Time to Admit It: A Smaller iPad Would Spell Doom for Everyone Else

The rumors of a mini iPad have surfaced once again, and I’m starting to believe them. Both Bloomberg and the Wall Street Journal report that Apple will launch an iPad with a screen smaller than 8 inches this year, citing unnamed sources.

In the world of Apple rumors, Bloomberg and the Wall Street Journal represent a sort of turning point. Their stories about unreleased Apple products are usually vague on details, but the gist–that product X will be released during timeframe Y–tends to be correct, especially when both publications report the same story.

As a fan of competition and someone who generally enjoys Android–especially the latest version, Jelly Bean–I desperately want to be contrarian about this. I’ve been trying to think of ways in which a smaller iPad wouldn’t destroy Amazon’s Kindle Fire, Barnes & Noble’s Nook Tablet and Google’s upcoming Nexus 7, but so far, I’ve got nothing.

(MORE: Google’s Nexus 7 and Nexus Q: A Photo Tour of the New Hardware)

Price alone won’t be fatal. Despite what some pundits are claiming, I doubt Apple can hit $200 with a 7.8-inch iPad. The only way the competition gets that cheap is by sacrificing hardware profits in hopes of making money on digital content sales.

Apple doesn’t work that way. According to unofficial estimates, Apple makes about $150 in profit on the Wi-Fi iPad 2, which now sells for $400, and for the latest iPad, the profit margins are even greater. Content sales are just gravy. Unless I’m drastically underestimating Apple’s supply chain prowess, a smaller iPad priced at $250 or $300 seems far more likely if Apple still wants to make a profit on hardware.

But even at a higher price than other 7-inch tablets, Apple would do well against its competitors purely on the strength of its apps. No other tablet maker has cultivated an app ecosystem like Apple’s, which is why 10-inch Android tablets haven’t made a dent in the iPad’s sales—even ones that cost less than the iPad.

If Apple can pitch a smaller iPad as a less expensive device for kids, or for women to fit in their purses, or for gamers who want something easier to grip with two hands, I think it’s a winner. It would likely have all the same apps, as iOS developer Joel Bernstein points out, because even when scrunched onto a 7.8-inch screen, they’d still fit within Apple’s design guidelines.

(LIST: 30 Best Apps for Apple’s New iPad)

And it kind of makes me sad to think about it. I own an iPad, and I really like it, but I’ve also been using Google’s Nexus 7, and it’s really, really good. Android appeals to my nerdy side, with all its customizability, its lack of a walled garden and the simple fact that I can play classic video game emulators on it.

But I know most people don’t care about any of that, and even though Android is now fast and fluid enough for curb appeal, the advantages it offers over iOS still aren’t obvious to the average user. Apple is the safe bet–the platform with all the apps–for which people will happily pay an extra $50 to $100. Amazon and other tablet makers can race further to the bottom, and they probably will, but they won’t come up with better products that way—only cheaper ones.

At the moment, 7-inch screens are the only place where Apple’s competitors can start to build ecosystems of apps and media–ones that could potentially come back to haunt Apple. With its own smaller, cheaper tablet, Apple could snuff those ecosystems out.

Looking Forward to 2012: Credible iPad Threats

The iPad is a great tablet, but you know what’s even better? Competition. Unfortunately, there wasn’t much of that in 2011, as Apple’s rivals rushed out clunky, expensive tablets based on Android Honeycomb, which itself was buggy and short on proper tablet apps. Next year will be better — I hope.

The Amazon Factor

Android tablet makers had three big problems in 2011: their hardware wasn’t cheap enough, the software wasn’t polished enough, and there weren’t enough apps compared with the iPad. Amazon tried to fix these flaws with the Kindle Fire, a 7-in. (18 cm) tablet that costs $199 and runs a heavily modified version of Android. The interface is easy to understand, and because of the small screen size, Amazon could get away with offering Android smart-phone apps slightly blown up to fit the larger display.

(MORE: Amazon: “Kindle Fire is the most successful product we’ve ever launched.”)

