Piles of Tablets scare markets

 It's been a gloomy holiday season for tablet makers -- unless, that is, you are Apple, Amazon or Barnes & Noble.

The stories of tablets hitting the market and failing to sell are piling up. This week, Dell discontinued its Streak 7 tablet, after the death of the Streak 5 in August due to poor sales.

The move marks Dell's departure from the tablet market in the United States, at least for now.

A Dell representative said the device will still be available in China and elsewhere overseas.
And last week, Research in Motion said it would take a $485 million write-down related to poor sales of its BlackBerry PlayBook tablet. A financial analyst estimated that RIM had 1.4 million unsold BlackBerry tablets left in its inventory.

Then of course there is Hewlett-Packard's TouchPad tablet, which was pulled off shelves after 48 days, followed by a fire sale of the device for just $100, down from $500. The fate of the TouchPad is uncertain, awaiting a decision from H.P. on what to do with the tablet's software, WebOS.

Why is it so hard to make a successful tablet? Companies are failing for the same reasons that a string of tablet devices flopped before the iPad came to market, says Sarah

Rotman-Epps, an analyst with Forrester Research. Lack of content and capability are the key reasons.

"It's the same story as it has been from the beginning," Ms. Rotman-Epps said. "They're all trying to sell tablets as if they were PCs. Verizon marketed all these tablets with 4G and gigabytes of storage. What consumers care about is what they can do with the device."

Meanwhile, Apple made roughly 42 million of the 58 million tablets sold worldwide in 2011, according to estimates by Gartner, a market research firm.

And Amazon's new Kindle Fire, a seven-inch tablet priced at $200, is having a promising start as well. Based on shipments of the Fire from Taiwan, Forrester estimates the retailer will sell five million of them over the holiday season.

The Nook Tablet from Barnes & Noble, a $250 seven-inch tablet released two days after the Fire, has a chance to take off as well. Forrester projects that up to two million Nook Tablets will sell in the fourth quarter.

Propelling the success of the iPad is the iTunes store, which offers applications, books, games, music, movies and more. Fire customers, too, can download e-books, apps and movies from Amazon, and Nook Tablet customers can grab media from Barnes & Noble's digital store.

Amazon and Barnes & Noble's tablet numbers are not shaping up to be nearly as big as Apple's iPad sales, but all three devices can succeed on different scales, Ms. Rotman-Epps said.

She noted that the lower price tags on the Fire and Nook would appeal to customers wanting a pure media-consumption experience. Apple will continue to have the edge, especially in the world of business, as many companies are opting to purchase iPads for their ease of use and flexibility, Ms. Rotman-Epps added.

"Today iPad is still synonymous with tablets, but with the introduction of the Kindle Fire and the Nook Tablet, that's starting to change," she said.

Apple in price-fixing?

The European Union's antitrust watchdog is probing whether Apple helped five major publishing houses illegally raise prices for e-books when it launched its iPad tablet and iBookstore in 2010.

The probe, announced Tuesday by the European Commission, offers a glimpse into the fierce fight for shares of the growing e-book market, especially as Apple has tried to take on Amazon and its Kindle e-book reader. It also highlights the struggle for profits between retailers and publishers, as more and more readers download books electronically.

In particular, the Commission is investigating a significant shift in the way the price of e-books is determined that occurred in 2010, just as Cupertino, California-based Apple introduced the iPad and its own online bookshop, iBookstore.

Apple was the first retailer that allowed publishers to move to so-called agency agreements, which let publishers set the price that online bookshops sell e-books to consumers. Until then, publishers were able to set the wholesale price of e-books, while retailers decided what price to sell them on to readers.

"The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices," the regulator said in a statement.

Giving publishers the power to set retail prices could effectively restrict competition between online bookshops, since it takes away individual retailers' powers to set lower prices. Since Apple's deal with the publishers, several other online retailers have also shifted to the agency model, possibly in an attempt to secure the rights to sell popular e-books.

The EU investigation targets publishers Hachette Livre, a unit of France's Lagardere Publishing; Harper Collins, owned by Rupert Murdoch's U.S.-based News Corp.; CBS Corp.'s Simon & Schuster; Penguin, which is owned by U.K. publishing house Pearson Group; and Germany's Verlagsgruppe Georg von Holtzbrinck, which owns Macmillan.

The Commission stressed the probe was in its early stages and did not mean the companies actually broke EU competition law. It follows a similar investigation by Britain's Office of Fair Trading and a class action lawsuit against the same five publishers and Apple filed this summer in the U.S. District Court for the Northern District of California.

The U.K. agency on Tuesday closed its own probe, since the Commission has taken over the case, but said it was cooperating closely with the EU investigation. It said its investigation was triggered by several complaints, without naming any names.

Apple representative Bethan Lloyd said the company would decline to comment at this time.
Pearson said the fact that the Commission has opened a probe did not prejudge its outcome. "Pearson does not believe it has breached any laws, and will continue to fully and openly cooperate with the Commission," it said.

Holtzbrinck echoed that statement, saying it found the Commission's case "without reason."
HarperCollins and Simon & Schuster said they are cooperating with the investigation, while Hachette Livre declined to comment.

The e-book market has been dominated by Amazon.com Inc. and its Kindle reader, with both Apple and Barnes & Noble's Nook reader fighting to break in.

In a summary of its complaint, the U.S. law firm Hagens Berman, which filed the U.S. class-action suit, claims that "Apple believed that it needed to neutralize the Kindle when it entered the e-book market with its own e-reader, the iPad, and feared that one day the Kindle might challenge the iPad by digitally distributing other media like music and movies."

The lawsuit also alleges that, following Apple's deals, Amazon was forced to abandon its discount pricing model and move to the agency model.