- The Washington Times - Thursday, November 24, 2011

Apple’s iPad created the tablet-computer market and has been its gold standard ever since, but industry analysts say its high price has left it vulnerable to a new type of competitor this holiday season- e-readers now coming decorated with more multimedia features.

Since the iPad revolutionized the computer market in early 2010, it has dominated tablet sales - widely perceived as the best, offering premium features and benefiting from a faithful group of Apple supporters. Meanwhile e-readers focused on books and magazines, targeting an audience less interested in entertainment-type features.

But that could change because consumers now can buy tablet versions of popular-brand e-readers, such as Amazon’s Kindle Fire and Barnes & Noble’s Nook Tablet. These products are now offering such luxury features as email, video streaming, music, Web surfing, and downloadable applications - making them cheaper alternatives to the iPad.

“I think we’re going to start to see the marketplace split,” said Jeff Kagan, a wireless and telecom industry analyst based in Atlanta. “E-readers were always in a completely separate battle. Now, for the first time, they are competing with tablets.”

It will make for an interesting battle in the increasingly large tablet market, which Mr. Kagan predicts could split into two categories - those who will pay for the luxury of a tablet computer such as the iPad and Google’s Android, and those who will settle for cheaper e-reader-like tablets.

“I think the e-readers are going to eat into the iPad growth,” Mr. Kagan explained. “Whatever the iPad growth is going to be, it would have been much stronger, if it was not for these new entries.”

Prices for the the iPad 2 start at around $500, while the Nook Tablet sells for about $250 and the Kindle Fire about $200.

Yousef Ali, founder of Media Conscious, a technology consulting firm in the District, doesn’t see the market splitting or the iPad dropping off. But he does agree that the Kindle Fire and Nook Tablet could profit from consumers looking for a bargain.

“It might be catering to consumers who wouldn’t be able to afford the iPad,” he said, though he cautioned that “Apple is going to continue its dominance.”

Others agree that the iPad is not going away. An eMarketer forecast shows the number of Americans who use an iPad will more than double from 28 million this year to 60.8 million in 2014.

However, the iPad is slowly losing marketshare to other tablets, according to the eMarketer report. In 2010, it accounted for 88 percent of tablet users. This year, it makes up 83 percent of users. And by 2014 that number will shrink to 68 percent.

“The iPad, which has clearly led the tablet market since 2010, will continue to do so throughout the forecast period, though its share will be slowly chipped away by competitors,” eMarketer reported.

Mr. Kagan said the Nook Tablet has an edge over Amazon’s tablet, because it is sold at Barnes & Noble retail locations where potential customers can test it out before they buy.

“It’s not as easy with Amazon.com and their Kindle Fire,” Mr. Kagan said. “Who knows, I may like the way the Kindle Fire works just as much, but I have no way of knowing.”

He noted that while potential consumers can try out a Kindle Fire “at stores like Office Depot, Staples and several other retail stores … the problem is you cannot actually use the device. It is just in demo mode.”

But Mr. Ali said the Kindle Fire has other advantages - a trusted brand in Amazon and the way the online-shopping giant is aggressively pricing the new device.

“It’s not going to compete with the iPad,” he said. “But it does create a market opportunity for Amazon.”

To keep up, Apple could be forced to design an e-reader that can offer a cheaper option for consumers who can’t afford the iPad, Mr. Kagan said.

“The pressure now is on Apple, and Apple is going to have to respond,” he said. “They never really had competition before. This is the first time that it’s going to eat into their ability to grow.”

Meanwhile, Apple also is facing more competition than ever at the higher end of the market, from iPad-like devices such as Google’s Android platform.

“There’s not going to be a single tablet that beats the iPad,” Mr. Ali explained. “But what you want to look at is whether Android as a whole will beat the iPad.”

He pointed out a number of Android tablets target different niche groups of consumers.

“There are so many Android tablets out there,” he said. “Everytime you blink, you see a new one.”

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