Apple tablet: For video, not books?
Chatting with a Canadian analyst, Cupertino execs offer hints about Apple's future plans
Rendering: Piper Jaffray
Apple executives (AAPL) have strict rules about not discussing products that the company has not announced. But they'll talk about market opportunities, as three of them did on Thursday at a special event for RBC Capital. And sometimes that's enough to discern what direction the company is heading.
In a report to clients issued Friday, RBC's Mike Abramsky ticks off the key takeaways from his meeting with Eddy Cue (vice president for iTunes and Internet services), David Moody (vice president for worldwide Mac marketing) and CFO Peter Oppenheimer.
What caught my eye was what they had to say about where they did — and didn't — see opportunities in digital content. They were talking about Apple TV, but it was as if they were thinking about future tablet computers.
Here's what Abramsky reports, in analyst shorthand, about that portion of the conversation:
Video/Content Opportunities. After music, video content is expected to be the next "exploding" opportunity, but requires overcoming industry rights dysfunctionality, competing with subsidies (cable box, video), and developing the right consumer "offer". Apple TV, while still a "hobby", is well positioned to benefit from evolving market dynamics. Apple was less enthusiastic about the online book/newspaper market, given unattractive industry structure.
Sounds like they expect an Apple tablet — should they be building one — to be used a lot more for watching movies or shows made for TV than for reading novels and newspapers.
Among other highlights of the Apple execs' remarks:
- iPhone: Interest remains strong among overseas carriers despite increasing competition, thanks to high returns per unit and low churn. Going to multiple carriers in Canada and Europe doesn't seem to have hurt Apple's margins.
- Android: Vertical integration and the iTunes ecosystem are Apple's secret weapons against the Google (GOOG) challenge. Developers, they claim, prefer Apple's single-platform model over Android's multiple hardware configurations.
- Windows 7: Bring it on. Apple, not surprisingly, sees the transition to Microsoft's (MSFT) new operating system as an opportunity to sell more Macs.
[Follow Philip Elmer-DeWitt on Twitter @philiped]
PED,
If it's any consolation, you came closer than you ever have to objective journalism with this one. I thought you just might be able to do it, and then…wait…doh! Had to get those last two jabs in at Google and MS at the very end of the article. So close!
ex ped: If you read closely, Jim, you'll see that I was reporting what Abramsky wrote, not inserting gratuitous Google and MS jabs of my own.
Another PED article…another mention of MS! Shocking…
This columnist has not been able to write an article that doesn't contain the word "Microsoft" for well over a year. Are you supposed to write about Apple or just write negative things about Microsoft? I'm confused.
Objective journalism? Whats that?
ex ped: Jim, much as I enjoy taking potshots at the market leader whenever I get a chance, what you write here is actually not true. You must have set your filters to retrieve only columns that mention microsoft, and not the ones that don't.
a previous poster said something about games… being an iPhone developer I can say this device will be as much about games as it is about everything else on the device. that doesnt mean it will be sold as a games machine but seriously play a game on a particular phone that Apple makes then play a game on a dedicated Nintendo handheld gaming device and you'll see what I mean.
i think it will be a device about everything and books/magazines/newspapers will feature as a part of this. Seriously, the App store has a books category and i am sure i wasnt the only one who was sick of seeing the TV ad for the "Classics" App which was all about reading old books.
This is deliberate Apple mischief and misdirection. A lot of work and a huge amount of money has gone into the new Apple device. This is a big deal for Apple. Whatever the tablet is, it will be highly attractive and change the game (or invent a new game!).
A film viewer in a tablet form factor will do neither of these things. It may very well, as a side benefit, play movies and video. But nothing you or Apple can do will make viewing, and hearing, movies on a ten inch screen a compelling experience. The tablet's prime function will be something else. Whatever else you can say about Apple, they're not stupid.
