The Real Reason Apple Wants a 7-inch iPad

| Analysis

So far, the analysis of the rumored 7-inch iPad is based on confronting and stalling the competition from the Amazon Kindle Fire series and the Google Nexus 7. But there is another, overlooked, reason for the 7-inch model.

The reason was referenced by Tim Cook himself during the last earnings report with analysts on July 24. Mr Cook said, “... we're seeing tremendous momentum for the iPad in education.”

Later, he continued:

"The iPad continues to be a great success in the US education market. With sales setting a new quarterly record and nearly doubling year-over-year to just under 17 million iPads. While interest in the new iPad was high, sales of the reduced priced iPad 2 in the K-12 market were particularly strong. Even though as I mentioned earlier, we achieved all-time record Mac sales to US education institutions during the quarter, we sold more than twice as many iPads as Macs to U.S. education institutions.”

Image Credit: Apple

Independent analysis by Charlie Wolf at Needham & Company bears that out. In a recent report to investors, Mr. Wolf pointed out that the iPad is now cannibalizing PC sales in the K-12 market. Mr. Wolf wrote:

"But in view of the fact that Mac sales held steady at around 520,000 units but overall PC sales declined by 265,000 units from 1.90 million to 1.64 million units, we believe the inescapable conclusion is that the iPad is beginning to cannibalize a material portion of PC sales in this market."

Implications

What are the implications of all this? First, we’ve seen that the US$199 price point for the Google Nexus 7 and Amazon Kindle Fire not only make it a desirable gift item, but also appeal to customers who don’t quite have the $499 to spend on an iPad 3 or even $399 for an iPad 2.

More importantly, this price point also applies to schools, many of which are strapped for funds and who might consider the trade-off in functionality and quality of the iPad 2 against a very attractive $199 price point. That’s a concern for Apple.

Yet another factor is those rural K-12 schools that can’t even think about a mass purchase of iPad 2s. But, in the spirit of BYOD, they may appeal to parents to supply the needed equipment for math, research, ebooks etc. And that’s exactly where a 7.85 inch “iPad 7,” weighing perhaps 14 ounces, and fit for small hands comes in.

The appeal of this smaller iPad is that is has access to the mature base of over 225,000 apps designed for just the iPad (and 600,000+ total for iOS). At some price point, this new iPad becomes the de facto K-12 educational standard. A lower priced competitor is now seen as a poor substitute for the real thing rather than a practical alternative to an expensive iPad 2. That price point is widely debated, but considering that Apple has a history of charging a little more for quality and reliability, I’ve been using the $249 list price number. (Educational discounts can reduce that price.)

Finally, the purpose of the current 7-inch iPads is to be a content consumption device for the maker’s wares. However, the head start of the iPad series, as we’ve seen in the TMO iOS software reviews, the iPad is well along as a content creation device, something that schools and students value.

An Educational Experience

For a short period of time, the competition has been able to offer a price-attractive, content consumption device that is intended to sell product. That was a good strategy, and using that strategy, Google and Amazon have had some success that other companies have not had. With a 7-inch Apple iPad, however, these companies will also receive an education.

Apple’s 7-inch entry is much more likely to not only meet those devices on their own terms, but also become much more favored in K-12 education where the price, retail store support, software and seriousness factor will be unbeatable. We didn’t see that angle in the early days of the iPad, but it’s all too clear now that the iPad series has evolved and entrenched itself as a personal educational tool that’s starting to replace, in K-12, the legacy PC.

As Apple SVP Phil Schiller said early this year, “Education is deep in our DNA.”

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Comments

skipaq

Nailed it, John. Huge opportunity in education that must not go lacking in product offering.

Pat Mahon

While I don’t pretend to know the setup within the American education system I have to say that my son, who is a special needs young 9 year old, has been using his original iPad every single day he’s had it. Which of course is over two years now.

This means he had just turned 7 when he started lugging that around with him. The added weight of a robust “drop proof” case from Hard Candy, the iPad Squish skin http://www.hardcandycases.com/squish-skin-ipad-case.html meant we have been calling out for a smaller iPad / larger iPod touch in this house since day one. Obviously he is not the average user in terms of usage time and over all dependancy but those school hours for every child really add up. Heck the ability to just pop it into an outer coat pocket alone will make a massive difference in the amount of iPads seen in public. Let alone the price barrier dropping to a proposed $249.

