When I suggested earlier this week that Apple was playing hardball by scheduling Tuesday's iPad Mini announcement so close to Microsoft's Windows 8/RT and Surface tablet launch, I didn't think Apple would play as hard as it did. The big reveal, the first Apple event streamed live over the Internet in two years and the first to be streamed directly into living rooms via Apple TV, showed Apple is still the dominant player in the tablet market.
And it obviously plans to keep it that way.
Apple CEO Tim Cook seemed delighted to announce that Apple has already sold more than 100 million iPads, ticking off all the reasons people love them and pointing out that 94% of Fortune 500 companies are now testing or deploying iPads. It was a clear message to Microsoft, Google, Samsung, Amazon, and pretty much everyone else that Apple still leads the product category it defined nearly three years ago.
The unveiling of the iPad Mini was almost a forgone conclusion - Phil Schiller even joked about that when introducing an updated Apple's Mac mini. What had been seen as a possible, but unlikely, announcement was a refresh to the existing 10-inch iPad, which arrived only last March. But Schiller did, indeed, announce such update, touting the iPad's new A6X processor and the move to a Lightning connector like that used in the new iPhone 5.
The new fourth-generation iPad is definitely a step up from its predecessor. Its A6X processor delivers up to twice the CPU and graphics performance of the model it replaces. And, like the iPhone 5 and the new iPad Mini, it also supports a broader range of LTE networks -- a key addition for users outside North America. Even with the arrival of this unexpected newcomer, Apple still sells the older iPad 2 as a $399 entry-level, full sized iPad -- albeit one without a retina display.
While the announcement of a new full-sized iPad was a surprise -- one greeted with decidedly mixed emotions by those who had already invested in a new iPad in recent months -- it was the iPad Mini that was the main event.
The diminutive form factor of the iPad Mini places it in competition with a range of Android-based devices, including Amazon's Kindle Fire and Kindle Fire HD; Barnes & Noble's Nook tablets; Google's Nexus 7; and Samsung's Galaxy Tab and Galaxy Tab 2 tablets.
Most of those tablets sell for $199 or less, which makes the $329 price for basic iPad Mini stick out like a sore thumb. Samsung Galaxy Tab models can even be found for free when paired with a two-year contract with a mobile carrier. (See also: Apple's Phil Schiller defends £269 iPad mini price)
The pricing reflects Apple's standard approach to many products -- framing it as a premium device that comes with best-in-class hardware. Apple is not a company that competes at the entry level of any product it sells, and it looks like the company isn't about to change its approach anytime soon.
Apple's overall product strategy focuses on delivering a quality user experience through world-class product design and engineering, higher-end components and a tightly integrated ecosystem of product lines, accessories, and apps. The strategy has largely worked well, since delivering a good experience for customers helps ensure enthusiasm and loyalty.
Having said that, it's important to note that many of the inexpensive tablets in the 7- to 8-in. space sell at subsidized prices. The Galaxy Tab and other tablets with mobile carrier support are often subsidized by a carrier in exchange for a two-year contract. Amazon CEO Jeff Bezos recently admitted that his company makes no profit on Kindle devices and sells them at or near cost as a way to drive purchases of electronic content -- ebooks, music, movie and TV shows, and apps (prior to his statements, it was widely assumed that Amazon actually sold the devices at a loss). And Google's primary source of revenue is advertising, so while the company is still perfecting its mobile ad strategy any Android devices are delivering valuable data to the company; making a profit off Android or its own branded Android devices isn't a high priority at the moment.
Apple, on the other hand, makes most of its money from hardware -- Macs, iPads, iPhones, iPods, and the Apple TV. Content is a tool to drive sales of devices more than a revenue stream in its own right. In that context, it isn't really a surprise that the iPad Mini isn't a bargain-basement option.
The question, of course, is whether Apple can show that the iPad Mini is worth $130 more than most of its rivals. I think it can demonstrate enough value to make the iPad Mini successful, but it won't appeal to everyone.
