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Tablet sale; the benefits of being a late adopter

Posted: 05.18.11

Last week’s announcements about new tablets, were hardly news. There are announcements every week now about new tablets. The latest announcement from Amazon’s CEO Jeff Bezos saying his company will release a tablet based on Google’s Android platform just seemed to ratchet up the silliness quotient. In an interview with Consumer Reports, Bezos said to “stay tuned” on the company’s plans for a multipurpose tablet product. He suggested that such a device would supplement but not replace the popular Kindle.

Bring ‘em on.

As the number of suppliers proliferate in a mad rush for market share, prices will plummet as feature sets become neutralized and differentiation will be on badge and price. Tablets are close to their TAM and will hit it sooner than almost all the suppliers and wannabe suppliers think. The cool factor will be the same as the ASP and drop as the costs of goods come down and the suppliers enter a mutual suicide pack of discount selling.

The last big consumer product was the DVD. Remember how astonished everyone was with its rapid market penetration? Market penetration. When that point is hit, growth slows and prices drop.

Two things happen in a consumer market like DVDs, PCs, and mobile phones: people buy more than one and features improve. Many homes today have two or more DVD players. Many people have two or more mobile phones. And many families will have more than one tablet—a tablet per person like the mobile phone? Not likely, but a lot of people are going to get them—and they are going to get cheaper real fast. We’ve already seen the $200 tablet at Walgreens, do you think that was an abnormality, a fluke? Would you like to guess how many 7-inch tablet manufacturers there are in China?

PCs look like they will never stop. If you look at the annual sales of PCs the curve suggests a half billion new units a year is within sight. Where’s the S curve for PCs?

And we’ve all seen the same type of curve for mobile phones—only up, no roll off.

But tablets aren’t PCs or phones. They’re damn handy things to have and can in many situations stand alone, but they can’t replace either a mobile phone or a PC, although they probably can replace a DVD.

A tablet just doesn’t have the versatility of a PC and therefore can’t satisfy all the myriad of users and use cases that a PC does. You can argue the same thing about a mobile phone. Tablets and mobile phones are function limited. You can do a lot on a mobile phone no question about it, but you’re not going to play “FarCry” on it, or analyze an MRI dataset, or run a stamping press, or replace the cash register.

And it’s a mistake to look at one product as being a replacement for another. This silly football mentality that one thing has to kill another, one has to win and the other lose, is not based on reality or common sense. We have motorcycles, cars, trucks, and SUVs— they all do basically the same thing, and many of us have one of each.

Tablets will cut into the eBook reader market­—they’re just too similar in appearance and function, but not price ... yet. Although not many people seem to realize it, the E-ink display is actually easier on your eyes than a backlit emissive display, but that probably will not save the eBook market. Most people don’t read for long spells of time these days anyway. And those who do will stick with the eBooks because they will know the difference.

But tablets will not kill eBooks, nor will they kill laptops, and SmartPhones won’t kill any of those things either, and SmartPhones won’t kill handheld game consoles, and big game consoles won’t kill PCs used for gaming. Do I need to go on?

So if you haven’t bought a tablet yet (I haven’t and no one has given me one either) then let’s face it—the Cool train has left the station and you ain’t on it. The cool people have their tablets. And when a new cooler one comes out, they’ll get that (and you and I might get their hand me down). Also, if you needed a tablet, you’d have one wouldn’t you? Who really needs a tablet? That’s the critical question in this exercise. So you didn’t get one yet, well you can just wait and get a new one at less than half the price of what the cool people paid. There are some benefits in being a late adopter.

There is not an infinite TAM for tablets

DVD players have reached their TAM

The phenomenal growth of the PC