And after the tablet arrives every state will pass a law banning drivers from using it while driving, as some jackass might claim it's not covered by current laws banning video displays within view of the driver…
TERRIFYING, if Apple is chasing a 'new' TV! Only about 5% of TV may be interesting, amusing, informative, but NEVER 'enjoyable' with those FREQUENT mind-destroying adverts!!! If Apple can 'TIVO-OUT' those damned obnoxious, brain-cell rupturing adverts, then perhaps, Apple IS on to something…but REALLY readers, I LOVE Amazon & Bezos for DOING REALLY GOOD, for thinkers, vs 1984-like droids.(NO offense to the GOOD GUYS ((and GALS!)) @ Goggle.)
Hey Patrick in Seattle,
Is anybody forcing you to use a Mac? Why are you so set against them? People have a choice in the personal computer they purchase, and there are advantages and disadvantages to each. Some people are simply nervous about switching to a different platform for fear of the unfamiliar, even if they see and hear about the potential advantages. Some folks, like yourself, are not willing to contemplate changing, because they have so many programs that are OS specific that they feel they can't live without. That's fine, nobody is forcing them to change. However, in the long run, OS's evolve and even old programs that we own or use become obsolete, requiring the purchase of a new version anyway.
And honestly, how man of those 20-year-old games do you still play? Really!
Books will be so easy to add it is not worth mentioning. It will cost nothing to load up the iTunes Store and sell them. Everyone that wants a small laptop and uses a Kindle can go back to using one device. Add a headset and it is also your phone. Geert in NL- you got it- games also. All our personal media, communications and work PC in one device. The line starts here!
Jeesh! All this hot air over a conversation someone told someone else about!
Look, we don't even KNOW what products might best fit an iTablet. All we can do is speculate.
But one big hole in the Kindle is the inability to show color. So things like comic books, movies, games, and so forth will obviously be a natural for such a device. Think of it as a super-compact touch screen mini-computer, and you'll get closer to what it'll probably be like.
And yes, obviously you'll be able to read stuff on it. Heck, I do that right now with my iPhone!
Basically, I see it as filling a niche in the Apple ecosystem between the iPod Touch and the various portables.
My company has company-specific PC-based software. I run it on my Mac using VM Fusion. It's easy. I love my Mac even more now, because it truly can do anything I need to do. I enjoy more flexibility in my schedule than ever. A Mac without the Intel chip would not be nearly as good or useful. But I would never be without a Mac.
I will be *very* disappointed if books, newspapers, and magazines are not a major part of any upcoming tablet computer. I would love to be able to do all of my reading on an Apple tablet computer.
I don't think that it's a case that there's not a viable opportunity here. Rather I suspect that the print media industry saw how Apple wrested control of music from the music industry and they're not going to allow it to happen to them… at least not at a price that is acceptable to Apple.
@Dan from Denver,
You don't have to be a Mac fan to understand why Apple made it possible to run Windows software (via bootcamp) or other such VM software. The reality is, as Apple grows its market share, where do these people come from? They don't just fall from the sky, they are existing Windows users. The prospect of being able to run Windows provides a security blanket for switchers and makes the move a no risk proposition. That is, if for some reason, they change their mind, the same hardware can be used as a Windows machine if necessary. While things like the "iPod Halo affect" have certainly helped Apple, the move to Intel hardware made switching a whole lot easier. Honestly, this is just common sense.
@Dan in Denver
Your startling insight has led me to see the error of my ways. Now if you would kindly lend me the cost of replacing all the software I use on my Mac (around 5k to by the PC equivalents) then I would be happy to switch to a Windows 7 machine.
OK seriously there are two different arguments here and you can't have it both ways. First argument is that the Mac doesn't have any applications which can then be responded to by saying well on a Mac you can run all the Mac software AND all the Windows software – and you can't knock it as a solution as this is exactly how Microsoft are doing backwards compatibility with Windows 7. The Second argument is that if you have OSX why would you want to have anything else – which is what you have just argued.
