Subplot of the day: have users realized tablets are unnecessary?
Today has been one of the rare days where we got big announcements from both the Android world and the Apple world. This morning, we finally got a look at the new OnePlus One Android smartphone (phablet?), and then this evening Apple announced its Q2 earnings which (mostly) exceeded expectations. But, there was an interesting subplot behind both stories: do tablets really matter?
Admittedly, that might not be the subplot you'd expect between those two stories, but it is there nonetheless. We'll start out with the Apple earnings call numbers. As we reported, Apple blew away the projections for iPhone sales with 43.7 million sold compared to expectations of just 38.7 million. Apple also announced a 7-to-1 stock split, which caused its stock price to skyrocket. Not surprisingly, those two stories have been leading the headlines for the past couple of hours, but those two stories weren't the only pieces of news to be found in Apple's announcement. The other interesting bit of information was that Apple missed its sales projections for iPads, and it wasn't even close. Apple had been expected to sell 19.36 million tablets in the quarter, but only managed to sell 16.3 million.
The reason why Apple missed on tablets is a more complex topic than you might think. There had been iPad mini Retina shortages early in the holiday quarter, but those mostly cleared up by the time Apple's Q2 rolled around. The high price tag of the iPad mini Retina ($399) may have been part of the reason Apple's sales numbers came up short. Also, the fact that the lower tier full-size iPad on sale was the iPad 2 likely also brought down the numbers. The iPad 2 was finally put to bed and replaced with the iPad 4, but that happened with less than two weeks to go in the quarter. That's not enough time to boost sales numbers, but we would guess that discontinuing the iPad 2 had quite a bit to do with Apple seeing the lower tablet sales coming in over course of the quarter.
Of course, that's just looking at the internal factors for Apple's lower tablet sales. There are quite a few external factors that would play a part in those numbers not making the grade. Most would probably put Android tablets at the top of the list of external factors that are cutting into Apple's tablet sales, and that may well be part of it. Additionally, tablets don't need to be replaced as often as smartphones (which we'll expand upon in the next section, because this is a benefit for users), and lower turnover means fewer sales for manufacturers like Apple.
But, the biggest reason is one that we don't tend to look at too often when looking at the mobile ecosystem: users may be realizing that tablets aren't really necessary in the same way that smartphones and PCs are. Smartphones have quickly become one of the most indispensable technologies that we have, and despite drops in sales, PCs still have a very clear use case for many users, most specifically professionals and power-users. Maybe though, tablets themselves aren't as essential to the computing ecosystem as manufacturers would have us believe.
One of the troubles with the tablet market is in finding the best use case of the device. Overall, tablets excel at being media consumption devices, and this alone points to the idea that while tablets are useful, and can be very nice, they aren't exactly a necessity, because no one could claim that we are short on media consumption devices.
Regardless of the size of the tablet, the form factor isn't that great for input, but it is very good for watching videos, reading, or browsing the web. Tablets can also be very good for gaming, but even here we have to start adding caveats, because how well gaming works on a tablet depends highly on the game being played and the size of the tablet on which the game is run. Casual games, like Candy Crush, work on tablets, but can feel like a bit of a waste of the screen real estate and processing power. Plus, the size of a tablet makes the use feel more like a sit-down experience because even smaller tablets can be somewhat awkward to hold up for long periods of time.
This means that, for the most part, tablets are used in very specific settings, like on public transport, in bed, on the couch, or while taking the Browns to the Super Bowl (aka in the bathroom). You aren't going to be using a tablet while at a desk (as Microsoft is finding out the hard way with its push on hybrid devices), because proper laptops still rule that setting. And, for all other instances, smartphones are the weapon of choice. If you have a few minutes while waiting in line or something like that, you're much more likely to pull out your smartphone from your pocket than you would be to reach in your bag for a tablet.
Tablets are easily the best option in the settings where they excel and in the use cases that they apply to best. Unfortunately, those cases are relatively limited. This is the same reasoning as to why analysts have been calling for the death of the traditional PC. The use case of a traditional PC is fairly limited as well. They are best used at a desk, or in a stationary position. PCs are best for content creation (photo/video editing, music creation, long form writing), which happens far less than consumption; and, for more hardcore gaming, which happens far less than casual gaming.
Although it was mentioned as a negative for Apple earlier, one benefit for consumers is that tablets don't need to be replaced as often as smartphones, partially because the use cases are so limited. Tablets are bigger, meaning less worry about battery life or heat, so they can feature faster internals. This means that assuming your tablet is still good enough for reading, watching videos, and some light gaming, you could keep the same tablet for multiple years. But, a smartphone that is older than a couple years can really start to show its age and feel sluggish.
When people talk about moving into a "post-PC" world, tablets aren't really what is intended with that designation, because tablets are used in many of the same settings that PCs are, but tablets simply work better in those situations for the common tasks that dominate the majority of casual usage. The thing is that while tablets excel in certain areas, smartphones excel in those same areas; and with phones getting bigger and bigger, the reasons for owning a tablet continue to become fewer.
