The Tablet Market in 2012: What it Means for Publishers

Those who planned their tablet strategies based on the predictions of key analysts and the excitement at the Consumer Electronics Show (CES) at the beginning of 2011 may want to be very wary of the wave of predictions for the 2012 tablet market after 2011 remained iPad dominant. Apple is now expected to sell around 39 million units worldwide, and even the top competitor in the tablet market, Samsung with its Galaxy Tab, has achieved very modest sales by comparison.

Motorola’s Xoom showed initial promise but faltered and was purchased by Google. RIM’s Playbook stalled with updates not expected until late-2012. HP launched and then abandoned the TouchPad and Dell shuttered the Streak.

At the low-end of the tablet market, competing against Barnes & Noble’s Nook, the Kindle Fire from Amazon is the only Android-based tablet seeing solid momentum with the company claiming around 1 million sales a week thanks to a $199 price point. However, despite the claims, inventory is still plentiful and the Fire’s software platform has come in for significant criticism (update promised soon) with a lot of customers giving it one to three stars.

A recent report from IDC , who now counts both the Kindle Fire and Barnes & Noble Nook as Android tablets, forecasts that Apple’s worldwide market share will dip to 60% in 2012 although it should be pointed put that the analysts’ firms use shipments numbers for Apple’s competitors that don’t necessarily equate to sales numbers. The current key players are Samsung, Amazon, B&N, Asus plus “others.”

CES 2012 from January 10-13 will no doubt showcase a vast range of new tablets, but if the history of the last couple of years repeats then virtually all will fail to gain any traction. Hardware alone without integrated software and an effective distribution system is doomed. Very few companies can provide the whole digital ecosystem, and Apple has a near unassailable advantage in this regard.

Merrill Lynch predicts growth of tablet market in chart below.

New iPads on the horizon?

Looking at the year ahead, Apple is expected to roll out the iPad3 in first-quarter 2012. The key features are the iPhone4 “retina” display and faster processors to cope with the demands of that higher resolution screen. Many expect Apple to launch a smaller iPad with a screen size of nearly 8 inches later in 2012, and this could help counter any competitive threat from Amazon. A possible pricing structure of around $250-$299 for an 8-inch tablet, $399 for the older iPad2 and the next iPad3 for $499 (or maybe a little higher) would allow Apple to cover the market from value to premium products. According to a recent report from J.P. Morgan Chase, total worldwide tablet shipments will reach 99 million in 2012 and will rise to 132.6 million in 2013. Although it will see some market-share erosion, Apple is likely to remain the dominate tablet supplier for the next few years so needs to be core to any publisher’s digital mobile strategy.
Publisher reset

For many publishers, 2011 has been a year of expensive experimentation. Now, many are reassessing their return on investment in tablet apps. Over-designed multimedia versions of consumer magazines appear to distract readers from the core content. The majority of tablet readers seem happier with simple enhanced PDF versions of their favorite brands or layouts that emphasize the readability of the articles on their devices. Photos and videos that enhance text are welcomed but not unnecessary interruptions and distractions. In a sea of often mediocre publisher apps, there are some real standouts–some of my favorites include National Geographic iPad version, the travel magazine TRVL and The Economist–that deliver an excellent balance that improves the tablet version over the print version.

Now, in addition to Apple’s iTunes, Amazon (and to a lessor extent Barnes & Noble) offers publishers additional digital distributions channels for paid subscriptions and digital newsstand copies. Outside these channels, the general Android marketplace is still searching for an efficient app marketplace for paid content. The industry consortium Next Issue Media (NIM), which represents Condé Nast, Hearst, Meredith, News Corp and Time Inc., has, so far, failed to achieve momentum, but maybe NIM will redeem itself in 2012 with an HTML5 strategy.

Publishers will continue to face a very challenging and fragmented market. They have to deal with Apple’s hardware dominance. Most mainstream publishers have somewhat reluctantly come to the conclusion they cannot ignore the iPad platform and have come terms with Apple–although there are some notable exceptions including Time magazine and the Financial Times. In rejecting Apple’s App store, the FT has developed a sophisticated HTML5 approach allowing content to be viewed in a mobile Web browser.

Although there are many compromises, an HTML5 approach allows publishers to take advantage of the growth of the tablet market without restricting themselves to any operating systems. As HTML5 continues to grow in sophistication, I expect the major publishers will experiment with both an app and HTML5 strategy.

On the iOS platform publishers can distribute directly via Apple’s Newsstand and also via Zinio’s reader app. Neither approach really gives the publisher the customer information they really want. On the Android platform the main app options for publishers are to go through Zinio (for tablets other than the KIndle Fire and Nook). For the Amazon and Nook platforms publishers can deal direct or go through Zinio. The publishers’ life is further complicated by a slew of app content aggregators – with Flipboard leading a very crowded field which recently saw the entry of Google’s Currents. Managing advertising and content metrics across these multiple platforms is extremely challenging.

Further clarification – the Zinio app on the Kindle Fire is not showing up for many users but instructions for downloading the app are available via Zinio’s site.

Where’s the breakthrough?

I believe it depends on the segments being served–the B2B market has always been more of a data information and service business and should see strong opportunities to drive revenues via quality information services targeted to their audiences. The key media brands can continue to play a trusted role aggregating services–content (original, aggregated and peer-to-peer /social), directory and supplier service, links to physical conference and events. Lead generation, premium paid services and sponsorship will be more important revenue streams than CPM-based advertising. In the long term, B2B publishers should really benefit from wider distribution as they can drive revenues outside of advertising.

For consumer publishers, it’s a greater challenge, but the B2B market can provide some pointers. Consumer publishers (and some are moving there) need to be more vested in the (customer) data business. They have to better understand the needs to their customers and engage with them through valuable content and services not just relying on impression based advertising.
The rapid move to mobility

The transition to consumption of content via mobile devices has been evident for several years–the technology and related services are now catching up with the vision. A mobile strategy needs to be at the center of all publishers’ long-range planning. The major challenge is that past revenue models are not transitioning easily to the new medium. Inevitably, the industry will go through a few more years of pain while new revenues models for the mobile world become obvious.

But the good news is that despite all the challenges, premium brands actually become more important as quality content is consumed by a wider audience and audiences look to trusted brands to guide them through an increasingly “noisy” content world.

The road ahead will be a bit rough but all publishers should be excited that in 2012 their content will be distributed much more widely and they will have a change to engage with new audiences.

That’s not a bad outlook.

This article originally appeared at MinOnline