You might argue that Amazon’s Kindle Fire is already providing serious competition to the iPad, but as a smaller tablet at a much lower price, the Fire caters to a different market than the iPad does. Amazon’s tablet is a cheap content-consumption device, whereas the iPad is primarily a way to enjoy big-screen tablet apps. These two tablets can thrive independently.

That’s not to say Amazon won’t go after the iPad in 2012. Rumor has it that Amazon is working on new Kindle Fires with 8.9-in. (22.6 cm) and 10.1-in. (25.7 cm) displays, DigiTimes has reported. If true, these tablets would likely undercut the iPad on pricing and would use the same simple interface as the original Kindle Fire. And because the original Kindle Fire is a hit, a larger Amazon tablet would likely draw interest from developers, who would finally start tailoring their Android apps to bigger screens.

Taking this speculation a bit further, a larger Kindle Fire could have a ripple effect on other tablets. Apps developed for Amazon’s tablets could also be made available through the Android Market, alleviating the app shortages of other Android tablets. But those rival tabletmakers would have to slash prices to compete with Amazon. Apple, meanwhile, may decide to keep selling earlier iPads at lower prices, as it does now with the iPhone. Consumers who have no interest in the Kindle Fire may still benefit from Amazon’s making larger tablets, simply because of how other companies respond.

Windows Strikes Back

After two years of staying out of the tablet wars, Microsoft will roll the dice in 2012 with Windows 8. The operating system will sport some radical changes, including an interface designed for touchscreens and an app store for tablet software.

What makes Windows 8 intriguing is that — depending on what type of processor is inside — it’ll still support the classic Windows desktop and legacy software. And because Windows is at the core, all devices will support external mice and keyboards, complete with helpful shortcuts like copy and paste. This opens the possibility of having a single device that can act like a tablet, a laptop or a desktop as users attach keyboards, mice and external monitors. That’s one way to answer the all-important question: Why should someone buy this instead of an iPad?

The first tablets based on Windows 8 are expected in the second half of next year. Because millions of people will get Windows 8 as they upgrade to new PCs, Microsoft’s mission is simple: slow the iPad’s ascent by selling people on Windows machines with touchscreens.

Despite these threats, the iPad isn’t in any serious trouble next year. It remains the gold standard for tablets, and most competitors won’t have a chance. But at least 2012 will bring products with clear strategies for competing with Apple. That’s enough to make me optimistic.

Can Devices like the Kindle Fire Finally Pave the Way for a la Carte Cable?

Pundits asking whether the new Kindle Fire will be an “iPad killer” are way off the mark. It's a killer alright, but the victim is not who you think it is. “We don't think of the Kindle Fire as a tablet. We think of it as a service,” says Amazon CEO Jeff Bezos.

And the main competing service in his sights is cable TV.

The Fire, of course, is not the only killer gunning for cable. Amazon's streaming video service is available on dozens of TV-connected devices, including TiVos and Roku boxes. So is Netflix, which although it has stumbled a bit recently, is clearly positioning itself as a streaming alternative to cable. And of course let's not forget Apple, with not just its iTunes movie and TV offerings, but also Netflix on all its devices, including the Apple TV.

(IMAGES: Amazon's Kindle Fire and New Kindle E-Readers)

Cable operators are feeling the heat. Comcast and Time Warner, the two largest operators, have reportedly lost 1.2 million cable TV subscribers in the 12 months ending June 30. Many of these are said to be “cord cutters” who prefer the flexibility of online video, such as Amazon Instant Video, which lets them choose a la carte what they want to watch whenever and wherever they want.

Yet cable prices continue to rise. One reason is the climbing cost of programming itself. Cable companies (like Cox or Charter) pay programmers (like Disney or Discovery) to carry their networks, and in turn they charge consumers. Programmers have been hiking prices for their content, often as a result of access to sports content. ESPN, for example, recently signed a $15 billion, eight-year TV rights deal with the NFL, a 73% increase from their last agreement. That's one reason why the sports network is the most expensive channel to operators, at about $4 per subscriber. Yet the more prices go up, and the more choices like Amazon and Netflix are available, the more we can expect viewers to cut the cord.