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The Apple iPad is a category-cataclysm and no one knows it yet: Double-thinking Steve Jobs and his double-suss of the hi-tech marketplace

Here’s the question that will appear in the deep-think mainstream media analyses of the brand new Apple iPad:

How can hardware vendors answer Apple’s new tablet?

Guess what? It’s a dumb question.

Slightly brighter lights might ponder this, instead:

How can Amazon compete with the new iBook store?

And: Yes: It’s another dumb question.

Here’s why: With the iPad, Apple CEO Steve Jobs has managed to double-suss the entire hi-tech marketplace. After 30-plus years of being ridiculed by nerdy dipshits like Bill Gates, Apple is poised to take over everything that matters in the new economy.

And, as far as I can tell, no one so far has even figured out what they’re doing.

Why is it that all of the supposed iPhone killers have fared so badly in the marketplace? Because the iPhone is not a cell-phone. It’s a software experience packaged as a cell-phone. Phone vendors can compete well enough with the actual phone, but they have nothing at all to offer as a software experience. Wannabe iPhone clones only have apps at all because iPhone app developers port their products to BlackBerry, Palm and Droid devices.

And if you’re about to get huffy about hardware or performance or open-source or whatever, stand down. We’re not done yet.

The true fact is, the iPhone isn’t a hardware product, and it’s only a software experience from the point of view of end users.

What is the iPhone, really? It’s the user-interface for the iTunes App Store. For iTunes generally, of course, but mainly for the App store.

So what is the iPad, really? It’s portable retail store-front for everything sold at the iTunes store.

Apps. Movies. Music. Books. And now newspapers and magazines.

The iPad is not a tablet computer, so all of the supposed iPad killers that will be introduced in the coming months will fail, just as all the iPhone killers have failed. Hardware vendors will kill themselves eclipsing the iPad’s hardware in every possible way — and they will fail dismally in the marketplace.

The iPad will be a great hardware experience coupled with the typically-superb Apple software experience. That goes without saying. But none of that will matter.

Here’s what matters: The iPad will be the means by which you will acquire all of the digital content for sale at the iTunes store — and all those wannabe iPad killers will not. Without the iTunes connection, the iPad will have no competition. None. Zero. Never.

That’s half the genius of the iPad. Here’s the other half: Amazon doesn’t have the iPad. Apple understood the Kindle the way no one else did: Not as an eBoook reader but as a retail store for eBooks. And with the iPad, Apple has stolen the real product from Amazon, leaving it with warehouses full of useless Kindles and charging Amazon a premium to become Apple’s partner in the eBook retailing business.

The iPad is a truly frolicking brilliant move by Apple. It can’t be beaten as a hardware/software device, and it can’t be beaten as a retail Point of Purchase for digital content.

Apple has not only just killed the desktop, laptop and tablet computer category, it has also killed the digital content marketing category. The iPad is the future of for-pay digital content. The only future, eventually, for content creators who want to get paid.

And here’s the killingest thing of all: Apple isn’t even going to own much of its own content. It’s not a retailer, truly. It’s a broker — a consignment store. Apple will take 30% or so from book, newspaper and magazine publishers in order to make their products available through the iTunes store. Similar deals for music, movies, software applications — everything. If it runs on an iPod, an iPhone or an iPad, Apple will broker the content and take a big split on every sale. The risk remains with the content creators, but Apple will keep a cut every time the cash register rings.

And the device itself, if it is an iPhone or an iPad, is the cash register.

The world has bitched forever about the cost of Apple hardware, but it seems likely to me that the iPad and the iPhone would be immensely profitable even if Apple gave them away for free!

This is a brand new way of doing business. It’s wrong to say that Apple invented it. Amazon did, with the Kindle. But Steve Jobs understood what no one else did: Great hardware is not enough. Great content is not enough. But marry the two together and eventually there will be nothing left for anyone else.

This is big news, bigger than anyone can understand as yet. The iPad will get lots of gushing coverage tonight and tomorrow. But the real news is here: Steve Jobs and Apple today announced the eventual demise of both Microsoft and Amazon, among many, many other hi-tech companies.

The iPad is not a category-killer. It’s a category-cataclysm. Whatever our congenital hall-monitor of a President says tonight in his State of the Union speech, this is the big news of the day, by a huge margin.

 
My early posts on the iPad:

Related posts:
  • Ten million iPads to be sold in 2010? It could happen…
  • Dear Steve Jobs: Stop jerking everyone around with a goofy set-top box. Give us a real Apple TV — a TV engineered by Apple.
  • Apple tablet computer announcement liveblogging now…

  • 21 comments

    21 Comments so far

    1. Damon Chetson January 28th, 2010 9:39 am

      I view the iPad as better than the Apple TV, but that’s about it. Apple TV could’ve been great, could’ve adopted an open standards approach, could allowed for DVRing, could’ve integrated more fully with the internet. But it basically serves as yet another way to buy from the Apple Store.