One point to keep in mind about the iPad Mini is that it generally comes with more on-board storage than competing tablets. Most of the others offer 8GB of storage in their entry-level models. The iPad Mini starts at 16GB, like all of the bigger iPads and current-generation iPhones. That changes the comparison a bit. Given that many tablets are used for media consumption, it's easy to fill up 8GB quickly. When you're comparing many 16GB or 32GB devices to an iPad Mini, the price points are closer. The big exception is Amazon's Kindle Fire HD, which retails for $199 and has 16GB of storage.
If you're looking for a device with a greater amount of storage to begin with, the iPad Mini's price points are easier to accept. That doesn't mean everyone will need or want additional storage and in today's economy many, particularly cash-strapped families planning holiday shopping, may opt for a lower price over capacity.
While this issue doesn't apply to all iPad Minis, it's an important consideration for anyone buying a tablet with LTE connectivity. Yes, iPad Mini will mean a larger up-front expense than a subsidized Android tablet like the Galaxy Tab. The flip side is that there's no two-year contract involved. As with buying a subsidized smartphone, most users will end up paying significantly more over the life of the contract than if they had paid full retail up front.
Being contract-free and pre-paid, the iPad Mini also allows greater control over its data plan than subsidized tablets. If you're traveling for work, you can purchase more data as needed. If you're not traveling, you can turn off data completely. You can also monitor and manage data effectively in real-time to avoid any overages completely.
One of the biggest questions preceding the iPad Mini's announcement was how Apple would add support for another screen size in its iOS lineup. After all, screen size has been one of the reasons for the fragmented nature of the Android ecosystem. Apple's solution was both brilliant and incredibly simple: introduce a new physical screen size, but not a new logical screen size. By building a screen that has the same number of pixels as the original iPad and iPad 2, Apple ensures that every iPad app runs just fine on the new device and with greater pixel density for a sharper image, though not as sharp as on a retina display.
The move illustrates one of the competitive advantages iOS has over Android in attracting developers as well as buyers -- there's very little fragmentation in the iOS ecosystem. With just three screen sizes (original iPhone/iPod touch, iPad and iPad Mini and iPhone 5/4th generation iPod touch), it's easy for developers to ensure compatibility with every potential iOS device. Even if you add support for retina displays, it's still easy for developers to deliver an app that runs on every device.
Screen size isn't the only fragmentation concern. There's also mobile OS version fragmentation, something that carriers and manufacturers have made more problematic in the Android world. With such a range of devices running an OS that's one or two years out of date, developers must often choose between creating apps for older OS releases for maximum accessibility or apps using the latest OS and hardware features for the best experience. Android also creates security and device management challenges for IT departments in schools and businesses because of the range of OS versions.
One point of debate between iOS and Android fans is whether Apple's curated App Store approach is better than Google's open approach, which lets users get apps from Google Play as well as alternative stores. While many Android devices offer that more open approach, some of the most popular tablets -- the Kindle Fire and Nook lines -- don't. In fact, they're even more restrictive than Apple in some key ways.
While Apple offers ebooks and newspaper/magazine subscriptions through iBooks and Newsstand, it doesn't force you to use them instead of competing apps. An iPad owner can load the Kindle and Nook apps, as well as a range of other ebook readers, and get access to any books or magazines available from their related stores. iPad owners can buy music from Amazon's MP3 store and load them into iTunes and into iTunes Match and listen to them on an iPad.
That opens up a wider selection of options. Amazon and Barnes & Noble don't offer that same flexibility, which could make the iPad Mini a bit more attractive for readers.
iOS experience, ecosystem, and halo effect
The iOS experience is extremely consistent across devices. That alone can be a selling point for consumers. I recently witnessed the value of this first-hand when my 76-year old father, who has had an original iPad for nearly two years, got his first smartphone, an iPhone. Both he and I assumed that he'd have trouble using it at first. After a few minutes, however, he declared that it was "just a baby iPad" and he was off and running with no learning curve at all. For many technophiles, a reliably consistent experience isn't the biggest selling point. For most consumers, however, it's an extremely important advantage.
