It's been an exciting couple of weeks for the tablet industry: Apple is rumoured to be manufacturing more than 2 million iPads per month, an irrationally exuberant brokerage analyst just called for 55 million tablets to sell in 2011, the CEO of Best Buy was quoted as saying that 50 per cent of their netbook sales were being cannibalized by tablets and Canada's own Research in Motion announced they were getting into the market with the PlayBook, due in early 2011.
Whew! Those are a lot of moving pieces for an innocent Canadian consumer who is trying to figure out what - and when - to buy. How big will this market get? Who will make the winning devices? Does RIM have a chance?
Given that there is only one tablet actually selling in serious numbers, it's unusually difficult to try to predict the future of the entire industry. Apple is enjoying tremendous success so far, but we are only in the equivalent of the top of the first inning. Anyone saying that RIM (or any other manufacturer) is "too late" is being premature.
First, the dynamics of the tablet industry are going to unfold over many years. The iPad has only been on sale for six months! It is like trying to predict the future of the PC industry back on February 12, 1982. Most of the early PC winners weren't around a decade later, let alone today.
Second, at this time only Apple has really been up to bat. Just because a team scores five runs in the top of the first doesn't mean the result is a foregone conclusion. Although various surveys have been conducted about other devices, form factors, manufacturers and price points, those surveys are all essentially worthless. The only test that truly matters will be consumer buying behaviour once the products are actually available for sale.
Further, many people who are evaluating the various proposed tablet alternatives keep making a fundamental error. Whenever a new tablet comes out, they look at it and measure the various ways in which it is superior or inferior or identical to the dominant iPad. This is a goofy approach for analyzing the early days of any emerging industry - the portable PC winners of 2010 were not determined by which company had a better floppy drive than the Osborne in 1981.
In order to understand why, you need to think about how technology platforms evolve over time, and how different computing platforms have different attributes.
If you taped over the manufacturer's name on almost all notebook PCs, even a relatively savvy computer shopper wouldn't be able to reliably differentiate one 17" laptop from another. After almost 30 years, the PC industry has converged toward a single form factor, in varying shades of "greige." And inside the box, laptops are even more identical - all use similar chips and operating systems and software.
On the other hand, 20 years into the cell phone industry's development, it is still a cornucopia of shapes, colours, features, and operating systems: clamshells, candy bars, sliders, touch, QWERTY, and so on.
A LOOK AHEAD
The tablet marketplace of 2014 will look very different from today's iPad-dominated market. It will be much bigger, with about 70 million tablets sold annually, we think. They will be cheaper - the average selling price across all units will probably be around $400. The market may have a much larger enterprise component: almost all tablets today are bought by individual consumers, but Deloitte research suggests that by 2014 up to 40 per cent will be purchased by corporations for business uses - led by retail and health sectors.
The operating system market is not likely to look like the PC market, where one player has a virtually monopolistic 90-per-cent share. Instead, the fragmented tablet market will probably have five to seven serious players, with the top three forming an oligopoly with roughly 70 per cent of the market. Apple looks like a shoo-in for that elite group due to its early lead. Based on the number of proposed Android tablets, and its recent success in the smart phone space, that OS has to be considered a strong contender for the top three.
The number three spot is probably between Microsoft and Research in Motion, although wildcards like Palm, Nokia and others of course have to be included.
Although a lot of people count Microsoft out of anything mobile, the idea of a tablet that has the virtues of an iPad (cheaper, lighter, instant on, nice touch user interface) but also has full Microsoft compatibility would have significant end user demand. Especially if the enterprise adoption is as large as we think it might be. Whatever anyone thinks, there are millions of Microsoft Windows and Office users in the world. The iPad apps that currently allow compatibility are useful tools, but they are not perfect reproductions of the real thing.
Why do I include RIM? It isn't about their success as selling something that looks like a tablet (they have no such track record), the supposedly spiffy QNX-powered operating system (consumers don't care about operating systems as much as geek reviewers do) or even the name (although PlayBook isn't a bad moniker.) RIM has 50 million smart phone users worldwide. If even 10 per cent of them next year tether a PlayBook to their existing Blackberry and data plan, then that's probably good enough to make RIM a strong number three or four in the tablet wars for 2011. And the PlayBook's is clearly positioned to differentiate itself from the iPad and some of the other proposed tablets: smaller, cheaper, lighter, more cameras. Add in the usual enterprise-friendly features that IT departments love and strong security and it seems likely that while there's no guarantee it'll be a success, it can't be dismissed as either.
You might have noticed that in many earlier paragraphs I have been fairly precise about making tablet predictions ... but not so much on the PlayBook. That isn't cowardice. It is a lack of knowledge. We don't yet know the PlayBook price or its battery life. No one has played with its touch screen and tested the responsiveness. We don't know how it will be sold, whether developers will build apps for it, or what the next generation iPad will look like.
Given those uncertainties, I'd rather make a PlayBook prediction based on orders of magnitude and probabilities. If RIM actually introduces the device, I am 99 per cent sure they will sell hundreds of thousands of units in the 12 months following launch. 90 per cent sure that they will sell millions. And only 9 per cent sure that they will sell tens of millions in that first year. Not a very precise forecast, but the best that I can do considering the unknowns.
Duncan Stewart has been researching technology since 1990, and writing about it in the media since 1999. A former pension/mutual/hedge fund manager, he now directs tech research at Deloitte Canada, and lives in Toronto.
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