Bring it on I say. And not a moment too soon.

mhikl

Slow and steady like the tortoise, Apple rarely reacts, instead taking a pre-planned act at the appropriate moment. It is like the game of darts, focused eye and steadied muscles gets the bullseye. Now that education knows what a tablet can do, decision is made possible with a smaller and more economical iPad mini an option. Where before many educators could only dream, now they have an economical reason to take the plunge.

I expect $250 lays to rest the argument that Apple tablets are over priced. Can Amazon or anyone make a fully featured tablet for less than this without their tablet being a loss-leader?

Lancashire-Witch

Absolutely Mr. M.  But it’s more than Education.  I would welcome a smaller, lighter iPad. The current one seems big and heavy after continued use.

Bosco (Brad Hutchings)

John, I’m going to disagree with one thing here based on ongoing educational software development that I’m doing. When apps are delivered through the browser—even in standard HTML5, no Flash—the App Store advantage goes away. School deployment and licensing can be more easily achieved by placing small server appliances on site or IP source filtering in the cloud than by using App Store supplied licensing. Everyone I’ve given this pitch to quickly sees it as a total no-brainer. The only downside would be if customers (read schools) see brand value in the App Store so strong that they wouldn’t consider alternative delivery if it lowered cost or improved experience. Schools don’t think that way.

Real browser choice on Android tablets is resulting in better environments for running web-based apps. As I type, I have an assortment of devices on my desk: iPad 2, iPod Touch (latest), Gingerbread phone, ICS phone, JellyBean tablet, Windows 7 tablet.  I use each of them daily for extended periods of time while testing.

The iOS devices basically only run Safari. Alternative browsers miss out on Nitro Javascript acceleration. So does the home screen bookmarked stand-alone experience.

The Android and Windows devices have more browser options. On Android, I’m really impressed with the new Firefox. Add the free, readily available full-screen extension, and you’ve got an immersive experience with no distractions on old and new hardware alike. Windows is Windows and will have similar flexibility—at least the x86 branch.

Another thing that won’t fly is mandating that kids’ parents buy them devices from one vendor. And that alone will push software at least cross-platform if not into the browser via standards. Apple is going to have to compete in education tablet market as a commodity. Ultimately, they will need to price accordingly.

mrmwebmax

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John,

While I agree with everything you’ve said, my only question is this: Assuming that Apple releases the iPad 7/mini/whatever after the imminent iPhone 5 release, they’re positioning it for the upcoming holiday season. If education was the true goal, why wouldn’t they have made it available earlier to attract both the back-to-school crowd as well as school districts?

mrmwebmax

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Bosco,

You wrote:

John, I’m going to disagree with one thing here based on ongoing educational software development that I’m doing. When apps are delivered through the browser—even in standard HTML5, no Flash—the App Store advantage goes away. School deployment and licensing can be more easily achieved by placing small server appliances on site or IP source filtering in the cloud than by using App Store supplied licensing. Everyone I’ve given this pitch to quickly sees it as a total no-brainer. The only downside would be if customers (read schools) see brand value in the App Store so strong that they wouldn’t consider alternative delivery if it lowered cost or improved experience. Schools don’t think that way.

Two arguments against yours here: I would argue first and foremost that apps written for a superior platform are far superior to browser-basef apps. One only look at the success of the App Store to see this.

Secondly, can you name any Android tablet doing better in education than the iPad, to prove your “schools don’t think that way” comment?

mrmwebmax

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TMO:

I really would like to edit my last comment. Can this functionality be restored? I hate having typos in my comments!

Bosco:

I meant to say that apps written for a specific platform are far superior than browser-based apps. Furthermore (I’d have added this with the ability to edit my comment), how many typical schools have the capability to manage on-site server appliances or IP source filtering, vs. simply installing apps on iPads???

John Martellaro

mrmwebmax: That’s a very good question, one that I’ve been wondering about. Launching an iPad 7 in early August for K-12 would have been nice. The only answer I have is that there must have been some kind of supply issue or conflict with scarce components that delayed the rollout.
So Apple will have to settle for a Christmas feast.

Bosco (Brad Hutchings)

I meant to say that apps written for a specific platform are far superior than browser-based apps.

It depends on the app. Let me provide an illustration. Assume the “app” is a Mac news site and community, like TMO. Were your statement true, then a TMO native app for Mac and Windows would be far superior to this site. Maybe Dave and Bryan should update the app and push a new version through the MAS each day. Each new version would have the day’s news. Not quite sure how comments would work… If your app is “now” enough and “dynamic” enough, the opposite is actually true—that the browser is, indeed, a better context for the app.

