Why the iTablet is Critical to Apple’s Future

| Hidden Dimensions

" We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. "

-- Roy Amara

Trends that appear to be continuing unabated to extremes often become unstable and unsustainable. If that happens in the business world, a company either seizes control or fate dashes its hopes. That's why Apple is planning now for the product line of the future.

CEOs get paid to anticipate changes in the industry. Rupert Murdoch thinks he knows how to stem the financial losses of his publications. Whether he's right or wrong, he's trying to anticipate the future and avoid cruel fate.

It's also the responsibility of CEO Steve Jobs to think about what his company will look like in five years. Certainly, thinking now about a product means working prototypes in a few years and sales a year after that. Just what will Apple look like in five years?

Looking at the Sales Data

One clue comes from Philip Elmer-DeWitt. On August 5th, he did his math and looked at the profile of Apple's income over the past few years. His first chart shows the contribution of the iPod to Apple's Total revenue. For example, back in 2006, the iPod sales had risen so far, they contributed more than half of Apple's income: 55+ percent.

Some executives would have taken that to mean that Apple should have changed its name, again, to "the iPod Company" and discontinued the Mac. (Well, a few anyway. We know who they are.) Instead, Apple's executive team realized that the dedicated MP3 player was an endangered species. That's because they knew: 1) the market would saturate, 2) they knew about their own plans for the iPhone, and 3) they knew that eventually, foreign ripoffs would drive the market prices into the cellar. I took this picture recently of a 1GB MP3 player for $10 at a local supermarket. Notice any similarities?

iPod ripoff 

iPod ripoff. It even has the collar clip.

Now you know why the new iPod shuffle looks and operates the way it does.

Back to Mr. DeWitt's charts. Notice how, as the above items would predict, the iPod sales have steadily dropped except for spikes during the holiday quarter. Even so, the trend is downward.

Well, we know all this you say. Tim Cook and Peter Oppenheimer at recent earnings reports have reminded us that Apple knew this would happen, introduced the iPod touch, let it cannibalize sales and competed with itself before someone else could. So far so good.

What that doesn't tell us is where Apple is going next. The third chart shows how, in a relative* comparison, the contribution of the iPhone, and how it is quickly taking on more and more of the percentage of revenue. However, once again, no product can expand unrestrained. Apple isn't going to become "the iPhone Company" either. Instead, it will continue to leverage off its technologies to develop, as it has in the past, state of the art products that take the place of former products, just as the iPhone and iPod touch are supplanting the stand-alone MP3 player, the standard iPod.

The iPhone, too, Will Pass

In a previous Hidden Dimensions, I argued the merits of a tablet device and provided plenty of reference links to back up the argument. For now, I won't dwell on the features of the rumored iTablet. That'll come later. Instead it's first important to recognize what forces could slow down the iPhone bandwagon and lead to a successor product. For example:

  • Competition. Other smartphone makers getting more clever. I won't say smarter. But they will tend to close the gap on the leading edge iPhone and drive prices where Apple doesn't want to go.
  • Commodity prices. Apple has about $280 worth of parts in a phone for which they get paid about $500. As commodity prices go down, Apple can either cram more features into that relatively tiny device or, instead, leverage the available hardware into a next generation product that, again, leaves the competition behind. In other words, don't look for the iPhone of 2011 to have a Geiger counter, smoke detector and close-range radar. Instead, consumer needs and behavioral patterns will dictate the introduction of a new product category -- even if it does use the iPhone OS.
  • Technology enabling. What is impractical now with 3G may become routine with 4G/LTE. For example, we've heard rumors of a Netflix app for the iPhone, but limited to Wi-Fi. Why? The mass watching movies in an iPhone app via 3G would crush the AT&T 3G data network. As a reminder, I just downloaded Mac OS X 10.5.8, 759 MB, in about 12 minutes. Five years ago, that would have been only a dream. Accordingly, one has to plan for products by anticipating what the infrastructure of the future will hold. That's why CEOs chat on the phone or meet for lunch and have drinks.

Gauging the Future

Arthur C. Clarke often referred to Amara's Law, quoted in the preamble above. The observation means that we get overly anxious and then pessimistic when short terms technology gains don't pan out. For example, we might hope that personal, petabyte drives will be upon us next year. Well, no chance. But when they do come along in, perhaps, eight to ten years, we'll be taken by surprise. Just like we're amazed today about 2 TB personal drives for US$150.

So any technology CEO has to strike a middle ground in this regard and also understand his customer needs, the changing profile and age of his customers, and the infrastructure available when the product ships.

Here's an example, I think, of a technology writer who is taking a short-sighted view of the tablet technology. As I said in that previous Hidden Dimensions, the Apple iTablet, if and when it comes out, won't be designed by or dictated by crusty tech writers who are immersed in Netbooks, Windows XP and Excel spreadsheets.

