Revisiting the iPad's Impact on Video

With the iPad available tomorrow, it's worth revisiting the prospects for the device, with respect to video specifically. Two months ago, based on information provided during the iPad's unveiling, I wrote that while the iPad is ultra-cool, it was unlikely to have a very big impact on the online and mobile video worlds, due to 3 key limitations - high price/narrow gadget appeal, no new video applications and certain key product limitations.  In the past 2 months a number of things have happened, so while I'm still doubtful of big iPad success, at least in the short-term, I am somewhat more sanguine about its prospects longer-term.

High price/narrow gadget appeal - Since the unveiling, nothing has changed on the price front, which I continue to believe is the number one factor that will suppress sales. If you want the 3G capable model, you'll be paying approximately $700 including tax, plus $30/month for the AT&T 3G service. Sure, there have been many encouraging reports in the last 2 months that America is emerging from the recession, but the reality is that many people are still watching their expenditures closely. Until Apple cuts the price (and btw, I'm betting on a $150-200 reduction by Christmas), the iPad's high price alone will limit its sales.

Of course price doesn't stand alone; consumers evaluate price in the context of utility and other factors. However, on the utility scale, the iPad's constraint is that it still feels a lot like a gadget. The closest it comes to must-have utility is as an e-book reader, but if that's your main motivation there are many great e-book reader options already available for half or less the iPad's price.

The conversations I've had with those who submitted iPad pre-orders, or intend to buy one in the coming weeks leads me to believe that most early buyers are more eager just to get their hands on one (a gadget motivation if ever there was one) than because they already envision it somehow playing a central role in their lives. While I love gadgets as much as anyone, I just don't think that type of positioning will drive sales in the millions as Apple hopes.

Video availability - In Steve Jobs' demo two months ago he showed video from the NY Times and YouTube, but didn't highlight any new partners or even any new applications. Since then magazines and newspapers have been most enthusiastic in unveiling iPad apps. And in the last 24 hours new apps from Disney/ABC, Discovery, Paramount, Time, NBA, Yahoo and many others have surfaced. One new app of particular note is from Netflix, which hasn't offered an iPhone app to date (I've confirmed that Netflix will issue a press release tomorrow morning at 8am, no doubt officially announcing it). For sure others will be announced tomorrow as well.

It's encouraging to see a content ecosystem around the iPad and the touch screen interaction will create new excitement for these brands. Still, as I asked 2 months ago, will the iPad bring some new type of video, that is more engaging in some way? I think it is possible longer-term (3D on the iPad?), but is unlikely for tomorrow's launch. Jobs is right that iPad viewing will be more intimate. The problem is, try using the iPad on AT&T's overloaded 3G network and excitement will quickly turn to frustration. AT&T is trying hard to keep up, but given iPad users' expectations, disappointment is all but guaranteed when longer-form content from Netflix, ABC or others is accessed.

Product limitations - Cool as the iPad is, when it comes to video, it is missing the most fundamental building block - support for Flash, which is by far the most widely adopted video player. Steve Jobs's disdain for Flash is widely known, and it is forcing partners to reformat their video to work with the iPad. For the deep-pocketed like Disney/ABC and Netflix this isn't so big an issue, but for many others it is. The rise of HTML5, which Apple does support is surely in the iPad's favor, yet its widespread adoption is still a way's off. In the meantime, users who surf to Hulu and other Flash sites on their iPads will be let down. Another issue is battery life. It will be interesting to hear reports from users about how close to spec the iPad's battery performs when watching video continuously.

Despite these concerns, tomorrow will bring a frenzy of activity at Apple stores nationwide which will last for weeks as the first reviews emerge. In addition to the iPad a bevy of additional tablet devices will roll-out this year as well. The whole category will be scrutinized closely to see if consumers have decided there is indeed room in their lives for this new type of device. My sense is that at the right price, people can be convinced. The iPad's price is not there yet, but by fueling early adopter interest, Apple is setting itself up for deeper mass appeal as it brings the price down. If nothing else, with the hysteria we're witnessing around the iPad, Apple has once again proven itself as the world's unparalleled marketer.

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Categories: Mobile Video

Topics: Apple, iPad