Well actually think about it. The "it also runs Windows" argument is a security blanket for switchers. It lets them run that software package that they can only run in Windows.
Of the many switchers I have met very very few are still running Windows on the Mac. So poo-poo it all you desire but if you can't see what is happening then you are missing the point.
Brian @ SF : Makes sense to me! I just think the tablet would do more for books/print than it would for movies and music; iPod/iPhone seem to do well for those … can't see what the tablet would bring to the movie/music party that the iPod/iPhone don't.
Zack@Colchester: "Backed up all of my important data on an external drive, then just reinstalled everything" – I think you're missing the point here about the problems of upgrading to Windows 7.
Most people really don't want to have to reinstall everything, and a large number wouldn't be able to because they've lost the CD/licence.
Patrick from Seattle – why do you need uTorrent and mpg player? Oh…hm for those movies you haven't purchased on iTunes but rather pirated on torrents?
Answer me something, Mac fans:
If Apple says Windows is so bad, then why it made it possible to run it on the Macs. After all, if you have OS X, you don't need anything else, right?
I find it strange for some to make the comment that there is plenty of software available for Mac OS and then go on to say that you run a Windows OS to run the additional software.
When I buy a computer, I want one single OS – I don't want to monkey around with booting into Linux, Mac OS, Win XP/7…just give me one OS where I can conduct my business.
If it can run OpenOffice, MS visual studio 2008 with .NET, Borland 2008 Builder, HEW for Renesas processors, MPLAB IDE for Microchip processors, uTorrent, sp-lint, videos in mpg format, and the handful of games I've picked up over the last 2 decades then I will buy it. If you tell me that I need to buy a completely new computer with OS loaded and then purchase a license for an additional OS – NO THANKS!
Jeff@omaha : Rumor has it this device will run IphoneOS -> You still get kindle software, they just don't want to have the conversation where they're competing with ebook readers.
R @ Boston : Also remember that from a hardware point of view, Macs & PC's are not so different, the difference is the OS and good marketting… Windows 7 will run on Apple Hardware. Apple can sell pretty machines and let people install Windows. They may not want to come right out and say it, but it will happen.
I upgraded to Windows 7 from XP on Oct. 22, only took me an hour with a 1 TB hard drive. Backed up all of my important data on an external drive, then just reinstalled everything. All the talk about the upgrade taking up to 16 hours is BS.
Oh, come on! Really — the tablet will be for music and movies and not books? What on earth is Abramsky smoking? The iPod/iPhone and AppleTV (despite its flaws) is all over music and video and has been for some time now. If Apple was successful in surmounting the "unattractive industry structure" imposed by the music and film industries (which weren't suffering economically as badly as books and newspapers are now) then surely it will overcome the "book/newspaper market." Cue et al.'s comments on the book/newspaper market were obviously meant to throw our scents off the trail. The last frontier for Apple will be the publishing industry. Period.
I just bought a Mac Pro yesterday. I have transferred my environment from my previous iMac. It took less than one hour, and all is perfect at the end of the day. This is computing. Not fighting with backups trying not to loose your young son's pictures…
As an IT pro, my environment is quite complexe and I have a lot of stuff on it.
I still have an XP license running perfectly under Parallels 4. It allows me to keep developing financial applications in Delphi. And I enjoy developing in this configuration since XP is very fast and stable on my Mac !
But I am not going to buy THE tablet if it is only here to allow me to watch films on it. I have other projects for such a device. I would be really disappointed.
A bit off topic, but I'd like to thank Galleon Group for liquidating their position in Apple, thus pushing its price down and letting me add to my portfolio at less than $200/share.
Xmas came early!
Really, Dave, Why not knock Windows? It's just too easy. Microsoft gives us so much ammunition, It would be a shame not to use it. System Seven's malware problems will not be going away, although that is, now, mainly hidden by XP user's malware.
