Digitimes: PC hardware players to phase out from tablet PC market in 2012

[cbn]

http://www.digitimes.com/news/a20111116PD216.html

PC hardware players to phase out from tablet PC market in 2012

Aaron Lee, Taipei; Joseph Tsai, DIGITIMES [Thursday 17 November 2011]

Due to pure PC hardware players such as Hewlett-Packard (HP), Acer, Asustek and Dell not having any advantages to compete in the tablet PC market, sources from upstream supply chain believe these players will gradually phase out from the market with players that have strong content support such as Apple, Amazon and Barnes & Noble, to continue to compete through lowering their hardware prices.

With Amazon offering its Kindle Fire at US$199 and Barnes & Noble to provide its upcoming Nook Simple Touch at a price of US$99, the pure hardware players are unlikely to profit from the market through price competition.

Since Amazon and Barnes & Noble are mainly profiting from their content platforms, not the hardware, the sources believe these hardware devices will eventually be offered for free.

The sources pointed out that although iPad 2 is also seeing strong demand from consumers, sales were lower than those of iPad, indicating that consumers' strong enthusiasm for tablet PCs has already disappeared.

 

[s44]

Already refuted.

Dell and HP are out because they suck in mobile. But Asus, Lenovo, and of course Samsung look to be in for the long haul. And even Dell/HP will be back for Win 8.

 

[Brian Stirling]

Already refuted.

Dell and HP are out because they suck in mobile. But Asus, Lenovo, and of course Samsung look to be in for the long haul. And even Dell/HP will be back for Win 8.

Yes, but competing against the content providers that are willing to sell there tablet at a loss will be difficult for the hardware makers that need to profit from the sale of the hardware alone -- or mostly alone.

This is why I've said before that it will be difficult to compete against the Fire etc at the low end of the market and the middle will be too close in performance to fare any better.

The only space where the hardware makers can hope to profit is the high end where Apple rules the roost.


Brian

 

[poofyhairguy]

Asus won't go out. They basically ate Moto's lunch this year with the Transformer.

In fact, in the tablet market it is the primarily phone manufactures that offer the least amount of value- Moto's Xoom, BB's Playbook, and HTC's Flyer.

Dell and HP will get back into tablets, but not Android tablets. Microsoft has made it clear that its future is tablets with Windows 8, and so too will that be their future. In fact, I expect them to rip off the Transformer design as that is what those two do best.

 

[Pliablemoose]

Apple also makes cash off their app store and music store, the other manufacturers that need to compete on the high end do not, so essentially, it's subsidized tablets that will be dominating the market.

Google makes the $ off the app store not the manufacturers, unless Google wishes to share the profits with the manufacturers, they're hosed.

 

[manko]

...Barnes & Noble to provide its upcoming Nook Simple Touch...

An odd article. The "Upcoming" Nook Simple Touch has been out since June.

 

[LegendKiller]

Apple doesn't sell the ipad for a loss, so right there that's wrong. The Nooks, AFAIK, aren't sold for a loss. Who knows about the Fire, but I doubt it considering it's just a rehash of already released tabs. I don't agree that the "content providers" are going to allow tabs to be loss-leaders to an extent it'll undercut the true pure-play manufacturers. First off, almost all of the "content provider" tabs are stripped down tabs, locked boot loaders, no cameras, slower chips, no GPS/BT/HDMI...etc. Second, the Fire, while somewhat of a crossover like the NC, is still an e-reader, not a full fledged tab.

Now, if Amazon wants to release a Tegra 3, dual camera, micro-hdmi, BT, GPS...etc tab that is fully unlocked for $199 or even 299, then I would say Asus is in trouble. Otherwise, the logic fails.

 

[OneOfTheseDays]

There's no point releasing a tablet if you don't have a marketplace for music, movies, books, etc. Everyone is racing to catch up to Apple right now in this regard. No other company comes close to providing an end-to-end solution that is as integrated and polished.

Microsoft is really the only company that I can see capable of pulling this off. They have the software expertise to match what Apple is able to put out, the only thing is they are running about 1-2 years behind Apple. Playing catchup is tough.

