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31 March 2012

Keep Taking the Tablets

Tag(s): Business, Technology

The tablet computer has deep historical roots but it was Microsoft who first tried to establish the tablet personal computer concept. In the early years of this century it sought to define this as a mobile computer for field work in business. This was based on traditional x86 IBM PC architecture with a resistive touchscreen interface driven by a stylus. For all these reasons and also because of price this did not really take off outside its specialist applications.

Then in April 2010 Apple launched the iPad, a tablet computer with an emphasis on media consumption. This uses the iOS operating system which was developed for the iPhone and the iPod touch. This rests on ARM architecture which uses less power and so increases battery life. It has a capacitive touch screen that allows fingertip control, has increased usability but is of lower weight and cost. It comes with 3G connectivity and its main source of third party software is online and so now applications or apps are downloaded at little or no cost in their billions.

Samsung followed with its Galaxy using Google’s Android operating system and the category is now well established in just two years. Apple alone had sold 55 million units by the end of December 2011 and in the first weekend that the third generation iPad was put on sale earlier this month 3 million were sold. The tablet is a game changer.

I recently attended a seminar on the development of the tablet in publishing.

Hans Janssen, CEO and co-founder of WoodWing software explained how tablet publishing, or digital publishing, improves efficiency. Indeed publishers can now distribute content through multiple channels including print, the web, mobile, social media, email as well as tablets. There are low barriers to entry so new publishers are emerging. It is being adopted by corporations for their annual reports. Retailers are creating their own devices with the Nook from Barnes and Noble while Amazon has followed up its highly successful Kindle with the Fire. Penetration in the US was 8% last year, is expected to double this year and to reach 22% in 2013. Media consumption particularly news already exceeds PCs. It is especially heavy in the evenings and at weekends. Hans believes we are now entering phase two of market development where the emphasis will be on efficient publishing to tablets and monetising the process through advertisements, paid for content and use of customer data. Profit drivers will also be lower costs and optimising the supply chain. One editor can now reach many channels. Hans also said that the tablet is a game changer!

Simon Regan-Edwards is Head of Technology at The Times and The Sunday Times. The digital version of The Sunday Times was launched in December 2010. All 12 sections were adapted with 360° pictures and other digital additions. Rupert Murdoch had identified the iPad as a game changer and believed the time was right. Circulation is building steadily and it is now the number one grossing app on a Sunday. It was voted the world’s number one newspaper and magazine app for 2010. The typical reader views in excess of 100 pages so their reading is more like a traditional newspaper. Simon also identifies multiple revenue streams including advertising, commercial supplements, app inserts, app serialisation as well as the base subscription. It has been a huge effort to digitise every story, every section, every week and to create a rich interactive experience but they believe it is worth it.

Niall Ferguson is Group Publishing Director of Future Publishing which publishes many magazine titles including T3 which stands for Tomorrow’s Technology Today.  He believes tablet publishing is here to stay (though he did not actually say it’s a game changer!)  In January 2010 T3 had just 200 digital editions. 20 months later that had increased to 20,000, 25% of total circulation. For Future Publishing it means its UK based titles can go global. This is also a phenomenon that has been enjoyed by the Daily Mail whose online pages are widely read in the US.

So the future looks bright for tablets and media owners looking to publish to them. But I do see some issues. There have been three successive years of revenue decline in the European telecoms sector which is hindering its ability to invest in next generation phone services. Operators need to improve networks to cope with all this increased data traffic. EU regulators are putting pressure on the big telecoms companies to upgrade their networks. In the UK this position is mirrored with falling revenues. Fixed voice revenues are expected to fall but fixed internet revenues are also falling as consumers switch to lower cost broadband. In the UK operators were forced to pay excessive prices for 3G licenses by Gordon Brown’s stupid policy of auctioning the licenses. It is far better to license at a low price, after all the airwaves do not cost the government anything, and then tax the profits at an appropriate level, a policy that was successfully followed by the British Government for many years with North Sea Oil.

Future mobile network revenues are further threatened by wise consumers using apps to keep their bills small by pushing traffic online. WhatsApp is used to send one billion messages per day and Viber, which offers free international calls and texts, has been downloaded thirty million times. Growth could also be harmed as a consequence of aggressive patent litigation between competing mobile telecoms companies including Samsung, HTC, Apple and Google with its Android technology and its acquisition of Motorola Mobility. In November 2011 HTC was ordered to cease all sales of its smartphones in Germany as a result of patent litigation. And recently there has been evidence of a decline in SMS use. Texting has long been a major revenue earner but it is increasingly being replaced by email and instant messaging services such as Blackberry Messenger.[i]

Mobile operators and providers should also be able to make money out of the growing army of tablet owners from mobile data services of all kinds. But they will need to invest in growing capacity in 4G and beyond as  generations of people who have only known a world in which they are always online consume ever more data believing it to be free or almost free.

Copyright David C Pearson 2012 All rights reserved

[i]  Sector focus/communications/technology/Telecoms themarketer March/April 2012

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