An Integrated Hardware/Software Approach

Over the last few weeks both Google (see Nexus Tablet and Nexus Q) and Microsoft (see Surface) have announced major hardware initiatives.  In both cases, these hardware initiatives have been primarily focused on the mobile/tablet ecosystem.  Even Microsoft’s recent software announcement – Microsoft SmartGlass – is targeting the growing tablet ecosystem.  Both companies are taking a more hands-on approach to the growing tablet ecosystem as they seek to more closely integrate their software strategy with a hardware component.  These moves are partly in the hopes that a hardware component will spur software demand and help buoy their entire platforms respectively.…

Tablet and eReader Ownership – How to Read Apple’s Numbers

Later today, Apple will report Q1 figures.  We know much has changed in the tablet market over the last three months.  Earlier this week, Pew Research Center’s Internet & American Life Project reported tablet and eReader ownership (unsurprisingly) surged during the 2011 holiday season.

This is consistent with what I expected (and subsequently reported) following Black Friday and the (unofficial) start of the holidays. Starting with Black Friday (but really through the entire holiday season) several things too place to help drive tablet sales.  First, prices came down significantly.  Prices for many of the “high-end” tablets were marked down significantly and lower priced tablets entered the market in calendar Q4.  A declining price helps up-take.  Secondly, both devices have been in the marketplace for 18+ months and are moving quickly into mass market appeal.  We are moving into the fat part of the adoption curve.  Finally, tablets were the loss-leader for many retailers on Black Friday.  While the volume wasn’t high on a single-store basis, in aggregate there were a plethora of tablets (from a variety of OEMs) bought during the weekend across a myriad of retailers from Best Buy to Big Lots to Radio Shack to Staples, to ToysRUs.  CEA estimates 14 percent of those who purchased tech over the weekend bought a tablet – up from six percent in 2010. eReaders also did well over the weekend with an estimated 15 percent of tech shoppers buying an eReader.  This figure is up from 13 percent in 2010 and two percent during the 2009 Black Friday weekend.

According to Pew, both tablets and eReaders are now owned by about roughly 1/5 of the US population.  More than a third of those living in households earning more than $75,000 (36%) now own a tablet computer and almost a third of those with college educations or higher (31%) own tablets.…

BBY, Connected TVs, and the Innovator’s Dilemma in Action

BestBuy recently announced they would launch a connected TV under the Insignia brand using the Tivo user interface.  This is a great example of the Innovator’s Dilemma in action. The Insignia brand is one of Best Buy’s house brands.  It (like other private label brands) is frequently used as the opening price point for devices.  House brands tend to…

Are Multi-function Devices Killing Single Purpose Devices?

IHS iSuppli recently projected sluggish growth for single-purpose consumer tech devices like MP3 players, PNDs, and digital cameras.  At the same time they expect multi-function devices like smartphones and tablets to enjoy strong double-digit growth over the same horizon The IHS iSuppli statement quotes, Jordan Selburn as saying, The success of multipurpose electronic equipment, often coming…

When eReaders grow-up to be Tablets

What happens when eReaders grow up to be tablets? This morphing is already well underway. Barnes & Noble has always referred to the Color Nook as a tablet eReader – with tablet being the operative word. At their event this week. B&N claimed the Color Nook is the top selling android tablet in the market. Amazon – the current king in e-ink eReaders – is getting set to launch potentially two new tablet-oriented devices.  E-ink is actively working to bring to market color e-ink screens and other eReader players are treading towards tablet-like devices.  But this evolution has important implications.

First, network economics for text are very different than they are for video and more data-intensive applications. One of Kindle’s opening hallmark features was the ability of the user to download books via the cellular connection without having to independently contract with the service provider.  In fact, at one point Amazon switched Kindle cellular service from Sprint to ATT and users never took notice.

This won’t be the case as users gain access to more data-intensive offerings. These services are more bandwidth intensive (and therefore costly) than delivering text over the network.  Even though our research has constantly shown most tablet users primarily connect via Wi-Fi, the existing service contracts can’t work when devices are more than books. This will be a key element in the new tablets being launched by Amazon.

App usage on apps-enabled devices will crowd out book usage.  This has ramifications for device pricing.  In the early days of Kindle, Amazon subsidized the content instead of the hardware. This changed as Apple moved into the book business and subsequently eReader OEMs began selling ebooks at the publisher price and subsidized the hardware prices (or atleast began selling them at very low margin).  If the margin is made on the ebooks and their are less ebooks sold as a result of changing use-case scenarios – OEMs will be in search of a new business model to driven margin.  …