5th Generation iPad Case Leak

The Apple rumor mill is constantly swirling, and I avoid posting links to most stories, but 9to5Mac usually has good information. Mark Gurman, once again, has the details and photos in his story.

It's inevitable that the regular iPad will come to look more like the iPod touch and the iPad mini in any future redesign. The photos clearly show a narrower case. This design would lead to reduced side bezel, just like the iPad mini. This works fine on the mini, but I think it could pose some problems with handling the larger iPad.

Time will tell.

'Insatiable Appetite'

MacRumors posts a story today referencing the demand for the iPad mini in China and Hong Kong. Clearly a case of Apple not understanding their audience when pricing this new product. Hmpphhh.

iPad mini v. iPad

I agree with almost everything Dana Levine has written in a post about the popularity of the new iPad mini. I used one for two weeks and loved it. I believe it will be the best selling iPad, starting possibly this quarter if Apple can make enough. I returned to my iPad 3rd generation because I'm one of those minority users for whom Retina is the most important feature.

I'm not normal.

Beautiful iPad mini Print Add Campaign

Apple's television add campaign for the iPad mini has been some of their best recent work. The new print campaign is starting to show up now and it may be even better. 9to5Mac has posted shots of the iPad mini adds found in two recent magazines.

Very simple. Very elegant. Very effective. In all the right ways, very Apple.

Microsoft's Surface Problem

Microsoft has a tablet problem and I'm not sure they know it. This is a new problem. Just over 48 hours old actually.

Microsoft has been absent from the tablet space since Apple launched the iPad in April of 2010. That has just recently changed with the introduction of their Surface product.

The concept of this product has been billed by Microsoft to be one of ’no compromises’. That is, the user can have all the advantages of a tablet and a traditional computer in one device. You just need to decide which mode you want.

A very important part of the Surface concept is the cover keyboard. Microsoft all but tells you that you need to buy one to use the device. In the tablet interface, it's not entirely necessary, but it’s helpful. In the traditional space, it's a requirement. It seems likely that the creation of these covers and their almost full sized keyboards dictated the aspect ratio and size of the Surface.

The actual usability of this concept is open for debate. Reviews range from loving the concept to thinking it’s a disaster. It's very early, so improvements to the software and people's willingness to embrace the concept are likely. The Surface is a pretty large screened device when used as a tablet. Many reviewers have commented that the device wants to be used on a flat surface with a keyboard attached. Microsoft seems to be sending the same message in it’s advertising. In other words, it's not optimized for the tablet experience.

I believe it's this combination of size and optimization priority that will cause a problem very soon.

It's well known that Apple chose a different path when they created the iPad. They chose to differentiate the tablet experience from the experience of using an Apple computer. The operating systems share a common core, but they're totally separate. iOS apps don't run on OS X, and OS X apps don't run on iOS.

Apple launched the iPad with a 9.7" screen. They customized iOS to run natively on this screen in a 4:3 aspect ratio. In 30 months they've sold 100 million iPads. There are now over 275,000 apps built specifically for this screen. iPads have had a starting price of $499, with the year old model available for the last 7 months for $399. This is all well known. 

Because no manufacturer has fielded a competitive tablet to compete with the iPad, Android manufacturers and Amazon have introduced smaller screened and cheaper devices. These products are thought to have sold well, although exact numbers are unknown. This market has never been thought of as anything but a discount space. It's a place a buyer can go if they can't afford a larger device or if the smaller form factor works better for your usage case.

That changed on Friday with the introduction of the iPad mini. This is a premium device with amazing build quality and it can run every app ever created for iPad. I'm certain this model will very quickly outsell the bigger iPad. Cheap Android models and the Kindle Fire will continue to sell because they're still cheaper.

I expect the smaller tablet market to surpass the sales of larger tablets within a quarter.

What's Microsoft's answer? I don't think they have one and that's a huge problem. To use the new Surface as it’s truly designed, a buyer needs to spend $600 for the Surface and a keyboard cover. You can enter the iPad ecosystem for $329.