You need to learn some Apple history, though. Microsoft has no generous impulses, nor was Apple in dire straights in 1998. Apple had 1.2 billion dollars in the bank when Microsoft invested that 150 million dollars in non voting stock.
http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/592FE887-5CA1-4F30-BD62-407362B533B9.html
One odd thing is that Apple had lost 850 million dollars the previous year (1996) and spent a billion dollars in 1997, although out of that it purchased NeXT Corp for 600 million.
Yet, despite suffering a drop in revenues of a billion dollars between 1997-8, Apple maintained its investments and grew its cash. That deal with Microsoft was a settlement from Microsoft stealing Quicktime software through Intel and the San Francisco Canyon Company. A conservative estimate is that Microsoft paid Apple between a half to two billion dollars in the deal, but neither is saying.
Apple is not obsessive about market share the way that window pundits are. It has about 10% of the US market and is growing about 30% a year. Any faster growth would cause Apple channel congestion.
Apple has more software than Windows does. It has all of the Mac OSX apps, all the Unix Open Source software which has been written in forty years, and all of windows software, since you can run Windows in a partition on the Mac. But, Mac software is so good that most of us don't bother running anything else.
Dave in Florida
You're badly misinformed. Bill Gates didn't rescue Apple from bankruptcy. I worked at Apple during that time and the truth is that Microsoft purchased shares of non-voting stock and agreed to continue developing Office for the Mac largely in return as settlement of a lawsuit. It's certainly true that those weren't Apple's best days, but they were never close to bankruptcy.
Secondly, according to IDC Apple's Mac market share for the last quarter was 9.4% and their share of the smartphone market is 30% and growing much faster than competitors.
It may have been true once upon a time that there was a dearth of software available for Macs, but that hasn't been true for a very long time.
With the Windows 7 introduction there will be some opportunity to sell Macs due to the fact that a number of people will have difficulty upgrading from Windows XP and they could take the opportunity to purchase a Mac if they're willing to spend the extra money and try something different out of curiosity. The consumer's best bet is to buy a new computer and they could go either way to WinPC or Mac. It's a longshot, that's all.
As for the corporate world getting Macs it's likely a no go. Not as long as the old-guard IT manager exists. They've made the decision for 100,000 computer users who had no say in what type of computer they want to use. Those old guys narrow-minded heads are so into Microsoft and Windows PCs and they're too scared of losing their jobs to make any changes. Eventually a lot of them will retire or die off and then maybe some changes might take place. It'll take time, but as long as Apple makes money from consumers, that'll just have to do. It ain't about market share, it's all about making money and keeping customers happy.
Note to Dave Bokeelia:
The suggestion that somehow Microsoft (you say Bill Gates) saved Apple from bankruptcy is an urban myth.
You may be referring to an agreement reached between Apple and Microsoft in 1997 that ended years of litigation through a cross-licensing agreement between the companies.
In that comprehensive agreement Microsoft agreed to continue development of Office for the Mac for five years and ended a threat of further litigation from Apple from the appropriation of QuickTime technology and settled the past disputes concerning Microsoft's appropriation of the "look and feel" of the Mac OS.
Microsoft chose to invest $200 million through preferred stock in Apple. An investment that provided a handsome return to Microsoft.
At the time Apple had over $1 billion in cash and equivalents on its books and at no time was in danger of filing bankruptcy.
Fred Anderson, Apple CFO at the time, also had ample credit facilities in place in addition to the $1 billion in cash on the books.
Microsoft was eager to end the litigation threats from Apple which would not have been a concern if Apple was in any way nearing bankruptcy or dissolution. Microsoft viewed itself as vulnerable legally and a comprehensive agreement covering all areas of dispute was the best outcome for that company.
R in Boston:
It's an opportunity because the hardware requirements to support Windows 7 and the expense of upgrading both the operating system and hardware make it a no-brainer to at least look at Apple as an alternative. If your CIO is laughing at the idea of Macs he's probably unqualified for his position. Seriously.
