It looks like Apple has finally found a way to reverse years of declining iPad sales: Lower the price.
As you may recall, iPad sales had been falling for over three straight years, or over 12 quarters. That’s almost half the lifetime of the device lineup. Or, as the Apple-friendly New York Times puts it, the iPad had been “struggling in recent quarters.”
No matter your grasp of reality, or your credibility in reporting the truth to readers, there’s no way around the fact that the iPad, viewed as the linchpin to the post-PC world, has indeed been struggling. And Apple has tried everything.
First, it rode the mini-tablet trend belatedly with the iPad mini, a version of the product that it is now ready to abandon. Then, it copied Surface Pro with its 12.9-inch iPad Pro, and when that went nowhere fast, it created a 9.7-inch version. And then a 10.5-inch version because they will get it right eventually.
But this past quarter, Apple finally found a recipe for success: It released a new version of its standard, 9.7-inch iPad. And this new iPad arrived with two major changes from previous iPads: It actually includes less sophisticated technology than its predecessors. And it cost significantly less.
Cue cash register sound.
For the quarter ending June 30, Apple reported, for the first time in over three years, that iPad unit sales had actually risen year-over-year. Apple sold 11.4 million iPads in the quarter, up 15 percent from the 10 million units it sold in the same quarter in 2016.
Revenue from iPad also rose: Apple reported $5 billion in iPad revenues this past quarter, up just 2 percent from the $4.9 billion it earned a year ago.
But Paul, you may argue, Apple has, in fact, released three new iPads this year. Not just the cheaper new base iPad, but also new 10.5- and 12.9-inch iPad Pro models too. Perhaps Apple’s Surface rip-offs contributed to this success as well?
Nah. Do the math and the conclusion is obvious: Apple sold many more iPads—1.4 million more, a jump of 15 percent—but its revenues only rose 2 percent. That means it made less on each iPad on average. Prices on iPad Pro actually went up with the new models. So the cheap new base iPad has weighed disproportionately on that business.
That’s a fact. But my belief is that this basic new iPad is the only iPad that is selling well, and that this business is still in trouble. After all, one of the prevailing theories out there is pro-Apple land (sadly, it’s not just the New York Times) is that Apple, and the market, are still trying to figure out what the replacement timeline looks like. And that customers will flock to new iPads in time.
But I think this is a one- or two-quarter phenomenon. And that sales will simply decline or limp along going forward. And the rationale here is simple: The iPad, put simply, is not necessary. Not in a world in which large screen phablets are preferred for consumption tasks, the iPad’s primary use case.
As for the “pro” market, the iPad Pro, even with iOS 11, continues to be a lackluster alternative to a PC, Mac, or Chromebook. And with good PCs and Chromebooks undercutting even the base iPad pricing, that trend will simply continue. The iPad Pro just isn’t competitive.
So congratulations, Apple, and welcome to the real world. As I wrote in March in Apple is Finally Competing on Price (Premium): “Competition has finally had its inevitable impact on even the mightiest of consumer electronics companies: Apple, suddenly, is competing on price. Just like a normal company.”