What if I told you, the future role of the tablet is on display in Ohio? That is exactly where I have found a showcase example of where I see tablets going in the future. There is a narrative around tablets the growth is over. I don’t subscribe to this narrative. However, I also think what many initially believed the role of the tablet (as a replacement computer) was going to be is not the area where I am optimistic of its growth.
In this post for insiders (which I’ve made free for the purpose of this column so feel free to read it), I explained how I see the role of the tablet evolving as quality tablets enter the market at extremely low prices. Inevitably, when hardware drops, margins get so low the business model shifts toward monetizing services, not the hardware. That is exactly what is taking place in Ohio.
I stumbled across a company called Buckeye1, a local cable and internet services provider in Northwest Ohio as well as Southeast Michigan. They are using iPad’s as a part of their internet services bundles which break down like this:
50mb Internet Speed – 500gb Data Plan Included
iPad Mini 2 Included
The Blade All Access plus Sunday Print Included (all access means all digital products as well as electronic delivery of the newspaper inlcuded)
Watch BCSN Included (Buckeye Cable Sports Network, Live Streaming and VOD 700 Live Local Sports events a year from High School Football to Minor League Baseball)
Price starts at $50 per month
Premium TV Services like HBO, ESPN, Fox News, etc., can be added. We have several price points depending on status as current customers, new customers, with or without some TV service, etc. Buckeye1 is the only service we offer that includes the iPad.
What makes this interesting is the iPad is simply part of the bundle. By itself, the bundle is fairly compelling and in line with rates in other markets. The iPads come pre-loaded with all the Buckeye1 TV channel apps covered in the bundle, the digital edition of the Blade newspaper, and other core home services.
Interestingly, this entire solution is fulfilled by Apple. When orders come in for the Buckeye1 service, Apple pre-installs the applications bundle and provides the co-branding on the back of the iPad as well.
The bundle and the service is paying off for Buckeye1. They provided me the following stats, which are a result of this creative bundling:
- As of today we now have 10,000 subscribers. We soft launched on September 15th with our first rate-based promotion on Black Friday.
- 91% of all subscribers are completely new to The Blade (newspaper).
- 25% of all subscribers are completely new to Buckeye CableSystem
- Our current pace is 2,000 subscriptions per month and we finished 2014 with 4,000 subscribers
Another fascinating tidbit I learned from this service is it actually grew subscriptions for the Sunday print edition. I’m not sure too many newspapers can claim their print delivery subscriptions grew.
I’ve been articulating, as a point of my tablet market analysis, that services companies who use tablets to drive their services are better positioned strategically than most companies trying to monetize the hardware. If you think about what Comcast or Dish or DirecTV could do as a bundle using tablets as portable TVs, and mobile entertainment stations deeply integrated into their services, the value add of the tablet hardware is significant. It is hardware as a service, broadly defined.
I’d love to see more service provider examples of tightly integrated software and services, but leveraging a tablet as a service model to drive their business. I believe we will. My tablet narrative and bull growth case depends on this to happen in the market. Prior to the Buckeye1 example, I was just making up examples, as a series of “what if” scenarios, of how this business model shift would take place. Little did I know I’d find the perfect example to highlight my case for tablets in Ohio.
15 thoughts on “The Future of the Tablet is on Display in Ohio”
Very interesting indeed. These business model would never be as compelling here in Brazil. The prices are very nice for such good internet speed and using tables in these bundles sounds like the perfect solution. No question.
The “The Implications of the Low Price Tablet Era” article in the link above is not coming up as a free article.
Apologies. Just fixed it.
Many thanks! And, great insights, as always!!!
I’ve been seeing lots of content+tablet (newspaper sub + tablet w/newspaper app and citizen-reporting app; or premium TV + TV/Timeshift app) or service + tablet (cable sub + tablet w/ TV/Timeshift app; or ADSL/fiber sub + whatever DVR & service/account management apps the ISP has) promo bundles for years now.
Maybe those are different because they’re relatively one-off promotions (I’m not aware of any ongoing ones, though there might be), and they don’t mix all 3 ISP + TV content + print content. And they’re certainly not fulfilled by the tablet maker, not strongly co-branded either.
Yes, I also see similar bundles in Japan. Both Android and iPad.