Microsoft can’t scale down the Surface because that keyboard cover is so essentially a part of the user experience. A keyboard cover attached to an iPad mini sized device would be marginally useful. The other problem is getting around Windows 8 in the traditional desktop space. Already reviewers are commenting on how small many of the touch targets on the Surface are because they're obviously not optimized for touch. This same interface will be unusable on a 7” device.

Just when Microsoft is finally making a concerted effort to be a tablet player, the market is going to shift away from them. The folks in Redmond can't catch a break these days.

First v. Best

There's often a competition between first and best. The ideal is to be first and best. First can also pay short term dividends. Best, as long as you're not too much later than first, is the next preferred option.

I mention this in connection with the modern tablet market. In the large tablet space, Apple was first and best with the original iPad. They sucked all the air and profit out of the space.

In the smaller tablet space, Google and Amazon were first. This had short term benefits, but almost no profit.

Apple just entered the space this weekend with the iPad mini. They’re not too much later than first. They're also now the best. Time will prove this out.

iPad mini @ 24 Hours

I've been playing with an iPad mini for 24 hours now and I've got a few initial thoughts:

• It's incredibly thin. It makes the iPhone 5 seem thick. Crazy, I know. Especially since they're essentially the same. It's because it's so much larger.
• It seems like a natural size in my hand. The way it always should have been? Until the screen comes on. Then it looks funny. Not bad. Just different than what I'm use to seeing.
• The build quality is amazing. Better than the Retina iPad. I'm more sure now than ever that the 9.7" iPad will still be refreshed in the spring. If people were upset about the 7 month refresh on the 3rd generation, just wait....
• The screen isn't Retina quality. If you have a Retina device of any kind, it looks less than great. It fades as you use it though. If you've never owned a Retina device, you'll likely wonder why every tech writer says it's a big deal. It's because Apple has spoiled us with their latest displays. Coming from the iPad 2 or most any computer, the screen is pretty beautiful.
• The iPad mini is a consumption device. Maybe the perfect consumption device? I know that's always been the knock against the Retina iPad, but it's not true.
• The finger detection near the bezel works really well at ignoring my touches.
• I've never been a fan of the existing 7" tablets. I've played with the Kindle Fire models and some Android variants. The screens always felt small. It may sound like marketing BS, but Apple nailed it with this 7.9" screen. It's a totally different experience. Try one and tell me I'm wrong.
• The smaller form factor is a real market segment now that Apple is in it. Hater's will call me names for saying this, but that doesn't make it less true. This leads to my next point.
• The iPad mini is a serious headache for the competition. Primarily Microsoft. I think cheaper Android and Kindle devices will continue to sell in quantity to those who can't afford the price difference or hate Apple. Microsofts problem is one I don't think they have an answer to. Everything about the new Surface has been tagged by Microsoft with the 'No Compromise' slogan. You can have your tablet and computer all in one device. For a particular user, this could be a great thing. What's their answer to this smaller device category? In this size, a device can only be a tablet. Microsoft can't make a keyboard cover for a device this size. It won't work. This device is all about choosing a compromise. This problem will be exposed by my next point.
• Sooner than anyone will believe, the iPad mini will be Apple's best selling tablet. I think they'll have supply problems this quarter. If not for that, I think the mini would take the lead this year. I'd all but guarantee it happens before the end of March. This leads to my next point.
• Market analysts are stupid and short sighted. Don't believe what they say. Apple's stock is a bargain right now.
• The edge of the chamfer offers a bit of a grip when holding the mini. It's kinda sharp. Not in a bad way at all.
• I wish the slider for mute or orientation lock was just a bit taller or less rounded. My fleshy finger doesn't work it as well as the one on my iPhone and Retina iPad.
• I find myself using the mini primarily in portrait orientation. My regular iPad is used about 50/50.
• Typing is not a strong point. It's not that the keyboard is bad, it's not. It's just small in comparison to a regular iPad. It's better than every other small tablet. Once again, portrait orientation is better than landscape.
• The speakers have good volume. They're stereo. Big deal. Stereo speakers separated by an inch don't sound much better than mono. Glad Apple's not touting it as a feature.
• Newsstand magazines in general are poor efforts by their publishers. They're not great on the regular iPad. They're worse on the mini. Marco Arment's 'The Magazine' being the notable exception.
• The mini charges remarkably fast. Not iPhone fast, but way faster than a regular iPad.
• The iPad mini provides the best Facetime experience of any device Apple makes. Much larger screen than iPhone and hand holdable for a long time, unlike the 9.7" iPad.
• I have many friends asking what I think. There's genuine interest in this device that will manifest itself as soon as people see or touch one in person. Remember when the original iPad was just a big iPod touch?

