With both iPod and iPhone, Apple has gotten used to making huge profits on hardware, even if it takes a bath on the sale of content. So if Apple expects a 40-percent markup on the hardware, the company may find itself in Sonyland with big profits on tiny unit sales.
Apple should instead reverse the strategy: Make little to nothing on the tablet hardware to maximize unit sales, then earn big profits on TV subscriptions, HD movie sales, books and other content.
Apple could dominate the coming tabletsphere, and with it, Hollywood. But with low unit sales, Hollywood will find plenty of competitive devices to play on, and Apple will have missed its once-in-a-lifetime opportunity.
The ideal Apple tablet would connect to the Internet via Wi-Fi or via a tethered iPhone. Optionally, it should be able to have its very own mobile broadband data connection.
If Apple sells the tablet like it does the iPhone, with no authorized unlocked option, the gadget will fail. The number of people willing to carry two mobile data contracts is low. The number willing to buy a connected device that does not require another contract is high.
The coming tablet creates an embarrassing situation for Apple CEO Steve Jobs. When asked his opinion about the Amazon Kindle eBook two years ago, Jobs said that "It doesnt matter how good or bad the product is, the fact is that people dont read anymore."
Jobs says a lot of brilliant, insightful things, and this wasn't one of them. Reading should be one of the Apple Tablet's "killer apps," and by killer I mean it could literally kill the dedicated eBook reader category if they do it right.
I think they probably will. But the fact is that Jobs said what he said. If he really believes reading it dead, Apple could do nothing to exploit the huge and growing demand for a better eBook.
I'm on record in dozens of columns predicting a breathtaking future of multi-touch computing for phones, tablets, laptops and desktops. In that future, "gestures" will rule. Circle documents with your finger, then swipe them off the top of the screen to delete them. Draw a "K" on screen to conjure up the virtual keyboard. That sort of thing.
The iPhone represents the most minimal foray into this new world of gestures. Flick your finger to scroll through contacts. Reverse-pinch on pictures to zoom in. It's all easy, intuitive stuff, and presented no barrier to iPhone dominance.
But Apple could get ambitious about immersing users into a whole new vocabulary of gestures with the tablet. Make the learning curve too steep, and the new tablet could become a laughing stock.
This is more or less what happened with the Apple Newton MessagePad. The initial handwriting recognition system, called Calligrapher, could be challenging to use for the first two weeks of operation, as the system "learned" the user's handwriting style. But that contributed to a user perception that the Newton involved a "learning curve," and the device became the source of mockery in a wide variety of places, including even the "Doonesbury" comic strip.
Please note that these aren't predictions. With Steve Jobs personally in control of the tablet project (allegedly!), rather than John Sculley, who spearheaded the Newton project, the Apple tablet is likely to be amazing.
But these potential pitfalls aren't taken out of thin air, either. Each and every one of them is based on things Apple or its CEO have actually said or done.
So what do you think? Will Apple win or fail with the tablet?