As you note, the ones that I know of are not fulfilled by Apple and are not co-branded. I would have thought that Apple would be very reluctant to do this. Maybe we are seeing a different approach from Apple.
Several items make this different – fulfillment by Apple as has been mentioned – the customer pays before shipment – meaning the newspaper/cable company does not have to share revenue with Apple – and the local content with the newspaper is included in the bundle – along with a printed newspaper. So there are many things that make this unique.
As @obarthelemy has also noted, I have been seeing similar services in Japan. As a rule of thumb, I think that any subscription service that costs more than $30 per month is probably profitable enough if it is fixed-cost driven. Even if the service is more variable-cost driven, many services that cost $50 a month or more would also be profitable enough.
There are a lot of services that fit the bill. Education, network services, commute passes, sports season tickets, home security, insurance etc. Even your energy and utility services could be included.
The only problem I see is, what should you do when you have so many tablets in the house?
Very true about Yet Another tablet being redundant: pretty much everyone I know who wants has one. Which rises an extra couple of issues on top of redundancy
– the tablet has to be the right type. an iPad crossing my threshold would probably spontaneously combust. My sister’s husband wants Windows. Everyone I know has a tablet of the same ecosystem as their phone (except my niece: her dad bought her phone, I bought her tablet… make a wild guess ^^)
– the tablet has to be the right sub-type: 7-8″ or 10″, 3/4G or not, in the case of iPad large+expensive Flash RAM or not, …
This rises the specter of the included tablet being a throw-away waste (I assume you cannot sell it on in case you break the subscription), or unduly expensive.
Which kind of explain why Apple are trying to move tablets in that direction: they need the luxury segment to thrive, and it does mostly thanks to subsidies…. and we circle back to phone-like contracts with an “included tablet” subsidy, a tablet renewal feature 2 years on, a discount for “no device” contracts, a device catalog and the ability to pay extra for a nicer device…
I’m not sure I want that future… or just to pay extra for a redundant tablet.
Note in the low-cost tablet era article how I suggested these tablets move to more special purpose than general purpose. One could just be a bed side alarm, one could be just the portable TV in the workshop, one could just be the recipe tablet in the kitchen.
A number of recent articles have got me pondering, outside of Apple, is there a significant premium market? You’ve got a much better handle on the numbers, and I could be way off, but it seems that there isn’t much of a premium tablet market, it’s more of an iPad market. Same goes for the Mac. And the iPhone. And I’m wondering about wearables, are those devices (at least for a while) going to gain traction mostly in the premium segment, meaning Apple Watch will succeed while everyone else struggles, simply because that type of device and the value/experience it delivers is a much better fit in the premium segment.
Everyone else seem to struggle because they don’t seem to get that you can’t be successful by engaging in a race to the bottom, in other words, trying to be cheapest.
Apple’s increasing lock on the premium market of smartphones, means it is hard for anyone to compete in premium with other categories as well. So not much room for premium Android in tablets, and we will see about wearables, watches.
But service providers can take a different approach because they aren’t trying to monetize the hardware. Think what Comcast could do if they bundle a tablet with their TV anywhere service. It is more specific purpose than general purpose. That is where I see opportunity for the tablet to get to big volumes.
So with bundled services, the tablet becomes more of a single use screen, or a few uses. Premium and especially integration matters less I suppose. Although it’s probably a competitive advantage to bundle the iPad rather than some generic brand tablet.
I’m beginning to think Apple’s approach re: vertical integration is almost ‘table stakes’ for the premium segment.
I understand the thesis that you lay out in your previous article. What troubles me is that we are seeing good general purpose tablets in these bundles, and not stripped down, low-cost ones. I wouldn’t mind if my alarm clock was a low-cost Android tablet, but if it’s an iPad, then I would probably want to use it for other tasks. At the very least, I would not be in a hurry to buy a new iPad.
I just struggle to predict how the current tablet bundling trend (which is getting quite intense in Japan, even with iPads) is going to affect the tablet market as a whole. It might be that the subsidy-ish model may favour Apple products over Android tablets, as we have seen with iPhones. It might be that the bundled tablets are more often cheap Androids and that they will be the trojan horse that expands the Android tablet market. I can see good arguments for both directions and I have no clue as to which will win.
More importantly, it should have implications for post-PC. Is a household really going to buy a PC or even a Chromebook when they have five perfectly good tablets (iPad or Android) lying around the house? I think not.