 

[quest55720]

I do think everyone who does not have content to sell is in trouble in the current tablet market. The fire and NT are going to eat up almost all the non apple share of the tablet market. Especially when the 10 inch fire comes out. Because they can under cut everyone else in price. As we have seen outside apple no one else can sell a tablet for a premium. The closet is the transformer but that had a model that started 100 dollars cheaper than the IPAD and other 10 inch tablets.

Maybe a few will be able to cut a deal with MS to subsize some W8 arm tablets. Or go after the high end with W8 86 tablets.

 

[BenSkywalker]

If everything implied in these lines of thoughts is true, Apple should just shut down iPad production today. Sony is going to slaughter them.

Reality isn't nearly as simple as some people like to make it.

 

[Medu]

There's no point releasing a tablet if you don't have a marketplace for music, movies, books, etc. Everyone is racing to catch up to Apple right now in this regard. No other company comes close to providing an end-to-end solution that is as integrated and polished.

Microsoft is really the only company that I can see capable of pulling this off. They have the software expertise to match what Apple is able to put out, the only thing is they are running about 1-2 years behind Apple. Playing catchup is tough.

Wrong. People are buying the iPad because it's trendy and competitively priced. Most people don't have a clue what the iOS eco system even is.

 

[poofyhairguy]

There's no point releasing a tablet if you don't have a marketplace for music, movies, books, etc.

The Netflix App, the Hulu app, the Pandora app and the Nook app covers those needs for most people.

 

[s44]

The Netflix App, the Hulu app, the Pandora app and the Nook app covers those needs for most people.

And, you know, the Android Market, which has books, movies, and music.

Haters gonna hate.

 

[poofyhairguy]

Personally I see more and more people wanting "all-you-can-eat" style media approaches like Netflix rather than the nickel-and-dime you attitude of the iTunes media store. There is a reason the Amazon Prime streaming got people's attention to the Fire.

This is a bad economy, paying $3 an episode is ridiculous compared to $10 a month for watch what you can.

 

[s44]

Personally I see more and more people wanting "all-you-can-eat" style media approaches like Netflix rather than the nickel-and-dime you attitude of the iTunes media store. There is a reason the Amazon Prime streaming got people's attention to the Fire.

The problem is, as Topolsky noted on the last Vergecast, all-you-can-eat doesn't make enough money for the actual content producers. (At least under current pricing models.) This is just the tip of the iceberg, IMO.

 

[poofyhairguy]

The problem is, as Topolsky noted on the last Vergecast, all-you-can-eat doesn't make enough money for the actual content producers.

That issue is bigger than this forum, but now that they let the horses out of the barn it is going to be hell putting them back.

I am back in school now trying to get my masters, and so I interact with college aged kids all the time. And for them Netflix is THE way to go. Any time I mention a new TV show or movie the first question is "it is on Netflix?" and if the answer is no they disregard what I said.

There is a whole generation coming up hooked on "all-you-can-eat" on-demand. The era of their parents generation of paying over $100 a month for hundreds of channels with random content is dead once this generation grows up.

The media companies can bitch and moan about it, but the truth is any effort that is not finding a way to put together an ondemand service that CAN cover their costs is a waste of time. If they just try to cut them off, they will move to illegitimate services like Icefilms.

In fact, I think that is the reason for the Protect IP Act. It should really be called "Protect the Outdated Business Plan of Media Companies."

 

[alent1234]

the problem is sports and the tier 1 content like 30 Rock and the old Friends show. i've read that something like $30 of a cable bill goes to content and i bet something like $10 of that is just for sports and the top tier sitcoms. the shows where the players/actors make tens of millions per episode and the only way to make a profit is on syndication and DVD sales.

i've read that a lot of the channels on cable the business model is to have some hit show, fill the rest of the time with crap and syndication and collect $.25 per subscriber.

i think we're in a TV/sports bubble now and 10 years from now there are going to be some pissed off sports players and actors wondering why they aren't making $10 million per game or 30 minute episode anymore. because a lot of people are going to cancel cable. my wife and i are talking about it for next year

 

[Ns1]

the problem is sports and the tier 1 content like 30 Rock and the old Friends show. i've read that something like $30 of a cable bill goes to content and i bet something like $10 of that is just for sports and the top tier sitcoms. the shows where the players/actors make tens of millions per episode and the only way to make a profit is on syndication and DVD sales.