      So I agree with the general thrust of the analysis – that the iPad merely a means by which consumers will get content via Apple’s store.

      But I guess the question is whether you think a top-down approach – where Jobs controls the ways in which consumers can interact with that content – is going to beat a more open approach. Apple’s strength is that it is phenomenal about software design that is consumer oriented. Consumers want the ease of use of MacOS or the iPhone, and the generally seamless interface between Apple products.

      I think Apple has pointed the way for other device manufacturers, who will embrace a more open approach to content distribution.

      I like my Droid, for instance, with its open development system and And I like the system I built for my TV which allows me to DVR, use Hulu & Netflix, etc.

      I realize that I’m not typical – I’m a little more self-sufficient than most who buy consumer electronics. But I think the open approach will probably win out over Apple.

    2. Al Lorenz January 28th, 2010 10:05 am

      Great post and comment. However it goes, we’re all going to win as consumers. I don’t put it past folks like Google and Amazon to come up with a way to compete with Apple. But, hats off to Apple for figuring out how to provide an appealing solution to content in the market. I am looking forward to enjoying the experience and seeing the market work.

    3. Greg Swann January 28th, 2010 10:15 am

      Richard Riccelli fingered this post from Mashable that makes an argument similar to mine.

      > But I guess the question is whether you think a top-down approach – where Jobs controls the ways in which consumers can interact with that content – is going to beat a more open approach.

      It already has — for for-pay content. It’s plausible to argue for any number of other hardware/software design paradigms, so long as the content creators are not getting paid. It doesn’t really matter what I might want. Apple has established the last workable chokepoint, and the for-sale content distribution channel, going forward, will be the iTunes store.

      Yes, Amazon will continue to sell a few MP3s, but Apple will be 80% and then 90% of all digitally-delivered music and movie sales, and its share of all for-sale digitally-delivered content will rise continually, and every other vendor’s shares will fall.

      For what it’s worth, the place to compete with Apple is not on hardware or software. Other vendors refuse to think their products through, so they’re always going to suck compared to Apple’s products. But Apple is hugely vulnerable on content pricing. If Amazon or someone took the entire digital long tail — catalog titles available in digital form — and reduced prices to their actual market value, the iTunes store would be hurting. The problem is that content creators are not willing to sell their products at their true market value — say a nickel for last year’s hit single. As with everything else, Apple has sussed this out perfectly.

      All of this should be weighed against the idea that “information wants to be free.” Apple is standing as the only effective conservative force against the tsunami of free content, and it may yet turn out that ordinary information offered for sale (or even for rent) is a dinosaur thrashing through its last days in the marketplace.

      > But I think the open approach will probably win out over Apple.

      Hasn’t worked so far for phones. I could make a strong argument that the iPad really is “The Computer For The Rest Of Us.™” We just bought an iPhone for Cathleen’s mother, age 88, and she loves it. The iPad may be the way I get my own luddite mother onto the internet.

    4. Russell Shaw January 28th, 2010 11:57 am

      Brilliant analysis.

    5. Greg Swann January 28th, 2010 12:15 pm

      > Brilliant analysis.

      Apple’s marketing strategy is a lesson for us all, if we can figure out how to apply it. No matter how deadly the competition’s aim might be, they will always be aiming for the wrong target. At the intersection of game theory and capitalist economics, this might be a perfect solution to the problem of competition. We can talk about all the amazing gifts Apple has given us over the years — and how little they charge, comparatively, for the value delivered — but this business strategy may turn out to be the best gift so far.

      And meanwhile: What a fascinating time it is to be alive!

    6. Don Reedy January 28th, 2010 6:51 pm

      Greg,

      Here’s an article from Newsweek, that on its surface appears to belittle the IPad. But it’s a short read, and it appears you’re not the only one who has read the tea leaves in favor of what’s really happening with Apple and Steve Jobs.

      Who’d have thunk it?

      We don’t sell razors.
      We don’t sell razor blades.
      We facilitate the sale of your razors, your blades, and we just skim a few cents from the coffers every time you make a sale of whatever you’d like us to help market.

    7. Jessica Horton January 28th, 2010 7:35 pm

      My MLS is opening the door for Mac’s this year and I was really hoping for a little more from it on the computer side. Think I’ll wait for 2.0 or 2.5…

    8. Fiona January 28th, 2010 7:42 pm

      It can only be all good for us as consumers – new products, competing big companies makes for great products and inovations! Go Apple!

    9. Greg Swann January 28th, 2010 8:05 pm

      > We don’t sell razors.
      > We don’t sell razor blades.
      > We facilitate the sale of your razors, your blades, and we just skim a few cents from the coffers every time you make a sale of whatever you’d like us to help market.

      Don’t forget, this is what we do, too. Brokerage in general is a good business model, if the buyers and sellers will go along with it, because we socialize much or even all of the risk to the sellers.

