I spent last weekend in Adelaide with many of my good friends (and two of them fellow bloggers). For the most part we’re a pretty technical bunch with nearly all of us in IT based fields. You can then imagine that many of our conversations came down to various bits of tech or services that we might have found interesting or useful and with the hype of the iPad still fresh in our minds we inevitably came to discussing the implications of the device and strangely, for me at least, ended up with an agreement to disagree on many aspects of this device. Today I’d like to take a go at deconstructing the arguments that were put forth and see where it takes me.

“The iPad, from a technical standpoint, is nothing more than an overgrown iPod touch”: This point we could all agree on. Realistically the device itself is nothing of a technical revolution, nor is the software running on top of it. When Apple released the iPhone they did what they were good at, making tech that was reserved for the annals of geekdom cool and easy to use for the masses. The iPad takes the innovations of the iPhone and just plonks them on new hardware, with only small variations here and there. The real differences do lie within the software but as far as normal releases of Apple hardware go this was something of a technical let down, but that really only means anything to us geeks.

“Apple is seeking to revolutionize the print media industry/The iPad will see the birth of digital news subscriptions”: From eBooks to online newspapers the iPad is quite capable of serving them up on a quite large screen. Traditional media organisations have typically been pretty hostile towards new formats and the digital realm has been no different. Apple is definitely working at getting more content available for the iPad through direct channels with news organisations however their style of business is clashing with those of the old media giants. The talks are still in early days and there are already some publishers pledging their allegiance to the platform but I still don’t think this is enough. The iPad’s iPod ancestors had their content channels (read: iTunes) setup and ready to go long before the release of the device. Sure much of the iTunes infrastructure will be used in order to facilitate the delivery of said content but without solid media deals in place beforehand I can’t see this being as revolutionary as it’s being made out to be.

Similarly a point was made that the iPad would see people coming full circle on their news consumption habits and we would see the rebirth of the newspaper subscription, albeit in digital form. At the time I made the unsubstantiated claim that no one would pay for it, based mostly on the idea that I wouldn’t. There does seem to be some hard evidence to suggest that I’m not alone, with a recent experiment netting only 35 subscribers in 3 months for a total cost of $4 million. Just because the subscription might be made available on the iPad doesn’t necessarily mean that people will be willing to pay for it. In fact I’d argue that most of the big media corporations will continue to offer the majority of their content online for free and continuing to reap what they can from advertising.

The argument was then made that people are always willing to pay for good journalism. Whilst I can understand the idea behind that (you get what you pay for) the fact is that no matter how many paywalls go up there will always be another alternate source of news that will be made available for free. Many of the wire feeds can be had for a certain fee and realistically it wouldn’t take too much programming effort to grab said feeds, format them appropriately, slap on some advertising and put it on the web for all to see. The fact of the matter is that the current generation of netizens are accustomed to getting their fix of digital news for free and putting up paywalls, no matter how they’re delivered to the end user, will end in utter failure for them. I can see the possibility of say search deals with Google (as they have done for a good number of paywalled sites already) that drop the paywall in return for favourable search listings but the net result is still the end user not paying directly for the content.

“The iPad is a great eBook reader”: Well yes and no. It’s great for those who haven’t lashed out for an eBook reader and wanted a device to fill a need they didn’t know they had but as an eBook reader well it’s sub par. The LCD screen, whilst an appropriate size and quite usable, isn’t what you’d want to be reading books on for an extended period of time. E-Ink systems such as those found on the Kindle and Nook are far more readable in many more conditions than that of a LCD. It might sound like yet another geek technicality but those I’ve spoke to who own one of those devices swear by them. Many of them had attempted reading eBooks on other LCD based devices before switching to their new E-Ink device and for the most part wouldn’t want to take a step back, even for something that has oodles more functionality.

Additionally the biggest advantage that the Kindle and Nook have over the iPad is the free cellular wireless connection that comes with every single device sold. Whilst I can appreciate the fact that the iPad can have similar connectivity or the fact that many of these won’t be away from a wireless access point for very long the fact still remains that almost anywhere in the world the current eBook readers have free access to their book stores and various Internet sites. If you want Internet on your iPad you will be paying at least US$130 more for the privilege or you’ll be hopping from hot-spot to hot-spot, something which you just can’t do very well in places like Australia.

The picture looks even more grim for the iPad as an eBook reader when you consider the sales of devices already in the market. The Kindle is already over 3 million units shipped and the Nook, released only a few months ago, could already be passing the 500,000 mark. That’s an enormous install base to get past and, thanks to the proprietary nature of the current eBook market, none of them are going to want to switch since they would either relegate themselves to having to use 2 devices or give up on the book collection they acquired on their pre-iPad device. Consequently the range of books available through iBooks is currently unknown and you can bet your bottom dollar that Amazon and Barnes and Noble won’t be too keen to share their range with what will be their biggest competitor.