BTW, Mac market share in the US is now nearly 10%, hardly nobody. And try visiting any college campus. Market share by college students, while difficult to measure, is estimated at over 25%.
Dave from Florida:
Dave, Macs run MORE applications than a PC.
Elementary, since Macs can run MacOSX or Windows, either dual boot, or via Parallels. So, we can run all OSX programs PLUS all Windows programs
Can't run OSX on an HP or Dell. Sorry.
PC fans had quit using "fewer apps" in their attacks since the move to Intel processors and BootCamp. Didn't you get the EMail?
(Also, that reasoning was HURTING the WinCE agenda for smartphone market with so many apps in iPhone App Store.)
I would love to have this device be able to handle, video, gaming, web browsing, word processing, music, spreadsheets, email, GPS, Photobook, with WiFI and possible 3G/4G capability. Sounds like a bigger iPhone… All for under $1000.
I will pre-order the device or stand in line to get one!
Dave, you seem to have stepped out of a time warp from the 1990s. Apple Stores do the marketing of the software products that help make the Mac so attractive to an ever-growing share of the market. Sine when is market share a reflection of quality? Does Tiffany control the jewelry industry? Do most people jot their grocery lists with Mont Blanc pens? As for applications, well, you need to do your homework. Anything you need to do you can do and do well with an existing application for Macs. The ranks of developers are growing exponentially now, as the iPhone runs OS X, so all those developers eager to create iPhone applications are really learning to develop for OS X. If you think there's a lack of software, you really aren't paying attention.
Dave B…
Spoken like someone who hasn't used any Apple products. I guess your reasoning is why Microsoft is following Apple into retail stores? Or doing their best to sell folks a Zune? A Zune! What, exactly, don't you understand about 80% market share in portable audio? Or dominance in mobile computing? Ever get a virus? All Office software runs on Mac. Anything a PC can do, a Mac does better. (And I don't own a Mac!) Where is the Microsoft phone?
Jeez. I can see why Florida attracts retirees.
@R from Boston MA….
It's fairly obvious when you see the new Get A Mac ads why the Windows 7 upgrade is an opportunity (or why Apple looks at it as one)….because the largest percentage of the market that is upgrading to Windows 7 is upgrading from XP, not from Vista. The Vista to Win7 upgrade is a lot smoother than the XP to Win7 upgrade because, moving from XP, you've got to do a full format backing up all your data. So Apple says, while you're backing up all your data, move it to a Mac instead of another PC.
Good attempt at turning this into an opportunity, hopefully it works.
I think thats a smart way to go Apple. books are really not what people want these days, they can leave that to Amazon to sell books and other stuff. I believe if Apple can do well with videos, anybody can be watching the latest movies right on their Mobile phone. but there comes the Copyright and sharing problems. Lots of walls need to be broken down before this can happen.. google sniper
Apple's ONLY advertising strategy for Macs is to attack the Windows operating system. Too bad Bill Gates rescued them from bankruptcy years ago. Apple execs are punks who defend a product with so little actual share of market OR applications that it borders on being a cult product rather than a useful one. Is the reason Apple doesn't advertise the software available for it really because there is such a lack of it?
Why would Windows 7 be an opportunity to sell macs? The only hope apple had was hype and Vista hangover. From all accounts 7 is great so why would any business migrate to a platform used by ….nobody? We are upgrading our company's pc's next year. When someone asked CIO about macs, he laughed. Seriously.
It only means there's no structure in place for selling books via Apple yet. Doesn't mean people won't find a way to read books on the tablets
With Amazon's kindle taking the U.S. by storm, I can only imagine that Apple (and most likely other corporations) are deep in development of a similar, but probably better, type of product like that. The technology that is going to be coming out in the next few years is going to be amazing and I am excited. It would be great to build websites like my trfilliate payday on a small, simple product sitting in the train station, lol.