Apple has a hit on their hands. Even if not many people know it yet. The iPad mini is but the latest example of an Apple product that needs to be seen and touched in person to be appreciated. They've done it again.

The Price of Apple Computing

Something got me thinking about computers today. Apple has been in the computer business for over 30 years now. If you asked 100 people about Apple's prices, 95 would use the word 'expensive' in reply. People who like and purchase Apple products have always seen value in their products.

Over the years, Apple's computer prices have gradually pushed downwards. You've been able to purchase an entry level MacBook laptop for $999 for a number of years. In the PC market, computer prices have been much lower for a long time. Prices beginning in the $300-$400 dollar range have been common.

People have called on Apple to enter the lower priced market for years. The last major push came when PC companies starting making netbooks. Apple resisted, saying the user experience was terrible.

Then, it happened. Apple created the iPad. While the form factor is different, there's no doubt that for many people the iPad is the best computer ever made. It's opened up the computing experience to people who were never comfortable before. Overnight, the price of an Apple computer dropped from a thousand dollars to $499.

When Apple introduced the 3rd generation iPad in March, they dropped the price of the iPad 2 to $399 and lowered the barrier of entry again.

Today, the iPad mini launches. Beginning at $329, the Apple computer market is available to more people than ever.

It's a remarkable time in technology, and if you don't take a step back every now and then, it's easy to miss it.

Product Dictates Price

We're three days after Apple's introduction of the iPad mini and pricing is still a popular topic in the press, on blogs and in podcasts. Tim Cook & Peter Oppenheimer were questioned about it during the Apple earnings call last night. I wrote about it extensively two days ago.

One of the arguments for lower pricing came from Daring Fireball's John Gruber on Wednesday. I learn something every time I read John and I encourage you to read the post here. It really got me thinking. Something in his reasoning bothered me, but I couldn't put my finger on it. I finally got it last night. I often do my best thinking while I'm asleep.

Here's the pertinent information from the post:

And the iPad is hard to compare to any previous Apple product other than the iPod....iPad Mini’s $329 starting point leaves a price umbrella in tablets that Apple never left for MP3 player competitors....I’m just saying it wouldn’t have been unprecedented for Apple to focus more on price.

The trouble, I think, is with the last bit. John assumes Apple focused on price with iPod model creation. I have no way of knowing, but I'd wager iPod model pricing revealed itself as the job to be done was defined.

That is, product dictates price rather than price dictating product.

All iPods created during the expansion phase of the product (ignoring the iPod touch) had a very basic purpose. They enabled people to listen to their music on a small portable device. The devices differed fundamentally in two ways. Storage capacity and physical size. If you were backpacking through Europe for a month and wanted all your music, you chose what came to be the iPod classic. If you wanted the smallest possible device for your gym workout, the shuffle was your pick. The mini and then the nano occupied the middle ground.

There were significant price differences in these products because their job to do was very different. Apple still maintained a healthy profit margin on each device.

There's no correlation to Apple's tablet lineup as they've chosen to define it. Thus far, Apple views the difference between the iPad and iPad mini to be one of physical size only. You can see it in their marketing tagline; 'Every inch an iPad.'