Instead, the next generation product by Apple will seamlessly leverage off the iPhone and cater to a new generation of young people with different views, habits and values. In other words, what ever Apple introduces, by definition, we won't see it coming. We tend to get wrapped up in the needs of the moment while Apple looks to the future.

What I do know is that Apple was in a funk in the 1990s. It struggled to make the Mac a success by a visionary, Steve Jobs, who also struggled to make a brilliant but flawed NeXT computer a success. In time, the company looked around and said: instead of beating a dead horse with Mac OS 9, it's time to use modern technology and open standards to attack and solve problems for consumers.

MP3 players in 2001 were crap. Apple did something about it. Smartphones in 2006 were crap. Apple did something about that. Today, the high definition TV market is a whirlwind of confusing cables, competing sources of content, old fashioned thinking and non-technical executives. It makes sense for Apple to move us all into the 21st century for movie and TV watching at some point. Is there a different, better, more appropriate technology market for Apple to make its stand than book reading and video watching?

Maybe it will and maybe it won't be a 10-inch screen personal video iPod super touch tablet Macbook, but we can be sure Apple is planning for the next leg of its product portfolio. And once again, it'll take our breath away and leave the competition gasping.

Next time: What might the specifications of this next generation product be?

__________

* Note that even though the relative contribution of the Mac to overall revenue has gone down, the absolute sales, in numbers and revenue, have gone up during the iPhone era.

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19 Comments Leave Your Own

Lee Dronick

I have a feeling that an Apple tablet would be more a clamshell design. A virtual keyboard/touch screen as well as a monitor so that you can see your work.

Ken Underwood

Several years ago I submitted an idea to Apple.  I told “Uncle Steve” that what I really wanted was to use my existing Mac Pro workstation for video and audio editing during the day and then have a remote monitor that I could take upstairs to my Lazyboy and surf the net and check email.  The idea was to have a central home server powerful enough to do everything I need to do in my professional life and then use inexpensive wireless monitors to move around the house for the light stuff.

My sincere hope is that the “rumored Apple tablet device” will include this remote monitoring feature.  It would be financially beneficial for me to invest in a massive Mac Pro if all my family members could have simultaneous accounts accessed remotely from their own affordable wireless monitors.  Imagine how effective it would be to have a central home server with all your music, photos, videos, movies that every family member could access?  Imagine if your HD tv could access and display any file on your server.  Now if Microsoft designed it it would be awful, but Apple could make it work the way people would love.

By the way Uncle Steve, I’m available to serve on the board, or at least consult if you’re interested. wink

ctopher

I think what you mean is, the next product Apple creates is critical to it’s future.

There’s nothing here that indicates that you believe their next product is or is not a tablet. All you’re saying is, we’re not at Apple and Apple doesn’t do predictable products.

Then you mock bloggers who have an opinion about an Apple tablet, should one that looks like what they are writing about appear on the market. The blog post you mention doesn’t predict a product, rather it reacts to a product that others are predicting. In fact, if I take you at face value, you and Mr. Whittaker actually agree.

This is a fine article about how to stay on top in business. It is like a Firesign Theatre sketch; “Everything You Know Is Wrong” (but not as funny!)

Constable Odo

Apple’s upcoming tablet has already been drop-kicked into the trash.  EVERYONE already knows that past tablets have not been successful in the consumer market and therefore Apple’s tablet will be a failure.  Sight unseen.  Let’s all move on the the next Apple rumored device that answers the question that nobody asked.

The above paragraph is sarcasm for those serious Apple loyalists who firmly believe that the tablet will outsell the iMac.  How about if the tablet sells in quantities between failure numbers and the iMac numbers?  Satisfied.

aardman

The potential utility of an iTablet will not come into fruition until bandwidth for ultra-mobile (i.e. true go-anywhere, high throughput) devices become available.  That’s where the puck is going to be and iPhone and iTablet is Apple skating over there.

A lot of people are claiming that iPhone is good enough for their needs and iTablet will flop.  Here’s a case a again of people assuming that everybody else is like them.  Smart company that it is, Apple is developing a range of products that will fill out the product space of ultra-mobile devices.  iPhone fills up one region of that space.  There is a region consisting of people who are willing to sacrifice pocketability for more viewable video, just as there are people who wanted the iPhone without the phone (iPod Touch).

I for one would like a device as Mr. Underwood, above, describes.  Right now, when I’m in bed I access the iMac in the study with a MacBook.  Still too bulky.  But I’d also like to be able toss the iTablet into the car or in my carry-on when I’m away from home.

