We were promised such great things at CES 2011. We were told the coming year would bring worthy competitors to the mass-market consumer tablet space, an arena conquered -- if not pioneered -- by the iPad. Poised to challenge Apple's throne, Motorola and RIM unveiled two serious iPad contenders in the Android-powered Xoom and the BlackBerry PlayBook.
[bug id="ces2012"]Fast forward to 2012: Only 4 percent of U.S. customers who own tablets purchased one from Motorola last year, according to current Forrester Research estimates. RIM's PlayBook, meanwhile, flopped infamously, and the company has resorted to drastically slashing prices in an attempt to push out products en masse.
And there's Samsung. It currently produces the most worthy iPad challenger, the Galaxy Tab, but holds only 5 percent of the U.S. tablet-owning demographic. Apple, as yet unseated, holds 73 percent of the U.S. tablet marketshare, Forrester says.
Apple's competitors aren't going to pack up shop and go home. So what lessons have we learned over the past year's tablet buying trends? More importantly, will device makers take heed?
Here's some of what we discovered over the past year, along with advice for hardware companies as they ready for CES 2012.
Buyers Want It Cheap
In the lead up to 2011, the least expensive iPad, then as now, was $500. The first wave of Android competitors decided to beat that iPad's specs and offer a different OS experience, but at a more expensive price. The companies assumed that if consumers were willing to shell out so much scratch for an iPad, they'd pay even more money for an Android tablet on steroids.
But consumers weren't interested. Motorola shipped only 440,000 Xoom tablets in the first three months of the product's release (and "shipped" does not necessarily mean "sold"). Best Buy had reportedly sold a mere 25,000 HP TouchPad tablets out of the 200,000-plus ordered. And RIM's PlayBook arrived D.O.A., more or less, and shipments have only dwindled over 2011.
After all these tablets started collecting dust on the shelves, manufacturers and retailers hoped price cuts could lure in prospective buyers. But there's one problem with that: Beefy hardware costs money. 10-inch screens, dual-core processors, and extra HDMI and SD card slots are expensive -- and every new adornment slims down a manufacturer's profit margin further. So cuts of $50 here, and $100 there were as far as companies could go.
Until, that is, HP decided to deep-six the TouchPad tablet. First launched to much fanfare in July as a competitor to the iPad, HP killed the device after a mere 49 days, citing disappointing initial sales figures. In order to liquidate inventory on the massive $3.3 billion write-down the company took on "winding down" its TouchPad business, HP slashed prices to a fraction of what they once were -- $100 instead of $500. RIM followed suit recently, cutting prices on the BlackBerry PlayBook nearly in half.
Suddenly, HP and RIM couldn't keep the tablets in stock. Retail chains sold out almost immediately, while the manufacturers' online storefronts were on back-order for weeks.
And then there's the Amazon story. Pricing its tablet at $200 from the start, Amazon sold "millions of Kindle devices" during the holiday season. While we haven't been given official sales figures (and Amazon never hands those out), no Android tablet to date has debuted as successfully as the Kindle Fire.
And get this: The Fire comes with hardly any on-board storage. There's no removable storage port, and no camera. Performance-wise, it's a tortoise among hares. Hares on roller skates. With rockets attached.
But all of that doesn't matter. "Tablet success is not about 4G, quad-core chips, or Ice Cream Sandwich," said Forrest analyst Sarah Rotman Epps in an e-mail. "It’s about demonstrating the value, utility, and wonder of the device."
The Takeaway for CES
Upstart manufacturers need to quit aiming for the top of the tablet food chain. Instead, aim for the low-end, and execute well. Don't worry about the bells and whistles. At least, not yet.
Ship When It's Done
I can already hear your counterargument. "Millions of customers are shelling out premium cash for iPads. The market for high-end tablets is there."
This is true. But Apple's tablet has enjoyed a major advantage: iOS.
Apple's mobile software had three and a half years to mature on iPhones before moving to the larger form factor of the iPad. And in 2010, when the iPad finally debuted, Apple had only a handful of devices on which it had to configure iOS properly (and the differences among iPads have had very little bearing on OS support).
Contrast that with Google, whose Android OS stretches across hundreds of devices with myriad screen sizes. Or RIM, whose BlackBerry OS is being left behind for QNX, an OS acquired by RIM in April of 2010. Or HP, which failed to properly implement webOS on its hardware.
And Microsoft doesn't even have a mobile OS for tablets yet (and, no, Windows 7 tablets don't count).
Apple spent years refining iOS before graduating to the larger form factor of the iPad. The software worked for customers without a hitch. By contrast, Android's Honeycomb OS, when released in the first wave of tablet upstarts, felt janky and convoluted to newcomers. HP's hardware and software didn't seem to be completely in sync either, stuttering and sluggish to the touch.
RIM's PlayBook shipped completely lacking a number of key features, and even the successful Kindle Fire has received complaints for its sluggish browser, stuttering menus and funky app behaviors (though the tablet's low price most likely rebuffs any serious customer dissatisfaction).
The message from all of these tablets was clear: "Ship today, update tomorrow." The response from consumers: "No, we demand more -- we want an elegant tablet experience out of the box."
"Motorola, Samsung, RIM, HP, and all the rest put premium price tags on half-baked products, and consumers rejected them," said Forrester's Epps.
The Takeaway for CES
Ship a product when it's finished, not according to an arbitrary timeline, or in service of short-sighted business goals. Wait for operating systems to mature before slapping them onto hardware. We've got high hopes for Ice Cream Sandwich, a.k.a. Android version 4.0, though its implementation on tablets is yet to be seen. Here's to hoping it's not Honeycomb redux.
Someone's Got to Lose
The market is flooded. Dozens of hardware makers are pumping out tablets too similar to each other to really stand out. We saw this throughout 2011, and all CES indicators point to the trend continuing in 2012.
This will lead to carnage. Many tablets will suffer battle wounds in the coming year. And the tablets produced by companies lacking the time, capital and investor patience to soldier on for the long haul will be the first to die.
The small outfits like Fusion Garage will smolder and fizzle out. The industry giants like HP -- a company whose shareholders and board members don't have the stomach to lose billions waiting for a platform to grow over time -- will shutter divisions and pivot towards another industry vertical. There are winners and there are losers in every game. Such is life.
The Takeaway for CES
Unfortunately, there's no helpful takeaway for manufacturers for what I've described above. CES is just a few days away, and 2012 product road maps are unfurling in real-time. The tablet debuts at CES 2012 should show us clear winners and losers as they take the international stage next week.
Has anyone learned anything from the past year of failure? We'll see soon enough.