A second thing that web apps can do really easily is enable collaboration. You already have a server delivering the app, so you don’t need to insert one especially to enable users to collaborate. I actually supplied a quote on this for the press release for the latest Real Studio (which has a relatively new web application framework). Imagine your kid reading on her favorite tablet at home and you reading along in the web browser on your computer at work. As she turns the pages on her tablet, they turn in your browser window. And you’re speaking on the phone or Skype, maybe one day directly in the browser. Phenomenally easy with a web app made with Real Studio.

mrmwebmax

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Bosco,

It depends on the app. Let me provide an illustration. Assume the “app” is a Mac news site and community, like TMO. Were your statement true, then a TMO native app for Mac and Windows would be far superior to this site.

Here is where you and I agree: The benefits of an app versus a website depend on the content being accessed. I cannot imagine using TMO on anything other than my big-screen iMac where I have lots of screen real estate and a full physical keyboard. Likewise, I can’t imagine enjoying Angry Birds on anything except my iPhone (I have all four versions, and Rovio, PLEASE, I’m out of levels on all of them!), simply for the physical touch nature of it.

I enjoy the web on a computer, apps on iOS. Granted—and I admit this—I have neither an iPad nor any other tablet, so maybe my appreciation of web apps would change on such devices. Nonetheless, I will always believe that there are inherent advantages to native apps, and sorry, but the iPad’s sales figures point this out.

Bear in mind i am a website developer, NOT an app developer. I have a commercial interest in the continuation of creating great websites. (That’s why I changed my username to mrmwebmax, for goodness sake.) But I’m also a consumer, and I simply use no web apps on my iPhone.

Bosco (Brad Hutchings)

Of course there are plenty of inherent advantages to native apps. There are several to web apps as well, including one I pointed out above. There’s always economics to bring into the picture. For Facebook, their native app for iOS was effectively a web app—most content displayed in an embedded browser until last month. One really cool thing about web apps is that you need only update one installation to get the latest version to all of your customers.

Look, I know it’s counter-intuitive, and I certainly know it flies against the orthodoxy in TMO comments, but it’s where I’m putting my chips for some things I’m doing, and I certainly haven’t seen less delighted kids as a result. I hope to see many more such kids as tablet prices fall to within their parents’ reach.

barrh

First of all this $199 price is being pulled from hopeful nether-regions.  Comstant repetition doesn’t make it true. If it IS $199, it will be so crippled in comparison to similarly priced androids, it will be unappealing to anyone who doesn’t want it simply “to have an iPad,” or some semblance of one.  If its matched to the nexus 7 in hardware, it will cost at least $100 more.  Not for “quality” as the article states, since the nexus is quite high quality, but for the logo.

I hate to be cynical but I doubt this has very little to do with education and very much to do with selling more “ipads” to people who can’t afford the functional ones.  Lowest common denominator here we come.

iJack

Me. Want. iPad7. Now.

dhp

Early August would be way too late for schools to buy for this year. A lot of K-12 schools - especially in the southern U.S. - start classes in early August. And schools don’t buy stuff a week before school starts like families do; they plan these things months in advance and may even apply for technology grants a year ahead. I would say they are releasing the 7-inch with good timing for NEXT year. (That is, if they are releasing anything at all.)

Paul Goodwin

Well, since I don’t know what a web page looks like on a smaller screen than my iPad 2, I can’t really say how good of an experience it would be. I’ve done meetings on my iPad using Webex, and when material is displayed, the iPad’s screen is about as small as I would want it. The same is true for viewing everything on the web. Phones are too small, and the iPad seems to be sized perfectly.

So price point seems to be a main driver. If the smaller tablet is significantly cheaper, and the display is just big enough, it can be successful.

And enough about Apple’s hardware being over priced. It’s not. When you consider what you get - rock solid reliability, a huge and ever growing library of Apps, and a very secure environment. Part of the ease of use is not wasting time looking in 20 different locations for stuff to keep your software up to date. Apple’s HW/SW system is the world leader and is worth more because of it. Yes we pay for that logo, but complete systems are always more expensive than kits. And schools aren’t going to buy kits. Techies (myself included) can always put a kit together for less money, and we’re sharp enough to keep it updated. It can even be better. But at this point in time, when Apple does it for very little more, and the result is so good that they become the world’s leader in doing it, why would I or any school bother?

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