The reason this makes sense is because there is no single, company defined purpose for an iPad. It's a different thing to every user. It can be a different thing from hour to hour. That makes it largely impossible for Apple to tailor it, beyond size, to the market. What has always made the iPad magical is that the device disappears and becomes the app you're using.

The original iPad defined the experience of using an Apple tablet. That experience is comprised of many things, including device quality, OS, and app environment. Anything Apple could have done to lower iPad mini pricing to approach that of the competition (which is admittedly making no profit on device sales) would have compromised the experience. This would have been far more damaging to Apple than leaving a price umbrella at the low end.

Apple has chosen wisely here. They've broadened the addressable market for the iPad and they've done it in a way that preserves the user experience and maintains their premium brand. If, someday, Apple can find a way to bring the iPad experience down market still further, I have no doubt they'll take it.

It's All About the Margin

Yesterday, Apple released the much anticipated smaller iPad. The iPad mini is a real device anyone can order on Friday. To hear the loudest talk, people are disappointed with the starting price of the device. Even popular bloggers John Gruber and Marco Arment expressed some disappointment in the $329 entry price.

I'd simply ask; Is there really anything to be surprised about with regards to the price? Why would people expect that Apple would be the low price leader on a device as popular as the iPad mini will likely be? Is there a common thread to most all the product segments Apple plays in?

A brief history. As I wrote yesterday, Apple products have always commanded a premium price. Some consumers see value in Apple products and make purchases. Others don't see value or can't afford the entry price and don't make purchases.

Let's take a look at the markets Apple is involved in right now, before the iPad mini hits the market. Particularly, let's look at the computer, portable music player, smartphone and large tablet markets.

Apple was in the computer game from practically day one. Apple has made a fortune by being the high quality, low volume, high margin computer company. They've had no problem allowing other manufacturers to drive themselves into the ground as the low quality, high volume, no margin players.

Apple came to the portable music player game a little late. They quickly became the high quality, high volume, high margin company. The players in the market have disappeared by attempting to become the low quality, low volume, low margin option.

Apple came to the smartphone game very late. Over a period of a couple years they became the high quality, low volume, high margin company. The existing players and most challengers in the market have largely disappeared by attempting to become the low quality, high volume, low margin option.

Apple essentially created the large format tablet market. Apple has made a fortune by being the high quality, high volume, high margin player. The competition, such that it is, has floundered as the low quality, low volume, no margin players. Walk into any electronics store and you'll see a host of inferior, large tablets collecting dust on display tables.

Now, Apple is entering the smaller tablet market. It's a very interesting space and is perhaps most similar to the portable music player and smartphone markets. The reason being, Apple isn't an original player in the space. What's the current state of this market?

When manufacturers failed in the large tablet space, they shifted focus to a new market. One that didn't require them to compete with Apple. There have been a couple bit players, but two device manufacturers largely own the space. Amazon with their Kindle Fire line and Google with the Nexus 7 tablet.

This discussion will largely ignore the user experience on these devices and focus on what they contribute financially to their companies. Amazon has publicly stated that they break even on selling the Kindle Fire and hope to make money selling content for the device later. Google has publicly stated they lose money on each Nexus 7 device they sell.

Leaving aside technical talk of feeds and speeds, the user experience on the new iPad mini will be superior to the competition. The refinement level of the operating system, the frequency of operating system updates and the overwhelming number quality tablet apps in the Apple App Store ensure this. The quality of the device will also be higher than the competition. Hold the iPhone 5 and tell me I'm wrong. Apple is setting new manufacturing standards across their product lines.

So, Apple enters the smaller tablet space as the high quality, unknown volume, high margin player. The competition will be the  lower quality, unknown volume and no margin player.

Does any of this sound familiar?

Assuming Apple priced the iPad mini to maintain their usual margins, the price is right. The iPad mini will sell really well in markets where Google and Amazon have a presence. In most of the world, where they're not even available, the iPad mini lowers the price of entry and offers an alternative to the larger iPad.

It's all about the margin.