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What's Next in Tablet Land?

Now that HP has killed its tablet device, publishers are left hoping for a counterweight for Apple — and Amazon could be it.

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Barnes and Noble's Nook.

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HP Slate

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NEW YORK — Tabula rasa? No blank slate for publishers — at least not from HP.

The computer giant surprised the publishing world — and many others — a few weeks ago when it said it would discontinue its iPad-fighter, the TouchPad, and scuttle its webOS business. The tablet craze, which seemed to ignite consumers and hardware makers alike, seemed like a reasonable bet for HP, with a historically strong presence among budget-conscious PC buyers eager for a modest price point. Publishers were excited by the entry of new devices and platforms like the TouchPad, hoping for more media-bottom-line-friendly business models than the ubiquitous Apple accessory and its Cupertino, Calif., overlords.

But the result was a lackluster product almost as expensive as the iPad, and the only thing the TouchPad was able to ignite was a fire sale. The tablet’s price was slashed to $99 from $499, causing consumers to rush to buy one at such a cheap price (and for those who already have an iPad, the TouchPad can double as a serving tray).

While HP’s decision was surprising since the TouchPad’s lifespan was barely that of a few months, it wasn’t a total shock. Best Buy reportedly sold just 25,000 TouchPads from an order of 270,000 nationwide. Wal-Mart had already tried to return its large inventory of unsold tablets to HP. Not much of an iPad killer.

“About a year ago, we made a bet on webOS,” Hewlett-Packard Co. chief financial officer Catherine Lesjak offered in the postmortem on Aug. 18. She had clearly come to bury the TouchPad, not to praise it. “At that time, we set clear metrics and milestones to measure success. The sell-through of the TouchPad was not what we expected. Our expectation was to establish TouchPad as the clear number-two platform in tablets.”

That didn’t happen, partially because there was so much competition out there already. But the failure of the TouchPad probably won’t discourage other entrants.

So far, category leader Apple has sold about 28 million iPads. According to Forrester Research, Samsung said in January that it had sold 2 million Galaxy tablets since launch in September 2010. Motorola, which was recently purchased by Google, has shipped 690,000 Xooms since its February launch. The potential market is so large that it won’t be long before other manufacturers hear the tablet’s siren call.

Sarah Rotman, a senior analyst at Forrester, said a new competitor will emerge to give Apple a run for its money. “HP had a shot at some part of the market, but now that will be filled with alternative tablets that are expected to come out,” she said. “Amazon is expected to come out with something. Our data show there is demand among consumers for a tablet that’s not the iPad. But so far, there are no good alternatives.”

Yet one more thing Amazon can sell consumers. But what does that mean for media? Book-selling giant Amazon makes tablets, saves publishers from music-industry slayer Apple. Happy ending for all? Not so much.

Rotman argued that the bad news for publishers is that Amazon will not necessarily be a better friend to them than Apple, which takes a big cut of sales and doesn’t share user information. After all, Amazon isn’t exactly warm and cuddly when it comes to getting newspapers and magazine titles onto the Kindle. “Their [Amazon’s] rules are pretty much the same as Apple’s, which is a little discouraging for publishers when you think about what will happen in the tablet market,” said Rotman.

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Amazon Kindle

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Amazon’s tablet could launch as early as October. “If it’s launched at the right price, with enough supply, we see Amazon’s tablet easily selling 3 million to 5 million units in Q4 alone, disrupting not only Apple’s product strategy but other tablet manufacturers’ as well.” It would also be more competitive in price. The report said a 9-inch LCD touch-screen tablet from Amazon could sell as low as $299, according to Rotman.

While three big magazine companies — Time Inc., Hearst and Condé Nast — may still hope for true love in the tablet world (maybe Microsoft?), in the meantime they have no trouble playing footsie with the current BMOC, even if that campus is in Cupertino. Apple might not be offering the ideal revenue- and data-sharing deal for publishers, but it’s better than no deal at all. How can you argue with 56 million potential eyeballs for your magazine?

What is clear is that there is still a long way to go in tablet-land in terms of building a profitable business model. Earlier this month, Condé said that since making its publications available in the App Store in May, 242,000 digital downloads have been made for Glamour, Vanity Fair, GQ, Allure, Self, The New Yorker, Wired and Golf Digest. The price for producing those monthly publications for the iPad is steep, however, and can run from $20,000 to $40,000 an issue

Earlier this year, Hearst president David Carey said that tablets could comprise 25 percent to 30 percent of magazine circulation. It’s a bold, very bullish statement that Carey now provides a caveat to. “Well, I didn’t give a timetable,” Carey said, on Monday.

Carey isn’t ready to go on the record regarding digital downloads at Hearst, but he’ll reveal them this fall. “Sales are strong,” he noted.

Hearst publications are currently available in iTunes, on the Nook and through Zinio. Carey said Hearst wants to work with companies that have a strong direct to consumer relationship, such as Barnes & Noble. Of course, while neither Carey nor any other executive would publicly admit it, Amazon fits that bill, too.

Time Inc. is in the Android Market, iTunes and on the Nook Color. Steve Sachs, executive vice president, consumer marketing and sales, said digital magazines and other content apps from the company have been downloaded more than 11 million times.

“Hundreds of thousands of current print subscribers have upgraded their subscriptions to include the tablet editions for free,” he said. “We’re partnering with every major tablet manufacturer, and ultimately consumers are going to choose the winners here.”

Last week, Barnes & Noble formally said it would expand its newsstand on its e-reader with the aforementioned Time Inc. titles. The device now offers more “top 100 magazines” than any other digital newsstand service. For the sake of forecasting, Forrester said the e-reader can be seen as the first successful Android tablet, having sold millions since its launch in November 2010. On Tuesday, Barnes & Noble said its Nook business rose a staggering 140 percent to $277 million in the first quarter ended July 30 compared to the same period a year ago.

“We worked with them for a number of months to help design for tablet capability,” said Sachs. “Consumers from our research show they are purchasing it in record numbers.”

The question for magazine publishers is: enough of a record to make a profit?

 

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