When the iPod came out, there were no analysts around who could be bothered to project the numbers that it might ship. Had they made a projection, they would never have reached the more than 100 million that have actually shipped, in multiple sizes, including video versions, those without hard drives and tiny versions with their own cameras. They would have projected about 2 to 4 million by year end, and probably overshot the early marks.
We feel it is the same with the iPad and said so on the day it was announced ‘ that until Apple launches improved TV services ‘ with streaming from iTunes instead of just downloads, and channel payments instead of payments for each discrete program ‘ the iPad will simply eat other markets ‘ tiny chunks at a time ‘ but even this will be enough to see it score as a success.
The iPad is an iceberg or an onion ‘ mostly hidden beneath the surface, and revealed a layer at a time ‘ something we always attributed to the Sony PS3, which is even now only just becoming entirely apparent, years after launch.
So two things have happened this week ‘ sales numbers of 300,000 first day iPads were revealed, and the device was torn apart by a company called Chipworks and its partner iFixit. This latter move revealed perhaps too much detail about the hardware, but mostly shows something that we only suspected until now, which is that this is really two huge heavy batteries strapped to an iPhone, with a big screen. Obviously from a software and usability point of view that sounds quite insulting, but it’s not, we have always talked about the iPad being an oversized iPod Touch, and said that this is just what the Apple market needed.
The arrival of the iPhone and the Touch have allowed developers to focus on larger flat screens and they have come up with applications that suit yet still larger screens, especially for book reading, video viewing and web browsing.
Apple has also said that it has sold over one million apps from Apple’s App Store for iPads and over 250,000 ebooks from its iBookstore, all during the first day.
Apart from the large batteries and the Apple A4 chip, the iPad also has Broadcom chips for the screen and touch controllers and for Bluetooth, Samsung or other DDR SDRAM memory (dual suppliers?) and a Texas chip as a Touchscreen line driver. It has used cheaper chips and used the spare space that the larger screen gives it, for instance using three chips for a screen controller rather than one and the two batteries are about ten times physically larger than an iPhone battery.
We see this device eating a little of many markets before the persuasiveness of Apple streamed TV services emerge later in the Summer ‘ so that’s a small slice each of netbooks, notebooks, portable media players, ebook readers, portable gaming platforms, MIDS (mobile internet devices), Blackberries (portable email devices).
But once streamed TV services are released by Apple, it will be like the arrival of iTunes music store for the iPods. They did little better than okay prior to the arrival of the music store service, but then they did amazingly well. The new music services then led to the introduction of further devices. And that’s exactly how it will go this time around, which one exception ‘ that rivals will, to some extent, see it coming.
So a TV service will MAKE the iPad essential even to non-Apple lovers who don’t really go for apps, which tend to have quite short term entertainment value. It will be like buying a browsing Wi-Fi device with TV on it. And that TV service could give way to genuine in-home TV sets which may come out of Apple by year end ‘ in other words although the services will give way to a multiplicity of devices, the service will initially need the iPad in place to take off and for anyone to see why its worth having. But the iPad may not be the device which benefits the most in the long run from an iTunes TV service.
All of this rivals can see, and by rivals we don’t just mean the netbook companies making tablet formed netbooks or the chip vendors that will stimulate year end tablet form factor smartbooks. The other rivals are also content suppliers in the form of other streaming TV services that are likely to come from the likes of Hulu, or Fox and Disney directly and all of the studios and broadcast combinations that the US has.
This type of rival will be looking to attract devices and will court Apple iPad-alike devices from the Microsoft and Android camps. No broadcaster wants Apple to have the type of domination in TV that it already exerts over the record labels, so they will want other device combinations to stand up to the iPad. So service and device proliferation in streamed internet TV services will come about far quicker than Apple had competition in the iTunes space.
All of this has us worried about the future for broadcast mobile TV, something we felt would take off in the US during 2010. There is one argument that says that if Wi-Fi video streaming takes off in earnest in the US, then mobile TV is dead ‘ both MediaFLO and ATSC M/H. However history tells us that once streaming took off in both South Korea and Japan it was in fact a stimulant to broadcast TV. Whether or not the same will turn out to be true in the US, where Wi-Fi is widespread, but nowhere near contiguous, we will have to see.
Going back to the iPad itself, the hugeness of those batteries bothers us. This is not the case that we had previously thought, that the battery life was 10 hours because of the low power demands of the ARM A4 architecture ‘ but instead the result of designing the entire device around a battery.
Subsequent generations of iPad will almost certainly begin by being much lighter, as Apple discovers improved efficiencies in its A4 chip, and after that will stay the same weight, but develop yet longer battery lives. The battery life of an Amazon Kindle is over a week ‘ and although this is mostly due to the fact that it is a single purposed device (for the most part) and that this single purpose suits a screen technology (electronic ink) which requires next to no power, not being backlit. E-ink works from reflected light (rather like a book) and this savages the amount of power required to run it. But given that the only new service that Apple launched with the iPad was the iBookstore, it feels it needs to compete better with the Kindle. The fact that it is more than double the weight and physical size and holds a fraction of the battery life, will mean that anyone who is actually looking for an ebook reader who makes a direct comparison, will opt for the Kindle.
This will not be the case for someone who is looking for a ‘cool’ device, because they’ll want it to offer multiple functions ‘ so the Kindle will gradually develop multiple functions, such as web page browsing, while the iPad must head in the performance direction of the Kindle. For instance we’re sure that Apple would like to offer its iBookstore without a cellular data charge, and the download cost being picked up through the book price.
As Apple grows more confident of the markets and volumes for its iPad, it will also be able to opt for more highly integrated chipsets. Instead of choosing three chips for screen control instead of the single one the iPhone uses, the iPad will slowly be able to afford these more highly integrated chips, as they both come down in price, as they get older and better established, and also as the acceptance of what is a fairly revolutionary device, is established outside of the current apple community.
The iPad hasn’t actually sold out and there are still devices to be had in Apple stores, but every finance analyst who is following Apple has raised their projections from the 5 million mark to the 8 million mark for this year on this flimsy sales evidence. This is all before Apple brings out critical video services, and once they arrive we would expect shipment forecasts to rise once again, especially now that it is clear that the device is not component constrained.
It will likely be next Spring before a rival tablet-service combination arises strong enough to challenge the iPad for this nascent market, and by then the public may already be in love with yet another Apple device.
However just how many existing Apple lovers buy the iPad, as opposed to new Apple lovers, will dictate whether the sales of the iPad are largely cannibalistic or additive to overall Apple revenues and we won’t know that until Apple reports next quarter.
It is worth mentioning that on day one Apple has had something of a PR disaster, with the iPad Wi-Fi connectivity being highlighted as weak compared to the iPhone ‘ Apple had better hope this is a software fixable issue, because a recall of the product to replace a Wi-Fi chip will be both expensive and disastrous in terms of how it is perceived in the market.