The iTablet might not be a fiery success upon introduction, but wait until the ultra-mobile infrastructure finally gets built out.

geoduck

There’s one aspect of the iTablet that few if any are thinking about. As the baby boom generation ages, and gen x, etc., they don’t want to watch movies or serf the web on a 2x3 screen. Aging eyes can’t see that close and or small. Frankly until just recently that was my objection to the iPhone/iPT as well. It’s just a bit too small. Teenagers can do it but to be honest more than 10 minutes gives me a headache.* This is where the iTablet comes in. Nearly as much convenience as the iPhone but in a package that you don’t need extra strong reading glasses to use. I think that will be one of the big selling points for the iTablet.

*I will be getting an iPhone in September or October, but for some particular web sniffing apps and other work related tools. I probably won’t be using it for media much. Maybe snapshots.

Lee Dronick

they don?t want to watch movies or serf the web on a 2x3 screen. Aging eyes can?t see that close and or small.

I will be 59 years old this December, and I wear glasses for reading. For me it isn’t so much the size of the screen on my iPhone when I watch movies on it, but holding it. When the iPhone is at distance from my eyes for comfortable viewing, about 18-24 inches, then the apparent screen size is about the same as my living room TV from 12 feet away. The angle subtended thing. Disclaimer: I do not yet have a honking big flat screen TV, I have a 27 inch CRT television, so that is a factor.

This leads into what Tundraboy says about the product space. Would I like a bigger screen to watch video, or view still graphics, when on the go. Yes of course I would, but my iPhone is very portable. I do take my iBook when traveling or just up to the local coffee shop when I need to escape, but it is getting heavier as I get older.

geoduck

geoduck said: they don?t want to watch movies or serf the web on a 2x3 screen. Aging eyes can?t see that close and or small.
I will be 59 years old this December, and I wear glasses for reading.

Yes perhaps I should have said WE don’t want…. smile)

I agree about the portability of the iPhone. IT’s the very reason I’m looking into getting one for work. It’s to replace a 15” laptop that I haul around to sniff wireless networks and such.

But for casual surfing, watching media, and that sort of thing, i like the iTablet idea. I think this could be one of those concepts that everyone tries and gives up on, then Apple does it right and amazes all the rest.

Lee Dronick

I agree about the portability of the iPhone. IT?s the very reason I?m looking into getting one for work. It?s to replace a 15? laptop that I haul around to sniff wireless networks and such.

But for casual surfing, watching media, and that sort of thing, i like the iTablet idea. I think this could be one of those concepts that everyone tries and gives up on, then Apple does it right and amazes all the rest.

Earlier you mentions using an iPhone to take snap shots. Since getting my iPhone I have been using it to take more photos than I have in a long time. Not just snap shots, but I am taking “artistic” stuff as well such as interesting shadows and such.

As to sniffing out wireless networks I have found something interesting using my iPhone. Walking through the neighborhood I see all locked networks, I haven’t seen one yet that was unlocked. Walk through the shopping mall there are a lot unlocked networks. I haven’t tried to get on any, but I find it interesting that businesses are using unlocked networks.

Yeah, Apple will come up with something in the way of a tablet that will have everyone saying “Why didn’t I think of that?”

UrbanBard

I agree John that Apple needs to keep pushing the envelope. I have my own prefences for a 7 inch handheld iTouch.

The 10 inch form factor for a tablet didn’t sit well with me. I perceived that using it as a touch screen would feel awkward. It would have to lay flat if you were going to type on its surface.

I resisted the tablets and netbooks because Apple doesn’t copy existing designs. Mostly, that is because most designs in the computer world are not well thought out; they are driven too much by the needs of the hardware and how cheaply you can make a devise.

Apple doesn’t always tell the truth, but it will tell you why it doesn’t like existing products. It won’t tell you how they have solved the problems that they report.

So is there a tablet that I could support? Yes, Sir Harry Flashman’s clam shell.

:

I have a feeling that an Apple tablet would be more a clamshell design. A virtual keyboard/touch screen as well as a monitor so that you can see your work.

I guess with two touch screens, you could angle one for correct viewing while having a good sized virtual keyboard. If you laid it flat it would be like having dual touch screen monitors. As a web browser, one screen would be for cover flow or the keyboard in Safari 4, while the top would be for the individual webpage.

Too bad we don’t have flexible screens yet—although I’ve heard that they are rather close—because a 10 inch screen that could fold in half would be great. It would create a back pocket sized hand held which could fold out to a bigger size. But, that seems like science fiction, right now.

Lancashire-Witch

Hold on Sir Harry. Isn’t a “Clamshell Tablet” too much like a MB Air?

UrbanBard

Lancashire-Witch said:
“Hold on Sir Harry. Isn?t a ?Clamshell Tablet? too much like a MB Air?”