Back when Apple first unveiled the iPad back in 2010, smartphones were just beginning to cross the 4-inch display threshold; so, the idea of having a touchscreen device that had a display that was 10 inches made a lot of sense. But, an interesting thing happened in the next two years - as smartphones got bigger and bigger, tablets began to get smaller. 10-inch tablets lost popularity in favor of 7-inch tablets, and the average smartphone flagship headed closer and closer to the 5-inch mark. The thinking shifted to the idea that smartphones would stop growing around the 5-inch mark, and users would end up having a smartphone around 5-inches and a tablet around 7 or 8-inches, but that hasn't really happened either.
Smartphones have continued to push bigger and bigger with a number of flagships at or just over the 5-inch marker, like the 5-inch Samsung Galaxy S4, HTC One M8, or Nexus 5, and the 5.2-inch LG G2 or Sony Xperia Z2. There are plenty of devices in the nebulous "phablet" range, like the 5.7-inch Samsung Galaxy Note 3, the 5.9-inch HTC One Max, the 6-inch Nokia Lumia 1520, and the 6.4-inch Sony Xperia Z Ultra. Because the display size difference between what we call a smartphone and what we call a phablet has become that small (and the two classes seem to be on the verge of colliding), we recently wondered whether the term "phablet" was even necessary anymore.
The distinction came to a head with today's announcement of the 5.5-inch OnePlus One. Some outlets called the device a smartphone, while others called it a phablet. OnePlus called the device a "flagship killer", but more accurately, smartphones like this are "tablet killers". It's been a trend that we've already seen in places like South Korea: users don't necessarily want to buy two separate devices (or can't afford two devices). Instead, users are willing to trade off the idea of using a smartphone one-handed in favor of having a singular device that can do the work of both a phone and a tablet. And, this trend is one that is making its way across the Pacific to America. Remember, there's a reason why Apple has decided that it not only needs to make a larger iPhone, but needs to make an iPhablet as well.
When phablets first came about, they were definitely in the realm of jack-of-all-trades, but masters of none. However, the hardware design has caught up to the intention. Bezels have gotten smaller to the point of being almost non-existent, battery efficiency has gotten better, and internal components have gotten smaller. Here's the proof in numbers: the Dell Streak 5-inch "tablet" was 152.9 x 79.1 x 10mm (6.02 x 3.11 x 0.39 inches) and 220 grams (7.76 oz); the original Samsung Galaxy Note had a 5.3-inch display and measured 146.9 x 83 x 9.7mm (5.78 x 3.27 x 0.38 inches) and 178 grams (6.28 oz); and, the new OnePlus One has a 5.5-inch display, but has a smaller overall body than both at 152.9 x 75.9 x 8.9mm (6.02 x 2.99 x 0.35 inches) and 162 grams (5.71 oz).
We're nearing the point where 5.x-inch devices can't get too much smaller, at least in terms of width, but the gauntlet has been thrown. If you're going to purchase a OnePlus One, you're likely not going to bother with a 7-inch tablet, because your smartphone will already be able to do the majority of what you'd need from a smaller tablet. Maybe we'll see a shift back towards larger tablets, but at this point, people know what they're getting from tablets, and maybe the form factor is being regarded as less than necessary.
Let's revisit those areas where tablets were seen to excel. Web browsing on a larger screen is nice, but web browsing on a 5+ inch 1080p display is also quite nice, indeed. Casual gaming can easily translate to a large smartphone, and may be even better on that size device because it is more comfortable to hold over long periods of time. Tablets are still a bit better for watching video, but with 1080p displays on 5+ inch smartphones, the difference isn't too great; and, aside from YouTube, most video is still watched through a TV anyway. That just leaves reading. Comic books are best on tablets, and reading a book is better on a tablet than a smartphone. But, comics still have a relatively limited audience, and books are better on less expensive eInk readers like the Kindle than on tablets. So, at the end of the day, unless you read a lot (perhaps you're a student) or spend an inordinate amount of time on the toilet or public transport, tablets don't have too many advantages over a large smartphone, and it seems like consumers are starting to realize that.
The way the market is moving, tablet purchases probably have the best chance of rising along with the economy, because tablets are squarely in the luxury purchase category. Given how inexpensive Android and Windows tablets are getting, there will undoubtedly be enough people out there with extra disposable income to justify the purchase, but tablets are definitely not a necessity, which could be a problem for companies like Apple who try to charge a premium on hardware.
Going forward, it should be interesting to see how manufacturers react to this change. There have already been rumors that Google isn't going to be making much of a marketing push with the upcoming Nexus 8, and that may be due to the softer reception of the 2013 Nexus 7. Samsung has continued to put out new tablets, but has been reportedly keeping shipments low because it understands that the sales won't be there. We may end up seeing fewer tablets in the market, or we could see more agressive Nexus-like pricing with tablets to try luring consumers. We're hoping for the latter, because we still love our tablets around here, and getting them on the cheap is fine by us.