Thursday, March 08, 2012


Apple introduced the iPad 3 yesterday, just in case you were being held captive in the basement and haven't heard anything yet.

Apple is a company that fascinates me because of their customer loyalty, which is so extreme that it reminds me of Japanese soldiers lost in the jungles of the Phillipines who continued to fight WWII for thirty years after it was over. I always assume that when market data comes out saying Apple has 20% of the market for a product, it really means 5% of the market buying the same device four times.

While I do poke fun at Apple's hardware iterations, it doesn't mean that I don't occasionally lust after the hardware, particularly the iPad. There are so many games I'd like to play that are iOS exclusive.

So yesterday, when the iPad 3 was announced with double the resolution of the previous versions, it got my attention. 2048×1536 resolution is not a modest feature upgrade with a massive advertising campaign behind it. That's a huge leap, delivering that resolution in a 10-inch form factor, which translates to all kinds of good things in terms of possibility and usability. And I'm probably getting one.

Which, curiously enough, is not what this post is about.

Instead, it's about Apple's response to Amazon and the Kindle Fire, and it's also about Sony.

Sony, in terms of brand loyalty, was somewhat like Apple 10 years ago. The Sony name meant something in terms of quality and innovation. There were Sony loyalists, lots of them, and they bought everything Sony made. Sony charged a premium price for their products, and they were able to do so because of brand loyalty.

We all know what happened. Sony got eaten alive on multiple fronts from underneath. They kept trying to charge a price premium (in most cases, a ridiculous one), but other companies (Samsung, for example) put out products as good or almost as good at a much lower price, and brand loyalty collapsed due to wallet loyalty.

That brings us back to Apple, which has been able to continue charging the price premium and has been staggeringly successful in a financial sense.

After Amazon released the Kindle Fire, I was interested to see if Apple would respond in any way. No, the Fire isn't the iPad, but Amazon will narrow the gap and accept lower margins. They have to be taken seriously, because their model is also tremendously successful. And when Amazon enters a market, "premium" items rapidly become commodity items because Amazon expands the market so quickly.

So we have an interesting set of circumstances.

I was very pleased with the hardware specs of the new iPad yesterday (like I said, enough to buy one), but most interesting to me was Apple's response to Amazon: there wasn't one. No price reductions, no lower end model, nothing. It's as if, for Apple, Amazon doesn't even exist.

Well, if you want an iPad 2, they're $100 cheaper now. I think that's more to clear inventory than anything else.

In the next 24-36 months, this is worth keeping our eye on. Like I said, the Fire is clearly not in the iPad's class, but Amazon is going to rapidly improve the product, and Amazon has its own strengths that can be leveraged in terms of user experience.

I will be very curious to see if the wolves begin nibbling at Apple's flanks.

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