A device with no learning curve that integrates seamlessly with much of Apple's existing ecosystem is an attractive feature for anyone invested in that ecosystem. It's an aspect of the halo effect that often leads iOS device users to purchase additional Apple products. There's no learning, no rebuilding or moving of media libraries, no need to buy alternate versions of apps. Everything just works.
Business tested and vetted
In addition to a greater range of media choices, the iPad Mini also offers more functionality, particularly for business users. Like all iOS devices, it can integrate with Exchange and corporate networks, work with VPNs, run the same business and productivity apps, and network with printers that support Apple's AirPrint. Although Amazon has dipped its toe in the enterprise water with the Kindle Fire HD, no one would consider it a serious business tool and most IT professionals wouldn't describe it as enterprise-worthy. The Nook lineup is even less business appropriate.
More importantly, the iPad Mini comes with all the enterprise credentials of any other iOS device, including Apple's mobile management and security framework. There's no need to worry about how well an existing mobile management solution and strategy will work with it. There's no new device enrollment or deployment issues.
Basically, if an organization already supports the iPhone or iPad, it supports the iPad Mini out of the gate. That's a pretty powerful endorsement for business use, particularly as a bring-your-own-device option. Quite frankly, it's a claim that even Microsoft can't make with its upcoming Windows RT tablets, including the Surface RT, because it is essentially a new platform with new a new approach to management.
In addition to launching the iPad Mini, Apple also announced an updated version of iBooks Author, which can be used to create digital textbooks. Cook pointed out that the number of textbooks available is now large enough to cover 80% of the classes taught at the high school level and includes a mix of titles from major textbook publishers as well as from smaller groups and individual teachers. That illustrates a powerful influx of content in only 10 months and it proves that iPad-only classrooms are a viable option.
According to Apple, the iPad has been adopted in about 2,500 classrooms across the U.S., a significant number. But with 14,000 school districts across the country, Apple has clearly only scratched the surface of the iPad in education. The biggest criticism so far has been the cost. Although Apple has worked with districts to make iPads affordable through leasing and lease-to-own programs, the cost of outfitting a single high school class is a daunting investment, to say nothing about adopting iPads across all elementary, middle, and high school classes in a district.
The iPad Mini may help bring the iPad to a larger number of schools. Although it is just $70 cheaper than the iPad 2, those savings ads up quickly when buying in volume, saving $70,000 for a district of 1,000 students. If Apple can apply volume leasing and other cost-cutting methods to the iPad Mini as it has the existing iPad lineup, it can make the device even more attractive to school districts. That could drive adoption of the iPad Mini as well as iBooks textbooks.
iPad Mini, iPod touch or iPad 2?
The iPad Mini's pricing means Apple has positioned three different iOS devices at a similar price point. The fifth generation iPod Touch starts at $299; the iPad Mini, at $329; and the iPad 2, at $399.
The iPad Mini actually overlaps both the iPod touch and iPad 2 in terms of how it will be used. It has a bigger screen for gaming and reading than the iPod touch. It has more portability than the iPad 2, making it better for long-form reading and use on-the-go. All three devices are built around Apple's A5 processor.
Deciding which one to buy as a gift, teaching tool, business device, or for personal entertainment isn't going to be an obvious choice for everyone. In fact, many times people find that an iPhone or iPad leads them to use devices in ways that they didn't anticipate. Getting some hands-on time with the devices at an Apple store, mobile carrier, or other retailer may be the best way to make that decision.
Just wait until next year
In closing, let's return to the iPad Mini's price. It is higher than many people expected. While $199 was a hope for many, it clearly wasn't one that panned out. Indeed several analysts and Apple watchers thought the entry point would be $249, or perhaps $299. While $329 is higher, it isn't absurdly more expensive.
More importantly, this is the price for the first-generation iPad Mini. Apple is almost certain to follow the same price and feature diversification strategy as with the iPhone and iPad, in which a device's previous generation becomes the entry-level device. Just as last year's $199 iPhone 4S can now be purchased for $99 and the previous year's iPhone 4 is free with a contract, the iPad Mini that Apple released today will almost certainly be available at a lower cost -- perhaps $199 -- next year.
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