Sir Harry may have his own opinion, but I don’t think so. Imagine a laptop that opens all the way up to being flat so that you see two screens. No Keyboard or disc drive—SSD only.

Perhaps, the top half is only a little thinner than the bottom; maybe, it gets the battery while the bottom half gets the electronics. The bottom screen is not as tall as the upper screen so you have a little space for a palm rest.

It would look more like a plastic covered note book, than a computer. Some people would open it up expecting to see paper.

geoduck

Or even an eMate
http://en.wikipedia.org/wiki/EMate_300

Lee Dronick

Hold on Sir Harry. Isn?t a ?Clamshell Tablet? too much like a MB Air?

How much is too much? smile

I am thinking that there has to be some sort of cover for the tablet, in part for protection of the touch surface. However, then I look at my iPhone’s screen and it is fine after a year without a protective cover. I do have a rubberized case around the body.

Whatever. As has been mentioned a number of times, an Apple tablet would be something that was designed outside of the contemporary box.

Lancashire-Witch

It’s too much if Steve thinks its too much.  Something that is not too much for me (or you) might well be too much for him.
Either its born out of “continuous improvement” - super 7 inch ipod touch, Newton mark 9, Air Touch; or its a product that’s the result of a paradigm shift - announced with the words - “one more thing”.

I favour the paradigm shifting, outside the contemporary box, tablet. Not the me too, but better tablet because, as John said in his final words, it has to leave us all (Customers & Competitors) gasping.

J K Lassitter Jr

This is an excellent article.  It is interesting that when Apple enters the market with their take on an extant product line, it does so with an entire infrastructure in place to support their version of the product and extend its usefulness by magnitudes over existing alternatives:  iPod + iTunes, iPhone + App Store + iTunes, iPod Touch + App Store + iTunes, etc.  It’ll be interesting to see what new infrastructure, if any, that Apple introduces with their next major product introduction.  Apple’s infrastructures make living with their products SOOOOOOOO easy ...

seanieryan

Apple Tv will be the server. Tablet will be like the “remote” for each user in the family to access their library / shared library. When you are on the move, you can use ‘back-to-my-appleTV” facility to stream media from your library.
ITablet can be bought in 3 sizes , ipod touch, or the new 7” and 10” touch.

Gene King

There?s one aspect of the iTablet that few if any are thinking about. As the baby boom generation ages, and gen x, etc., they don?t want to watch movies or serf the web on a 2x3 screen. Aging eyes can?t see that close and or small. Frankly until just recently that was my objection to the iPhone/iPT as well. It?s just a bit too small. Teenagers can do it but to be honest more than 10 minutes gives me a headache.* This is where the iTablet comes in. Nearly as much convenience as the iPhone but in a package that you don?t need extra strong reading glasses to use. I think that will be one of the big selling points for the iTablet.
*I will be getting an iPhone in September or October, but for some particular web sniffing apps and other work related tools. I probably won?t be using it for media much. Maybe snapshots.

You said it man!
I just bought my ladyfriend an iPhone yesterday. As a 55yr old man who presently wears “progressive lenses” I would like something with a larger screen. How about an adapter for Apple laptops that you could doc you iPhone to and make calls, and watch video on?

Steve

Fascinating article. Thanks.

It bears keeping in mind what already exists when thinking about the ‘tablet.’ New iPhone has voice recognition capability. Time Capsule now has 2TB storage. Apple TV hasn’t worked all that great, yet, but think of it and Time Capsule and Airport as your own personal cloud, connected to the big cloud, in the form of MobileMe (a name I hate, just for the record). The app store has turned into a goldmine, but also iTunes REALLY needs an overhaul—perhaps as multiple programs—because for the most part it’s just so cluttered now. And a revamp is coming, which is supposed to enable social media.

External to Apple, games command more mindshare than TV. You can receive satellite radio in your car. Facebook and Twitter and their brethren are commanding more and more mindshare. The first photo of the plane in the Hudson? Taken on an iPhone and posted to Twitter.

Why the huge concern with ‘inappropriate content’ on the App Store?

And what do I use my iPhone for? 2% calling, the other 98% stuff I would have done on my laptop or with my camera.

So, in terms of the medium-term, if I were thinking of the perfect device, it would enable all of that other 98% and more—games, social networking, etc., reading, music listening and movie watching, document editing, presentation, and so forth. Stuff that the iPhone can do, but not as well as if it were faster and bigger.

Give it access to the cloud(s), voice recognition, beef up MobileMe again for other types of behaviors. Even at 10” I could still put it in my pocket, although that might be more difficult for most of the women I know. Do all of that, and I might just leave my MacBook and iPhone at home, maybe even forget them.

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