We know that people don’t have unlimited funds and are unlikely to buy both a new iPad and a new iPhone in the same year. The new iPhone that Gizmodo has found, is likely representative of the new design language from Apple. While there was some doubt whether this was real or not that doubt has apparently evaporated when the Apple employee who lost the phone asked for it back. Harder edges, fewer curves, thinner, potentially lighter, with a better display and potentially better performance this phone will be a huge temptation for existing iPhone users and non-iPhone users alike. But it arrives just at the iPad is ramping to market and suddenly the iPad looks old. Could one device critically damage the sales of the other? Possibly, let’s explore that.
Apple iPad
Breaking the Apple Model
Apple, unlike other PC vendors, had a winning model where they spaced new product announcements out so that a new product almost never created a buying conflict with an existing product that was new to the market. Being a relatively simple firm with few products allowed them the luxury of not having the conflicting and closely spaced product launches of most of their competitors. In addition, given they tended to field a marketing budget much greater than their competitors, it was critical they didn’t dilute it by spreading the money across too many products at once. They would typically push hard on a new product, and then switch to a sustaining marketing budget, before pushing hard on the next offering.
For the buyer, this had the unique benefit of not making products someone just bought look immediately obsolete. Or, more accurately, it removed the concern that this would happen and thus reduced substantially the buying risk tied to most PC products where folks constantly believe they should wait and get the soon-to-arrive next big thing.
That clearly isn’t happening here, the iPad hasn’t even completed its launch (the 3G version hasn’t started selling yet) and we already appear to be on an iPhone 4.0 ramp. It seems doubtful that people will buy both this close together suggesting, if the iPhone is as good as it looks, many who may have otherwise bought the iPad may not buy the iPhone. This would limit significantly iPad sales and given this would be an annual event with each generation of each product the possibility for each product to potentially damage the sales of the other doesn’t go away.
Possible Solutions: Tethering/Bundling
Currently the iPad is a large iPhone without phone features. However, it has a number of advantages over an iPhone in terms of screen size, and even if it had phone features, it is really too big to be a phone. If you could easily tether an iPad to an iPhone it could become a super iPhone accessory and that would reduce the either/or decision process that potentially cripples the sales of both products.You could also create sales bundles where, if you buy both, you get a substantial discount once again helping with the either/or problem.
Of course, the best situation would be a combination of tethering and bundling so you get both the price incentive at purchase and with the data plan. This could be incredibly powerful but getting a carrier to agree to allow tethering has been problematic even though, in these two devices, the data usage should be pretty similar and you wouldn’t be using both for data at the same time. Carriers are funny about being rational; they don’t seem to believe in it very often.
The iPhone has the Advantage
The new iPhone appears to be well worth waiting for, nicely improved over the 3GS and it provides a sense how the next generation iPad and iPod touch will look like. Will you buy both, and if not, which one would you buy? What would Apple have to do to get you to buy both (assuming you want both)? Right now, I think folks will have trouble justifying both a new iPhone and a new iPad. Which do you think will suffer? I think the iPhone is the more attractive offering of the two and if Verizon shows up with an iPhone, the choice gets even easier.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The opinions expressed in this commentary are solely those of the writer.
