The Magical Xbox Tablet
The profits in a game system come from royalties on the games. Game systems are sold at or below cost as annuities that pay back dividends when owners buy a service or purchase a game. The end result is Microsoft could price an Xbox tablet below cost, creating the best tablet value in market with better components and performance than any other.
11/12/12 5:00 AM PT
One of the most interesting rumors floating around last week was that Microsoft was working on a small form factor tablet that will be focused on gaming and branded Xbox. This could be a very interesting tablet, especially coupled with the initial success of the Surface tablet.
This is becoming a family, starting with the rumored Microsoft phone and ending with expected PC products -- each more interesting than the last. Microsoft is starting to look more like Apple, but with a stronger set of back-end services.
Like the Surface tablet, this rumored smaller offering would be designed to address the shortcomings in the iPad mini, and it would be even more compelling than its big brother. I'll get into that this week and close with my product of the week
The Advantage of a 7-Inch Tablet
The big advantage of a 7-inch tablet is that it doesn't try to be anything but a great entertainment device. Larger tablets try to be productivity products and stretch into the notebook space, but they lack the screen size and power of the best notebooks.
They try to be great entertainment devices, but they are generally too heavy to hold for movie length events or for reading. In short, while they most often are used as companion devices, people try to use them for more and have generally found the class wanting.
This changed with the Surface tablet, which can replace a notebook -- and since it has become my carry notebook, it does this surprisingly well. However, for reading and entertainment, it is best on a table. It is too big for a pocket, and it is really too heavy for comfortable book reading, aggressive game playing, and watching TV or movies without a table to place it on.
However, the biggest advantage of the 7-inch tablet has been affordability, with both the Kindle Fire and Nexus 7 aggressively priced at $200.
Steve Jobs was against the 7-inch iPad mini. This is likely because this class of product was already at commodity (thin margin) prices and Apple isn't configured to be a thin margin company. He knew they'd have to either collapse margins and dramatically reduce profits or bring out a product that wasn't competitive.
Jobs' strategy in these cases was to double down on another, more profitable, product like the regular iPad -- and argue that the smaller class of products is for idiots, pulling status from the class.
By bringing out a product priced 65 percent higher than the market, Apple set the stage for a future pricing action that will still do the anticipated damage to margins and profits, and now that it's validated the class, it can no longer execute a strategy that disparages it.
The Xbox Tablet
Much like the Kindle Fire HD is focused on Amazon services like books and movies, the Xbox Tablet will clearly be focused on games. That means that not only will it have a strong display, but it likely will have more performance than any other tablet. That also means it should cost more to build, which would suggest Microsoft could make an overpricing error similar to the mistake Apple made.
However, here is where the magic of the Xbox comes in. The profits in a game system come from royalties on the games. Game systems are sold at or below cost as annuities that pay back dividends when owners buy a service or purchase a game. The end result is Microsoft could price this below cost, creating the best tablet value in market with better components and performance than any other.
This would allow Microsoft to create another product that showcased the comparable Apple iPad mini's weaknesses. It would have high, not low, performance; it would have a better motion detectors for games; it would have an aggressive, less elegant, design to emphasize its purpose -- and it would be priced at or below cost. Saying it was well-differentiated from the iPad mini would be an understatement.
I think folks have long wondered why Microsoft never brought out a handheld gaming system. I think, once this is released, the answer will be obvious.
Microsoft wasn't interested in creating another Zune-like product -- it wanted something like the Xbox 360 that could do games, music, movies, TV, and become the handheld game winner of the social networking decade. It may look pretty smart if this is real.
Product of the Week: Plantronics Voyager Legend
It isn't often that a product with a name this aggressive lives up to that name, but the Voyager Legend is truly legendary. This Bluetooth headset is amazing. It has dual noise cancellation, and it is the only headset I've been able to use reliably in a convertible.
It has massive battery life with up to six hours of constant talk time and days of standby. It has sensors so that when you take it off it disconnects, and when you pick it up it automatically answers the phone.
It can even be flashed to provide updates, so it will work with newer phones. (Some headsets have had issues with the new iPhone 5 and this can be patched to address that problem.)
It uses a magnetic charging chord, but you can get a charging wallet that will store the headset and charge it with the same standard plug that all but iPhones use.
Plantronics Voyager Legend is truly legendary, and it is attached to my ear as if it were part of my body. That makes it a natural for my product of the week.