IS THE IPAD A DISRUPTIVE
TECHNOLOGY?
Tablet
computers have come and gone several times before, but the iPad looks like it
will be different. It has a gorgeous 10-inch color display, a persistent WiFi
Internet connection, potential use of high-speed cellular network,
functionality from over 250,000 applications available on Apple’s App Store,
and the ability to deliver video, music , text, social networking applications,
and video games. Its entry-level price is just $499. The challenge for Apple is
to convince potential users that they need a new , expensive gadget with the
functionality that the iPad provides. This is the same challenge faced by the
iPhone was a smashing success that decimated the sales of traditional cell
phones throughout the world. Will the iPad do likewise as a disruptive
technology for the media and content industries? It looks like it is on its
way.
The iPad has some appeal to mobile
business users, but most experts believe it will not supplant laptops or
netbooks. It is in the publishing and media industries where its disruptive
impact will first be felt.
The iPad and silmilar devices(
including the Kindle Reader) will force many existing media business to change
their business models significantly. These companies may need to stop investing
in their traditional delivery platform (like newsprint) and increase their
investment in the new digital platform. The iPad will spur people to watch TV
on the go, rather than their television set at home, and to read their books,
newspapers, and magazines online rather than in print.
Publishers are increasing
interested in e-book as a way to revitalize stagnant sales and attract new
readers. The success of Amazon’s Kindle has spurred growth in e-book sales to
over $91 million wholesale in the first quarter of 2010. Eventaully, e-books
could account for 25 to 50 percent of all books sold. Amazon, the technology
platform provider and the largest distributor of books in the world, has
exercised its new power by forcing publisher to sell e-books at $9.95, a price
too low for publisher to profit.
Publisher are now refusing to supply new books to Amazon unless it raises
prices, and Amazon is starting to
comply.
The iPad entered this marketplace
ready to compete with Amazon over e-book pricing and distribution. Amazon has
committed itself to offering the lowest possible prices, but Apple has appealed
to publisher by announcing its intention to offer tiered pricing system, giving
publisher the opportunity to participate more actively in the pricing of their
books. Apple has agreed with publisher charge $12 to $14 for e-book, and to act
as an agent selling books (with 30% fee on all e-book sales) rather than a book
distributor. Publisher s like this arrangement, but worry about long
term-pricing expectations. Hoping to avoid a scenario where readers come to
expect $9.99 e-books as the standard.
Textbook
publisher are also eager to establish themselves on the iPad. Many of the
largest textbook publishers have struck deals with software firms like
Scrollmotion, Inc. to adapt their books for e-book readers. In fact, Apple CEO
Steve Jobs designed the iPad with the use in schools in mind, and interest on
the part of schools in the technology like the iPad has been strong.
ScrollMotion already has experience using the Apple application platform for
the iPhone, so the company is uniquely qualified to convert existing files
provided by publishers into a format readable
by the iPad and to add additional
features , like a dictionary, glossary, quizzes, page numbers, a search
function, and high-quality images.
Newspapers
are also excited about the iPad, which represents a way for them to continue
charging for all of the content that they have been forced to make available
online. It the iPad becomes as popular as other hit products from Apple,
consumers are more likely to pay for content using that device. The successes
of the App Store on the iPhone and the iTunes music store attest to this. But
the experience of the music industry with iTunes also gives all print media
reason to worry. The iTunes music store changed the consumer perceptions of
albums and music bundles. Music labels used to make more money selling 12 songs
on a album than they did selling popular singles. Now consumers have
drastically reduced their consumption of albums, preferring to purchase and
download one song at a time. A similar fate may await print newspapers, which
are bundles of news articles, many of which are unread.
Apple
has also approached TV networks and movie studios about offering access to some
of their top shows and movies for monthly fee, but as of yet the bigger media
companies have not responded to Apple’s overture. Of course, if the iPad
becomes sufficiently popular, that will change, but currently media networks
would prefer not to endanger their strong and lucrative partnerships with cable
and satellite TV providers.
And
what about Apple’s own business model? Apple previously believed content was
less important than popularity of its devices.
Now, Apple understands that it needs high-quality content from all the
types of media it offers on its devices to be truly successful. The company’s
new goal is to make deals with each media industry to contribute the content
that users want to watch at a price agreed to by the content owners and the
platform owners (Apple). The old attitudes of Apple (“Rip, burn, distribute”),
which were designed to sell devices are a thing of the past. In this case of
disruption technology, even the disruptors have been forced to change their
behaviors.
1. Evaluate the impact
of the iPad using Porter’s competitive forces model.
a.
Traditional competitor in
Mobile industry : competitor such as Samsung which is well known for
their strong financial and R&D,
and LG
Computer electronic industry : Acer
which is well known for their low price computer hardware.
Operating system industry : Android,
operating system for mobile devices that produced by Google
b.
New market entrants : there is no new entrant beside
Apple itself, Apple inc. have to compete with traditional competitors.
c.
Substitute products and services : Electronic products
such as Samsung Galaxy tab and Amazon Kindle which is have certain same function
with the Apple iPad. For common
substitute products for the iPad are television, newspaper, book, music store,
and magazine. Sales for the media printed product will decline due to the iPad
impact.
d.
Customers : Customer will prefer product with
lowest price, easiest to acquire and has more customer’s benefits.
e.
Supplier : numbers of suppliers is important as
the company gain more control in their products especially in pricing and
component selection. Apple has many suppliers and this makes their product has
more values.
2. What makes the iPad a disruptive technology? Who are likely to be
the winners and losers if the iPad
becomes a hit? Why?
a.
The iPad
is a disruptive technology because its tendency to replace or obsolete previous
technology which as the similar function with the Apple’s iPad.
b.
Winners
will be the one who support or joint venture with the Apple. These winners are e-book publisher who agreed to make Apple as
an agent selling their books, the textbook publisher who eager to establish
themselves on the iPad, printed media who have convert their product into
electronic products such as electronic newspaper and electronic magazines, and electronic music store such as itunes.
Loser will be the product with same function
as iPad such as kindle and Amazon and also e-book publisher who sell their
e-books through Amazon. The printed media products will also be the loser.
3. Describe the
effects that the iPad is likely to have on the business models of Apple,
content creators, and distributors?
a.
Apple’s business model : Apple will start
selling e-books, e-newspapers and e-magazines. Its entire product will be
centered on the iPad.
b.
Content creator : they have to created more
creative content in order to compete with others because thousand electronic
content will be on the iPad as predicted.
c.
Distributors : distributors will have to compete
more as the Apple will be a large distributor of electronic products through
their iPad.
