When the elephants dance, the chickens must be careful

http://raganwald.posterous.com/when-the-elephants-dance-the-chickens-must-be

by raganwald • 15 years ago

40 25 15 years ago

raganwald.posterous.com

Samsung had some kind of book and video store the last time I checked. I remember they were giving away a bundle of books and films with their tablets.

I'm not sure it's self-evident that outsourcing the manufacturing is better (or worse) than outsourcing the content sales channel. Particularly if, like Samsung, you're building the components too.

raganwald5• 15 years ago

Of course they do. They also have access to all of the Android apps, and they build their own retail stores like Apple. But honestly now, what are their chances of reinventing themselves as content distributors, of beating Amazon at its own game?

What I suggest is this: There are people who will but a Kindle just to get the content Amazon has. Amazon’s content is a “killer app” for kindles. Whereas, content is not a killer app for Samsung. If a customer buys a Samsung for other reasons, Samsung can make some extra money selling them some content.

So yeah, Samsung may make a little more than the margin on the tablet, but Samsung is not going to sell more tablets because of its content, and I doubt they will make as much per unit as Amazon, not by a long shot. So I don’t see them having the content to drive market share, and I don’t see them selling enough content to subsidize a price war with Kindle.

JM2C.

ZeroGravitas2• 15 years ago

Samsung is selling a silly amount of smartphones, their sales growth recently is astonishing. Since tablets are fundamentally the same components with a bigger screen, (and again, those components are by and large made by Samsung) I really wouldn't count them out.

kenjackson• 15 years ago

Aren't Kindle apps available on most major platforms?

I get that Amazon can subsidize the tablet, but I do there is a story for someone who wants a Kindle app, and the Google/Microsoft app store, and the BN app, and the Netflix app. The cost might be higher, but I think a non-trivial portion of the world would be willing to pay it.

And note, there is nothing to stop Samsung from getting subsidies from Amazon, Barnes and Noble, Hulu, Netflix, etc... for pre-installing their apps. It's the great crapware returned, except this time antivirus won't be the dominant crapware, but rather contest distributors.

bradleyland• 15 years ago

I was with you right up to the point where you backed Apotheker. I'm not convinced that the iPad or Kindle Fire markets (I also view them as somewhat separate) have to be one-horse races.

raganwald5• 15 years ago

My “backing” was rather faint praise, given that it was served with the weasel phrases “Beginning to think” and “May have been.” I definitley agree that every market has room for a strong number one and a scrappy number two. There are good arguments to be made that someone is going to carve out a living as the scrappy number two tablet manufacturer.

Could it have been HP thanks to WebOS? RIM thanks to their co-called Enterprise strength? Samsung thanks to their manufacturing prowess? (see excellent comments elsewhere in this discussion...) Maybe. Tough business, tough call.

I’d like to think that the scrappy number two able to sell around Apple’s price point will have something innovative to offer. It might be none of these companies, it might be a hardware startup with some special sauce, or an entirely new approach to software.

But then again, if wishes were horses, beggars would ride. Maybe HP should have doubled down on WebOS.

ScottBurson• 15 years ago

It's funny to me how people are reading this. I was going to challenge your quote from the opposite direction (i.e., as being too weakly stated): I think Amazon's entry into the tablet market proves that HP's exit from it was very much the right call. I thought so before, and it's inescapable now. HP would only have been throwing good money after bad to continue.

I like WebOS (I used a Pre for a while) and sure, it would be great if HP could somehow be a significant player in the tablet market. I just don't see how it can happen. HP was late to the party and there's massive competition.

The only justification I could see for continuing to sell the TouchPad is if customers (primarily business customers) came to feel that HP's offerings were incomplete without it, and that drove them to other suppliers for desktops and laptops. I suppose it's possible things could get to that state, but I don't see it happening soon. Trendiness aside, I don't see many problems that businesses have that a tablet solves better than a netbook ... as witnessed by the iPads I see people carrying with cases and external keyboards.

Edit: clarification.

zeteo2• 15 years ago

Both Amazon and Samsung Electronics have unique advantages in the tablet market (e.g. Samsung makes the iPad's CPU), and their market capitalizations are similar. Calling one an elephant and the other a chicken implies a difference of impact of about three orders of magnitude.

raganwald5• 15 years ago

The metaphor applies to their market strengths, not their market capitalization. Samsung does have manufacturing prowess, which lowers its cost per unit, which allows it to compete with Apple on price. I get that, I really do.

What I don’t get is how it sustainably competes with Amazon on price. I’m not sure that manufacturing prowess is going to make up for such a disruptive business model asymmetry at the low end.

zeteo2• 15 years ago

That's fine, but we must also keep in mind that the difference in competencies can also lead to different definitions of success, of which Samsung's might be less visible. Samsung can still make a pretty good impact with a strategy for a symbiotic profit-sharing agreement on the iPad (Apple doing the OS and marketing, and Samsung supplying crucial hardware); with the Galaxy as a sideshow, its only purpose to achieve a good bargaining position vs. Apple regarding the profit shares.

roc• 15 years ago

To say nothing of Amazon's proven ability to extend and differentiate Android and integrate it's own popular media applications.

Even if Samsung could manufacture tablets that matched Amazon on specs, the price delta couldn't possibly be large enough to attract a consumer to stock Android media apps over Amazon's offerings.

phil• 15 years ago

e.g. Samsung makes the iPad's CPU

Not for much longer, I think.

fluidcruft• 15 years ago

I guess Googorola is the elephant in the room?

nicolaus• 15 years ago

I own a Kindle. I like it. I have, however, never bought anything from Amazon on my kindle because of the power this gives to Amazon. I use it to store and read _3rd party ebooks_ only. This is also the reason I do not own an iPad or an iPhone: I will not give up that much control and information to any one company. People like me do not exist in large numbers today. We will exist in large numbers tomorrow. Enjoy this revenge of the CD-ROM / Walled Garden model while it lasts. The lack of privacy / control experiment will not last forever.

wanorris2• 15 years ago

So far, I've been very happy with the content I've purchased from Amazon.

Apple sells content as an enhancement for its device-selling business, and thus does not do much to make that content available off of its own devices (iTunes for Windows notwithstanding).

By contrast, Amazon sells devices as one of many ways to make it easy for you to buy their content, and thus they make their content available anywhere there's a volume of users that might want to consume it. I've read Kindle books on my Kindle, a PC reader, my phone app, Chrome, and an iPad. So far, I've never had a device where I wished I could read a Kindle book but couldn't.

You may indeed ending up having the last laugh, because who can predict the future? But so far, Amazon has been a really convenient company to do business with.

teyc• 15 years ago

Bezos has the same canny business sense as Jobs. He made a lot of long incremental bets. This guy now runs a book store, a compute cloud and a tablet company.

wanorris2• 15 years ago

Actually, he runs a general merchandise store, not just a bookstore. And it would probably be more correct to say that he runs a digital content delivery company that makes it's own devices than to call it a tablet company.

sadlyNess• 15 years ago

There's a KiSwahili proverb that goes Fahali zipiganapo, nyasi ndio huumia. When the bulls fight, its the grass that gets hurt(translated literally).

When the elephants dance, the chickens must be careful

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