i've read that a lot of the channels on cable the business model is to have some hit show, fill the rest of the time with crap and syndication and collect $.25 per subscriber.

i think we're in a TV/sports bubble now and 10 years from now there are going to be some pissed off sports players and actors wondering why they aren't making $10 million per game or 30 minute episode anymore. because a lot of people are going to cancel cable. my wife and i are talking about it for next year

txt

ESPN charges cable operators an average $4.69 a month for each subscriber that gets the channel, up from $4.34 last year, according to researcher SNL Kagan. Cable networks such as CNN or TBS charge less than a dollar, says Kagan’s Derek Baine. ESPN’s average annual price increase to pay-TV providers will likely exceed 10 percent after the new Monday Night Football deal, says Baine.

Paying more for ESPN is only part of the problem. Disney charges distribution fees and collects ad revenue from its other channels, including ESPN2, ESPN Classic, ABC Family, and Disney Channel. To get ESPN, pay-TV systems must take bundles of channels, including some less popular. ESPN and ESPN2 account for almost 20 percent of the wholesale cost of the average pay-TV subscription, says Sanford C. Bernstein (AB) analyst Craig Moffett.

Polka of the cable association says it makes more sense to relegate ESPN to a “sports tier,” where sports fans can pay extra for it and other customers can opt out. Time Warner Cable is testing such a product in New York without ESPN for $39.95 for 12 months and $49.95 thereafter, vs. a standard cable package with ESPN for $68. Still, should the cheaper package catch fire and become the most or second most popular Time Warner Cable offering, a provision in ESPN’s contract would require the cable operator to include the costly sports network in that trimmed-down package—eliminating the reason it was introduced in the first place. “ESPN has demonstrated its value as part of basic cable for more than 30 years,” says Durso. “There isn’t any case that can be made for putting ESPN on a sports tier.”

http://www.businessweek.com/magazine/cables-espn-dilemma-wildly-popularbut-costly-09292011.html

 

[alent1234]

i've looked at the numbers and time warner cable a la carte internet is $30. add $15 for netflix and Hulu. another $15 for monthly itunes purchases of some shows and i'm at $60. compared to $150 what i pay now

not just sports. most channels are owned and licensed as a group by their owners so true a la carte is only going to happen via itunes or something similar

 

[Ns1]

i've looked at the numbers and time warner cable a la carte internet is $30. add $15 for netflix and Hulu. another $15 for monthly itunes purchases of some shows and i'm at $60. compared to $150 what i pay now

I dropped cable years ago (and netflix actually)

I'm now down to $60/mo internet

 

[poofyhairguy]

Even sports are moving out of the model as the actual content providers are learning to avoid the middle men to make more money in a worse economy.

The Big 10 Conference has been very successful with its own network. Why? Because they sell it directly to the cable companies without ESPN taking a cut. The MLB now lets you stream to their own pay-for app, and I bet the NFL will move to a similar model once the Directv contract is over. Already Directv lets people pay to have access to NFL games without their service via the internet, I bet the NFL will copy that model.

This is exactly why the fight over Net Neutrality and the Protect IP Act is so important. The obvious result if market forces work themselves out is the media companies are screwed. So while they still have power they are using their influence to prevent this from happening.

 

[Brian Stirling]

Apple doesn't sell the ipad for a loss, so right there that's wrong. The Nooks, AFAIK, aren't sold for a loss. Who knows about the Fire, but I doubt it considering it's just a rehash of already released tabs. I don't agree that the "content providers" are going to allow tabs to be loss-leaders to an extent it'll undercut the true pure-play manufacturers. First off, almost all of the "content provider" tabs are stripped down tabs, locked boot loaders, no cameras, slower chips, no GPS/BT/HDMI...etc. Second, the Fire, while somewhat of a crossover like the NC, is still an e-reader, not a full fledged tab.

Now, if Amazon wants to release a Tegra 3, dual camera, micro-hdmi, BT, GPS...etc tab that is fully unlocked for $199 or even 299, then I would say Asus is in trouble. Otherwise, the logic fails.

