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20/12/2011

Why the iPad Is the Most Hated Gadget Ever

By Mike Elgan.

As the Apple iPad succeeds beyond expectations, it leaves in its wake an enormous body count of dead and dying products. While consumers love it, several major industries have grown to hate it. And for very good reason.

Why the iPad Is the Most Hated Gadget Ever

Why Tablet Competitors Hate the iPad

It wasn’t supposed to be like this. The iPad was supposed to usher in a new era of tablet computing, creating a thriving new market that looked a lot like the world of smart phones.

After gaining an early lead, the iPad was supposed to settle in as a big seller, dominating the high end of the market. Android tablets were supposed to grab most of the unit sales, offering a variety of successful sizes, options and price points. And tablets running proprietary platforms like HP’s WebOS and RIM’s BlackBerry Tablet OS were supposed to bring healthy new sources of revenue to those companies.

But that’s not what happened.

What happened is that Apple has asserted an unshakable lead, and no other company other than Amazon has taken significant share.

What’s worse, the vast distance between expectations for non-iPad touch tablets and the ugly reality is causing havoc, wrecking companies and transforming whole industries.

The first major casualty was the HP TouchPad, which shipped July 1. Although HP had enormously high hopes for the tablet, its reception in the market was so bad that seven weeks later HP announced the termination of all WebOS hardware products.

Retail stores had literally hundreds of thousands of units that they knew would never sell at the initial price that started at $500. So they had a fire sale to dump the products starting at $99 each, a price far below cost. In the end, HP had to take a $1 billion cash charge on the fiasco.

The bloodbath was just beginning. Next up: RIM. The company’s BlackBerry PlayBook tablet has sold better than the TouchPad, but sales were disappointing and have declined since the launch on April 19. RIM’s estimates for unit sales were 2.4 million for second fiscal quarter, but they ended up selling only 200 thousand of them.

In order to dump inventory, RIM temporarily cut $300 off the price of each tablet, selling far below cost.

The company had to take a $485 million charge on losses from the PlayBook miscalculation.

Another factor is the Amazon Kindle, which is sold by Amazon at a loss to be recouped later with content purchased on Amazon.com.

Here’s the under-appreciated reality of all this: HP, RIM and Amazon have all moved millions of touch tablets into the market at below cost. This has caused two problems for the market. First, it’s created a domino effect. HP’s fire sale on the TouchPad cut demand for the BlackBerry PlayBook, reducing unit sales. That contributed to RIM’s need for a fire sale of its own. (Plus, Amazon has probably long intended to sell below cost.)

All this crazy, unexpected discounting has both artificially taken market share away from the various Android tablets, and re-set consumer expectations about how much a touch tablet is supposed to cost.

Now, the only way to sell a non-iPad tablet in any significant quantity is to sell it below cost.

Android tablet makers are faced with the choice between making a little money on each tablet but selling few, or losing money on each tablet and selling many.

It’s a horrible state of affairs for the tablet industry, unless you’re Apple or Amazon. And it’s almost entirely the fault of the iPad.

The iPad’s reception convinced the industry that they could succeed, too. The success of the iPad made HP and RIM vastly over-estimate demand. And the success of the iPad made it impossible to compete against the iPad in the market, forcing companies to ultimately dump inventory at below cost and, in doing so, nearly destroy the Android tablet market.

That’s why the consumer tablet industry hates the iPad. But they’re not the only ones.

Why Vertical Tablet Makers Hate the iPad

Tablets have been around for many years in various vertical industries.

The aviation industry offers something called the “electronic flight bag.” Several companies have sold expensive, dedicated tablets that give both professional and private pilots a variety of tools and charts necessary for aviation, as electronic replacements for the paper resources that used to be standard.

But the iPad is destroying that industry. The iPad hardware is much better. The interface is much better. iPads are far less expensive. And they can be used for other things. Pilot tools are provided as simple apps.

The electronic flight bag industry hates the iPad.

The same thing goes for a large number of industries, such as medicine, retail and many others. Everything was going fine. And now the iPad comes out of nowhere to destroy their expectations — and their revenue.

Why The Toy Industry Hates the iPad

The number one most requested toy for Christmas this year is the iPad.

And it’s also popular among parents as a gift for their children.

And boy does the toy industry hate that. The reason is that the iPad replaces not a single toy type, but thousands of them.

Apps make the iPad a replacement for all kinds of toys that parents now don’t have to buy. So the hardware takes away money that would have been spent on toys, then the apps take away money that parents would later spend on games, content, coloring books and so on.

Why the PC Industry Hates the iPad

The iPad has really thrown a monkey wrench into the PC industry.

One of the hottest segments three years ago was the tiny netbook. Many PC companies are still relying on netbook revenue. But, increasingly, they can’t.

Dell announced yesterday, for example, that it plans to discontinue consumer netbooks. Apparently iPads are too compelling an alternative. Instead, Dell plans to aggressively pursue ultra-portables that compete with the MacBook Air. Good luck with that.

Meanwhile, the Dells of the world have a bigger problem, which is that some people are using their iPad as an alternative to a full-size laptop or desktop.

Former PC World Editor-in-Chief and current Technologizer writer Harry McCracken said last week that the iPad 2 has become his favorite computer. McCracken wrote: “I think it’s possible to use an iPad as one’s primary device for professional-level content creation. Actually, scratch that. I’m positive it’s possible — because I’ve been doing it for the past three months, and I’ve been having a really good time.”

The number of people who favor an iPad as their main computing environment is small but growing.

And the PC industry hates that.

Why Amazon Will Soon Hate the iPad

The Amazon Kindle Fire is the only non-iPad touch tablet currently succeeding in the market.

The main reason is price. At $200, it’s far less than half the price of the iPad.

The other reason is that people like Amazon-specific goodies like free cloud service and easy access to Amazon content and shopping.

But mostly it’s the price.

It has also become clear in recent weeks that the Kindle Fire is a piece of crap.

The tablet has no physical volume buttons; no privacy, security or parental controls to speak of; a clunky user interface; not enough storage; an old version of Android; and a host of other problems.

The Amazon Kindle Fire fits the description Steve Jobs once gave for the netbook. The problem with the Kindle Fire is that it’s not better than anything. It’s just cheap.

The Kindle Fire is far less expensive than the iPad for two reasons. First, Amazon is selling it at a loss, while Apple makes a huge profit on every iPad. But second, the Kindle Fire is a 7-inch screen device and the iPad is a nearly 10-inch one. The screen, the battery, some electronics and some materials are far cheaper on a smaller device.

Now there’s a rumor that Apple plans to replace the iPod Touch with a 7.85-inch iPad. The rumor looks as solid as such rumors get. Plus it makes perfect sense for Apple to do this.

Given Apple’s economies of scale, it’s likely that Apple could sell the iPad at the same price as the current iPod Touch — $199 — which is also, of course, the same price as the Amazon Kindle Fire.

Merely announcing such a product would immediately hammer Kindle Fire sales. And actually shipping it would be devastating. Why would you buy a Smart ForTwo car if you could buy an Infinity M37 for the same price?

Consumers love the iPad. But the unprecedented success of the iPad is laying waste to products, product categories, companies and even entire industries, and nobody can stop it. Never before in the history of consumer electronics has a single product earned so much love – and so much hate.

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