    10. Greg Swann January 28th, 2010 8:12 pm

      > I was really hoping for a little more from it on the computer side.

      Look at a MacBook. You can get a rockin’ machine for $1,100 (I’m writing on one now), and, if the software is there for you, you can do everything associated with real estate brokerage from the road.

    11. Robet Kerr January 28th, 2010 9:23 pm

      I’ve read the analyses … and aside from the Apple aficionados, who will buy anything new and Apple, I just don’t see where the 3-4M in sales in Year One will come from.

      Some future Kindle sales? Yeah, Ok. Some future netbook sales? Ok, there too.

      3-4M in Year One? A pipe dream.

      By 2013/2014, the iPad could be the next Newton.

    12. Scott Cowan January 29th, 2010 10:37 am

      I really think that this device could be a difference maker. It is lacking some polish that we all would like to see. Multitasking, USB, Camera, etc… none of this however keeps the core for being brilliant.

      What does disturb me is the name. Given the name and the skit of a few years ago I think that Apple is going to have a lot of PR to spin on this one.

      http://www.youtube.com/watch?v=8eF0y0IfpPU is the link to the video from Mad TV about the iPad……Humorous perhaps….will it keep people from buying one? perhaps.

    13. Greg Swann January 29th, 2010 11:21 am

      > Multitasking, USB, Camera

      USB support is built in, as with the iPhone through the 30-pin connector. Camera support is built into the SDK, so it’s plausible in will be available in iPad 2.0. (Curious omission, I admit, but AT&T might have wanted it out, since an iSight camera, iChat and an unlimited data plan could put spasms in their dike fingers.) Multi-tasking may well be built in, as well, but shut off for now to make the iPad look incredibly fast. Power-users of OS-X will be well familiar with the beach-ball cursor. Jobs may be counter-marketing against early kvetching. The other big omission is Flash, and I’m still waiting for Apple to announce that it is buying Adobe.

      As for the name, I got five bucks against a triple grande latte that Mad-TV won’t make any difference at all.

      If I get time tonight, I want to write a post on vendor attitudes toward their clients and how it will make all the difference, in the marketplace, going forward.

    14. When Will Apple Develop A Ruggedized iPad? January 29th, 2010 1:22 pm

      [...] the iPad a game changer?  Yes, but maybe not for the reason you think so.  Greg Swann at the Bloodhoundblog.com was dead on when he said: So what is the iPad, really? It’s portable retail store-front for [...]

    15. Scott Cowan January 29th, 2010 1:27 pm

      Only betting a triple? =)

      I am not a Apple Fanatic living here in the land of Microsoft so I do not have a history of understanding how Apple rolls out products. I like what you have to say that the things that are missing might well be there just not yet. Having a native USB port would make this work really well with my massive investment in Windows based hardware and software. That is the only thing that I really am bummed about. If the 30 pin connector works that is a acceptable kludge for me for the time being. Flash support is disappointing too but I think you might be right that they will be buying Adobe soon….. Still, even with the potential short comings I am looking forward to toting one to the next BHBU event =)

    16. Jesse Rivera January 29th, 2010 2:06 pm

      This is no game changer. It is a great product for those Apple fanatics, but it lacks so much that the general public will not like it. As bad a Microsoft is, people are used to it and they will buy what is familiar.

    17. Brad Coy January 29th, 2010 3:43 pm

      Great analysis. The first thing that comes to mind is how awesome this technology is and how much MORE the public immediately expects from Apple.

      They had to give this a lot of thought when it came to the name and marketing the product. Yes, the word pad reminds us of one thing and not the other… but how long until consumer conscience switches to the Apple brand. Considering the presumed names of iTablet (pc) and iSlate (heavy) suck, iPad was probably the best choice.

      I most certainly will buy one of the next gen versions. Not only do I see it as a great tool to use on the road in Real Estate. I would love to have it on the coffee table in my living room where my MacBook now stays. It’s a big Win in my book.

    18. Kim Hannemann January 29th, 2010 5:08 pm

      All those who say “the general public will not like it” are absolutely and unequivocally wrong.

      This is a game-changer of epic proportions.

      Ordinary, non-geek people will get their hands on these at the 300+ Apple stores, and through their friends, and will not want to let go. None of its supposedly missing elements are going to make a difference except to analysts.

    19. Teri Lussier January 29th, 2010 6:20 pm

      Am I incorrect to think this is a Google-like revenue generating thingy?

      It’s purpose it to sell me stuff in a cool format?

      Like Saturday morning cartoons and sugar-coated cereal?

      It also could begin the next flu pandemic. ;-)

    20. Keith Lutz February 1st, 2010 7:03 am

      Wow, can’t wait for the future, just to see how far off base you are.

    21. Greg Swann February 1st, 2010 10:01 am

      > Wow, can’t wait for the future, just to see how far off base you are.

      Come and get it — if it’s there. Never afraid to admit it when I’m wrong.