Saw a report the other day that indicated the part price for the Fire is over $200 -- or, another words, more than they sell it for!

This model isn't new and the example most often sited is the shaving companies giving away the razor and making big money from the blades.

I don't think very many tablet makers will be in the business 5 years from now unless they find a way to capture some of the after sale profit from apps and media. There is a model for this as well with PC makers preloading crapware and that model is also being used by the smart phone makers. It would be interesting to know how much money Sammy/HTC/etc make on each phone from the preloaded crapware.


Brian

 

[LegendKiller]

Saw a report the other day that indicated the part price for the Fire is over $200 -- or, another words, more than they sell it for!

This model isn't new and the example most often sited is the shaving companies giving away the razor and making big money from the blades.

I don't think very many tablet makers will be in the business 5 years from now unless they find a way to capture some of the after sale profit from apps and media. There is a model for this as well with PC makers preloading crapware and that model is also being used by the smart phone makers. It would be interesting to know how much money Sammy/HTC/etc make on each phone from the preloaded crapware.


Brian

The difference is ~2.70 for just the tab, R&D and advertising would add to that but not too much. Overall, you're talking a very marginal increase. Apple makes ~199 on each iPad (16gb).

The razor blade case only works for a commodity, this isn't one. Stripped down e-readers are becoming the commodity, not tabs. The big thing here is tabs and Amazon isn't likely to subsidize the tabs that much.

 

[Brian Stirling]

The difference is ~2.70 for just the tab, R&D and advertising would add to that but not too much. Overall, you're talking a very marginal increase. Apple makes ~199 on each iPad (16gb).

The razor blade case only works for a commodity, this isn't one. Stripped down e-readers are becoming the commodity, not tabs. The big thing here is tabs and Amazon isn't likely to subsidize the tabs that much.

If company A sells a device below cost in order to garner large profits from the thing they sold for a loss than the razor blade analogy is spot on. If the hardware cost for the Fire is about $2.70 more than the parts cost and if the R&D and support cost is another $35 and the marketing, packaging and distribution and shipping are another $35 then you have a product that actually cost them more like $70 more than they sell it for.

Do not be surprised if they practically give them away next year when the next version is coming out...

The bottom line is that the traditional hardware makers will find it difficult to make money just selling tablets and most of them will be out of the market within 5 years. Apple will almost certainly still be there and maybe Sammy to but unless they find a way to profit after the sale they will have to be much more expensive than the content companies and will lose out to them.

Just a week or so ago when the price for the 7 inch Sammy was revealed at $300 there are several here that replied that Sammy FAILed because they were more expensive than the Fire. How can Sammy compete with that? Answer: about as well as an Ohio factory worker can compete against a Chinese factory worker on price...


Brian

 

[LegendKiller]

If company A sells a device below cost in order to garner large profits from the thing they sold for a loss than the razor blade analogy is spot on. If the hardware cost for the Fire is about $2.70 more than the parts cost and if the R&D and support cost is another $35 and the marketing, packaging and distribution and shipping are another $35 then you have a product that actually cost them more like $70 more than they sell it for.

Do not be surprised if they practically give them away next year when the next version is coming out...

The bottom line is that the traditional hardware makers will find it difficult to make money just selling tablets and most of them will be out of the market within 5 years. Apple will almost certainly still be there and maybe Sammy to but unless they find a way to profit after the sale they will have to be much more expensive than the content companies and will lose out to them.

Just a week or so ago when the price for the 7 inch Sammy was revealed at $300 there are several here that replied that Sammy FAILed because they were more expensive than the Fire. How can Sammy compete with that? Answer: about as well as an Ohio factory worker can compete against a Chinese factory worker on price...


Brian

First off, the Fire is nothing more than a rehash of products already released, thus, R&D was almost 0. Second, sales is minimal, as they aren't doing much outside of Amazon with review units. Thus, adding 30% to the cost is really quite silly. None of that even counts in special deals struck by Amazon for production.

I don't think you need to profit off of the after sale. I ride a commuter train every day. The number of people actually using ipads as music or movie/tv is actually less than I would have thought. I think plenty of companies will still be making tabs in 5 years.

I wouldn't even start on China vs Ohio. Keep it to tabs, it's easier that way.