“The iPad seeks to create a niche, not fill one”: I agreed with this point as it’s something that Apple has done several times in the past with great success. Their combination of minimalistic design and it-just-works usability has made geek tech cool and accessible to the masses. The iPod and iPhone are great examples of this with both of them coming into a market that was already awash with many other devices but was struggling to reach critical mass. The iPad is probably one of the little more adventurous additions to the Apple product line as whilst there are a few other tablets out there they’re still having trouble getting into people’s homes. This is in contrast to say the MP3 player and smartphone market before them which where very much alive and kicking at the time, but were still lacking mass market appeal.

Consequently calling the iPad a tablet PC is somewhat of a misnomer since it really doesn’t fit into the definition of a tablet that the market had defined prior to its arrival. Tablet PCs to this day have had the ability to function as full fledged computers on their own. The iPad on the other hand really can’t be used as a replacement for a full desktop or laptop simply because it lacks the higher end functionality that these devices bring. It would be far more apt to call the iPad a netbook since it aligns much more closely to those ideals, what with the custom user interface (ala the EEE) and lack of computing power.

Is there a market for this niche they’re looking to create? Absolutely. If we learnt anything from the Joo-Joo (aka Crunchpad) there are people out there who like to do the majority of their computing, mostly consisting of web browsing and light document editing, in non-traditional computing settings. These are the people that have been up until this point unsatisfied with their laptop/netbook and are looking for something, how would you say, more casual. Devices like this aren’t meant to be a drop in replacement for your home computer but if you’re wanting to quickly check your flight before you rush out the door a quick booting device that shows a web browser is exactly what you need. Couple this with iPad’s insane brand loyalty and you’ll have many of these devices hitting homes around the world before people are even sure what they want to do with them, but that will only last so long.

“Apple is a hardware company”: This is a point I didn’t make during the discussions with my peers but its something that’s come up time and time again in the online buzz surrounding the iPad. For all their spruiking and hype about the various services they provide the majority of them don’t appear to make a whole lot of money for Apple. Trying to uncover some hard numbers on their sales figures leads only to a rampaging horde of opinion pieces, none of which provide accurate figures. Steve Jobs has said in the past that it only makes enough to cover its costs, and has said similar things about the App store. You’d then wonder why they bother providing them in the first place.

Well the first reason is fairly obvious: Jobs was lying and their a massive profit machine. Without hard numbers though it’s just going to be another he-said she-said situation so I’m going to work on the assumption that they at least cover their costs, and are at least turning a profit now.

What I can work on though are some hard numbers of say what an iPhone costs to make. Taking numbers from here the grand total for the bill of materials for an iPhone is US$178.96 and that phone will sell for a good US$699. If we round up the cost to $200 to cover shipping and whatnot you’re still looking at a whopping $500 profit on each handset sold. To put that in perspective most companies run on profit margins for hardware somewhere in the vicinity of 3~5% which pales in comparison to the 250% that Apple makes on each iPhone sold. It is therefore worth their time to create services that, whilst not explicitly profitable for them, drive the more profitable hardware sales.

You can see this in every aspect of their business to with their entire range of Apple products attracting premium pricing regardless of the competition on the market. Initially this started with their desktop range and sales where driven by the “it-just-works” meme that Apple has indoctrinated into its users. Initially the hardware was significantly different to what regular consumers got but in the last few years the hardware they use is identical to what you’ll find in most common PCs. The premium then comes from the integration of all the various bits and pieces together into one cohesive bit of hardware and software that to the end user is almost brainless to use. Couple that with the hipster cred that comes along with it and you’ve got products that market themselves.

After all this I’m still not convinced that the iPad will achieve the greatness that the Apple fan club has attributed to it. Sure it might sell a decent number of units but I don’t think that will be enough to drive the eBook and online media revolution that some have ascribed to it. My RSS feeds used to be ablaze with the hub-bub about the iPad but the last month has seen that die down to a quiet whisper in the background. Time will tell how successful the iPad is and whether it can achieve all it sets out to do, and this blog post will either stand as a triumphant prediction of the future or a large helping of my own words which I will have to humbly consume in front of the wider Internet audience.

You can probably guess which I’m hoping it is 😉

UPDATE: Some recent developments have shown TV execs are also hesitant to cave into Apple’s demands for cheaper entertainment that would help spur sales of their devices. Can’t say that I blame them since it would be a boon for all of Apple’s media devices and probably wouldn’t be so good for them:

Apple has supposedly been pitching networks on lower prices for TV shows, cutting the current standard from $1.99 to 99¢. If a report in the New York Times is accurate, it seems that most networks have been reluctant to consider lowering prices for two reasons: they fear the lower price will devalue the content, and doing so may give Apple more control than they would like.

Though iTunes music sales have been a success in the face of dropping CD sales and increasing P2P file sharing—Apple is already gearing up to commemorate 10 billion songs downloaded—two-dollar TV episodes have only been downloaded about 375 million times. Apple is trying to convince networks that 99¢ will make TV shows more palatable and drive increasing sales.

Not that I wouldn’t mind that though. Paying that much for a high quality copy of a TV show would be mighty tempting, especially if there was no delay between the free-to-air and digital release. Yet another piece of interesting information to consider in the greater iPad world.

About the Author

David Klemke

David is an avid gamer and technology enthusiast in Australia. He got his first taste for both of those passions when his father, a radio engineer from the University of Melbourne, gave him an old DOS box to play games on.

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