A recent report from Piper Jaffray analyst Gene Munster claims Apple’s iPad is cannibalizing iPod sales. The analyst said some consumers looking to buy an Apple product are choosing the company’s tablet over its personal media player.
That has contributed significantly to reducing iPod sales and has made some wonder how much longer the iPod will share the spotlight with some of the more popular Apple products.
In the same report, Munster also said it’s possible that the iPad will cannibalize Mac sales as consumers decide to buy the tablet rather than a MacBook or MacBook Pro. Munster predicted that the damage to Mac sales will be minimal, but noticeable.
If the iPad can damage iPod sales significantly and could potentially have an impact on Mac sales, the question arises: Would the iPhone also be affected? It’s certainly possible. And it might be cause for alarm if Munster’s calculations aren’t quite accurate and the iPad takes more consumer spending away from Macs or iPhones than originally expected.
Here is why Apple should fear the possibility of its iPhone and Mac sales being cannibalized by the iPad.
1. The iPad is center stage
When the iPhone was first released, it took all the spotlight away from previous Apple products, like the iPod or Mac. It also stole the spotlight from just about every other product on the market. The same thing has now happened with the iPad, which has stolen the show from other Apple products. And although the iPhone is still selling well and Macs are poised to have another strong quarter, most folks are going to the Apple Store to get their hands on an iPad, not a smartphone or notebook.
2. It runs iPhone OS
Apple’s iPhone OS is arguably the best mobile smartphone available today. Although Google has tried to match the Phone OS, it hasn’t been successful. But the iPad also runs iPhone OS, and it accommodates every iPhone application. If consumers are looking for touch functionality and the ability to use apps around the house, the iPad might be a better option than the iPhone.
3. The iPad is a computer too
Apple has gone out of its way to prove that the iPad is a replacement for small laptops that make users productive on the couch. The debate over whether or not that’s true still rages on, of course, but all of Apple’s iPad marketing efforts have centered on getting users to buy the tablet to make them more productive at home. And since the iPad also connects to 3G, it’s arguably more useful than a MacBook for those who surf the Web and check their e-mail often. That could come back to haunt Mac sales.
4. A Windows-iPad environment is nice
This one won’t win over too many Apple fans, but a combined Windows-iPad personal computing environment provides the best of both worlds for the average consumer. Now, before Apple fans rail against that statement, they need to remember that the vast majority of companies in the United States run Windows, making the operating system a practical necessity for those working in today’s connected environment. But for those times when work doesn’t need to be done, having an iPad, rather than an iPhone or a Mac, is actually quite nice. As an iPad owner, I have started seeking out my iPad rather than my MacBook to use at night. It’s that good of a Web-browsing device. For the average, mainstream consumer, Windows might still be the best option for productivity, and the iPad is best for everything else. Sorry, iPhone and MacBook.
Tablets Seize Attention in Mobile Computing Market
5. Use means everything
When consumers decide to buy a product, they need to consider the value of using it. The iPhone is appealing because it delivers Web surfing, e-mail, apps and more in a smartphone. A Mac is appealing because it offers productivity in a different operating system. But users are quickly finding that using the iPad might be a better alternative. After all, it performs most of the iPhone’s tasks and is capable of doing just about everything a MacBook can do. Plus, it doesn’t require a monthly fee to use it, as the iPhone does. When it comes time to consider how a consumer would use all these devices, the iPad might come out on top.
6. Where’s the differentiation?
The biggest difference between the iPad and the iPhone is that the latter allows users to place calls over AT&T’s network. That’s a significant advantage that could make some either opt for an iPhone or use both an iPhone and an iPad. But for those who can’t stand AT&T and don’t require the iPhone’s offering, the iPad provides the best of both worlds. They can stick with the smartphone and carrier they want, while still enjoying the iPhone’s functionality on a bigger screen that only enhances that experience. The iPhone’s calling ability might be a key differentiating factor for some, but it might not be enough for others.
7. Price plays a role
Price could be the biggest reason why consumers would opt for an iPad over an iPhone or MacBook. For one, the MacBook is expensive compared with other notebooks, making it a less than ideal choice for those on a budget. The iPhone, on the other hand, is much cheaper than the iPad, but it requires a costly monthly plan from AT&T that quickly drives the price up. Granted, the iPad 3G also has monthly connection fees of up to $30, but those are optional, and they can be eliminated at any time. From a long-term cost perspective, the iPad is the user’s best bet, given its capabilities. That could hurt iPhone and Mac sales.
8. Consumers already have an iPhone
To some extent, iPhone sales rely on consumers who already own a version of the device buying the newest iteration. But with the iPad on store shelves, the need to pick up the latest and greatest iPhone could be diminished. In many cases, consumers buy the new iPhone because it delivers improvements that had been unavailable in previous versions of the device. And the iPhone is now no longer the only Apple touch-screen product on the market offering those improvements; the iPad will see updates too. Maybe consumers will decide to stick with their current iPhones and enjoy all the new bells and whistles in the iPad.
9. Iterative updates are dangerous
Apple needs to be careful when it updates Macs and the iPhone. Before the iPad was released, adding a few improvements here and there was enough to coax consumers to buy products. But now, the differences need to be great enough for them to opt for a MacBook or an iPhone over the iPad. Substantial updates are needed to limit cannibalization.
10. The future is in the tablet
Consumers, enterprise customers and even vendors are quickly realizing that the future of mobile computing rests with tablets. The iPad and several forthcoming tablets are proving that the industry is moving in that direction. The tablet is also causing doubts about how useful those lightweight notebooks, like the MacBook, really are. There’s no telling exactly what will happen in the future, but if anything is close to certain, it’s that tablets, led by the iPad, will continue their meteoric rise in popularity.
That could prove troublesome to some of Apple’s other divisions.
