoft dominates is the PC operating system market. But the software without the hardware is of little use. When it comes to to the PC market, taken holistically, then there isn’t a single vendor that owns an overwhelming share of the customer base. HP, Asus, Acer and Dell are all fighting for top spot, but none of them can claim they own the space. Apple currently dominates the tablet market with the iPad, a single product from a single manufacturer.
Consumer vs. Enterprise Origins
The second big difference is that the iPad, like the iPod before it, started life as a consumer device. The PC, while used in some homes in its earliest forms, initially grew faster as a business machine rather than as a consumer device. During the wild west of PC operating systems of the 1980’s, businesses started to see the value in a PC. It gave smaller companies access to computing power without having to invest in (or buy time on) mainframes. They were more flexible than the dedicated word processors that would also appear at the same time. During this time, the dominant player in computing technology was IBM. Given the natural tendencies for businesses to be conservative, IBM was a logical choice for them. It was safe, secure and a known entity. With IBM’s early dominance in the PC space came the dominance of DOS. When PC’s gained a GUI with Windows, and more consumer-oriented software started to appear, people naturally chose what was familiar: something running Windows. But the real foundation for the PC was laid in the enterprise market, not the consumer market.
It isn’t unusual to see one or two vendors dominate a particular space in the business world: Xerox copiers, IBM and Smith-Corona typewriters, IBM mainframes, AT&T telephone systems, Microsoft Office. Businesses have a habit of coalescing around one or two vendors, and when people change companies, they tend to take those biases with them. It also means that, by picking the same thing everyone else does, you have a better chance of getting someone already trained in that particular technology. That means they might be productive faster.
Consumers, though, aren’t like that. Outside of the iPod, name a product (not a “platform”) that completely dominates it’s particular product space? I’m not talking about the dominance of things like the compact cassette tape, VHS video tape or the DVD. Those are platforms or standards. It makes sense that one will come to dominate a space over time. I’m also not talking about markets in their infancy, but markets that have become stable and mature. Some technologies during their nascent periods (like game consoles) may be dominated by one early, but that doesn’t always hold over the longer term. When it comes to a single product, or a line of products from a single vendor, the pickings are slim.
Prior the iPod, one of the few times a single vendor dominated a market was GM back in the early 1960’s, when they represented more than half of all the cars on the road in North America. But even that didn’t last more than a couple of years. Sony owned a huge piece of the portable tape player market. Some may try to say that Nokia or Motorola dominated cell phone markets (Nokia globally, Motorola in the US), but keep in mind that a large portion of their early sales lead was to business customers, not consumers. Consumer use of cell phones didn’t start to rise until phones and plans came down in price. But when you look at consumer products overall (major appliances like stoves and refrigerators, stereos, TVs, wrist watches, clothing, etc), the number of single brands that overwhelmingly dominate their respective markets is rare, and for those that do, rarely sustained.
Okay, But What About…
There are other tablets out there, and some that have come and gone (or are going). The HP Touchpad came and went before you could blink, and only jumped into 2nd place in the tablet space last quarter because of the fire-sale prices to clear out inventory. The Playbook has been a huge disappointment, whose sales numbers in the past 9 months have yet to match the volume of the iPad 2 in its first week of sales. The various Windows 7 and Android based tablets are putting up a good show, but so far haven’t gained the traction their manufacturers have hoped for. To date, if you’re tablet isn’t an iPad (and unless you are Apple, it won’t be), it has been disappointing. And if the indicators in the Digitimes piece are accurate, then the future for non-iPad tablets does not look good.
A lack of hardware manufacturers could slow the uptake of Android tablets. So far, the biggest player in the Android tablet space has been Samsung, and given Google’s recent purchase of Motorola’s mobile division, these two could be the lone holdouts with any serious clout. There are other promising Android tablets (Sony’s looks interesting), but there is also a lot of junk and cruft that are, in some ways, dragging the brand down.
Android’s biggest hope as a tablet operating system is probably the Amazon Kindle Fire and the B&N Nook. Those, however, are hiding their Android roots, and the Kindle Fire is basically locking itself into the walled garden approach to apps, only supporting apps that are approved and for sale on the Amazon app store. While the fact that these two platforms are good for getting Android out there in volume, it means that they aren’t part of the mainstream Android ecosystem. Developers who want access to the Kindle Fire customers will need to build and package their app for Amazon, and have them approve it prior to release. What also remains to be seen is how many people buy a Kindle Fire “instead of” an iPad rather than “in addition to” an iPad, much like a lot of their current eReader-only Kindle sales. While Q4 sales of the iPad are likely to take a bit of a hit, if they rebound back or past their current volumes, then it would indicate that the Fire is more of an “in addition to” product, rather than “instead of” (which isn’t a problem for Amazon. They don’t care how you consume their content, as long as you consume it).
The other wildcard is Windows 8. Microsoft and it’s supporters claim that it will be a serious contender, in part because it will supposedly bring along the Windows software catalog. That, however, isn’t worth as much as it used to be, and it is up against an app store with a product inventory that rivals the Windows catalog now. A big advantage the iPad has is an app store inventory that is designed and built for a touch interface. Much of the Windows catalog (in fact, almost all of it) is still designed for a mouse-and-keyboard environment. The only major gap on the iPad is Office, but with the current uptake of the iPad into enterprises, it appears that the lack of an Office implementation doesn’t matter. Unfortunately for Windows 8, there is a fair bit of hype that is reminiscent of the Zune and Windows Phone launches: both were going to kill the dominant player in their respective markets. Neither made a dent worth mentioning. The Zune was effectively dead on arrival. The various Windows Phone devices grew to about 2-5% of the smartphone market, and have been mired there for about a year.
Yes, It Is Still Early
While it is tempting to declare “victory” and crown the iPad champion, it is still early. Consider that the tablet market in its current form is only about 2 years old. Yes, there were Windows tablet PCs available back in 2001 and 2002, but those were never a meaningful part of the personal computing landscape, and had almost zero presence in the consumer market. The current tablets, defined by 7″ – 10″ screens, thin profiles and long battery life, are still pretty new to the market, and people are still finding new and interesting ways to use them. As evidenced by the current sales rate, and the sales volume increases over time, tablets are finding a place in the personal computing universe. But where that place settles has yet to be determined. Does it stay viewed as an alternative to the netbook and entry-level laptop? Does it start to displace higher-feature laptops? Does it become the primary computing device for many people, or remain more of a secondary/adjunct/accessory machine? These are questions that will take another year or two to sort out, at least.
In the mean time, it appears that some hardware vendors are going to stick with products that are more in line with their current offerings, and back away from the tablet space. The Ultrabook, as characterized by the MacBook Air and recent ultraslim entries from Acer and ASUS, could be viewed as a tablet alternative. It has some similar characteristics to tablets: very portable and a long(ish) battery life. It has some advantages, since it offers a generally more powerful processor and a hardware keyboard. There are drawbacks, given it is still a clamshell, making it less comfortable to use in some situations. But, the MacBook Air has been selling in significant volumes, and is on its way to becoming Apple’s volume MacOS product. It has been the primary reason for the rise of MacOS in the PC world. This is a space that PC manufacturers are somewhat familiar with, and it may be their way to try to block the rise of the iPad. It fits in their comfort zone.
So, yes it is early, but the current signs and trends are not encouraging for companies that don’t make the iPad. Tablets could very sell shape up to be like the iPod, which means that portable computing manufacturers may have to find other products (like the Ultrabook) to have a presence in this space.