Where does the tablet market go now? Amazon has made its move this month with the new Kindle Fire HD tablets. The tech world is waiting for Apple’s other shoe to officially drop with an announcement of the iPad Mini at some point late in October.
The introduction of the iPad Mini could herald a change of Apple’s financial strategy, it’s likely to be more of the same from CEO Tim Cook. The iPad Mini will slot into a gap in the existing range of Apple devices. I don’t think that Apple is going to change the basic strategy of making a profit on hardware sales with access to content as a selling point, which is in part why I’m arguing for a $299 entry level iPad Mini with only 16GB of storage and Wi-Fi as the connectivity option.
Until Amazon arrived with the Kindle, there was no other tablet manufacturer that could challenge Apple’s iPad in the public conscious, which made it easy for Apple to retain the premium price tag on the hardware and keep pulling in the profits. It’s arguable whether Google’s Nexus 7 can tip the needle with the general public in the way it has done with the tech community.
But the Kindle Fire range, with a focus on selling the tablet devices almost at cost, and then making the profit on the content has the potential to disrupt Apple’s model over the next few years. At the Kindle Press event Jeff Bezos was emphatic and clear on how Kindle is designed as a business:
We want to make money when people use our devices, not when they buy our devices.
Paraphrasing Apple’s model into the same framework, and Tim Cook’s model can be described as clearly as Bezos:
We want to make money people buy our devices, and we’ll help them use their device over the next few years.
Both models are valid, and both models will deliver different results. Right now, the model to have is the Apple model, but Amazon is playing a very long game, and not just one restricted to tablets. Consider what would happen in the markets when (not if) a Kindle Phone is released. It’s not going to appear this year, it may even appear next year, but it is on the radar, and could be even more disruptive than the Kindle Fire.
Apple’s business model works right now. Amazon has a model that is in its infancy, but seems perfectly suited to where the market is moving to in the future. As the financial returns for these two models converge, will Amazon drive home an advantage? Will Apple cling to its model or change radically?
There’s a change coming. Who’s going to be aggressive enough to win?
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