NPD Group Blog » Apple’s MID Life Crisis

Apple’s MID Life Crisis

Thursday, January 28th, 2010
By Ross Rubin, Executive Director, Industry Analysis

At the iPad unveiling in San Francisco, Steve Jobs announced a milestone for the company he co-founded in 1976. Apple has turned 50… billion dollars in annual revenue. And to kick off its next growth opportunity, its super sized iPod seeks to fill the gap between the smartphone and laptop, a gap that has become an abyss for many.

I concur with my colleague Steve Baker that the iPad clearly avoids some of the cannibalization conundrums that have confronted PC manufacturers with netbooks. However, I don’t consider the iPad, which eschews PC conventions and focuses primarily on content consumption, a reinvented netbook, particularly with SKUs reaching past $800. (That said, we will see follow-on slates such as the one by HP flashed by Steve Ballmer at CES.)

Furthermore, with its 9.7” screen, the iPad does not fit into most definitions of a MID (Mobile Internet Device) that have typically been between 4” and 7”. That said, the iPad will face some of the challenges that have plagued MIDs as another attempt at a “tweener” device. That challenge is how it competes against less expensive fixed-function devices such as portable game consoles, portable DVD players, digital picture frames, e-readers and portable media players when it is more expensive than many of these.

While the iPad, unlike Apple’s handhelds, hasn’t grown out of an established category, it will address some of these competitors by secondary, contextual functionality. For example, nobody would spend $500 for a digital picture frame, but the iPad can serve that role when it is otherwise idle. The iPad also has a fair shot at doing to the portable DVD player what the iPod did to the Walkman and offers unique gaming and e-reading experiences. And while it has significant promise for use as a multifunction rear-seat video player, its size actually precludes it form competing with a number of devices, such as portable navigation devices, where its smaller siblings compete.

The iPad crystallizes the opportunity for embedded mobile multifunction devices. To win against dedicated devices, they must fill a critical mass of needs well enough to justify the price premium. With the iPad’s app portfolio, developer attention, and Apple’s distribution, it has one of the best chances to date of making that case.

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