Who ordered the scrambled brains?

Prices were just “released” for the Microsoft Surface tablet. Many are claiming the low-end price is too high to penetrate the established tablet market. I think these people ignore several things.

First, they are targeting different user profiles. Traditionally, tablets support a consumption-oriented type of computing. Reading books, watching movies, browsing the web, casual gaming. You don’t pull out your tablet and start composing the great American novel/application on that virtual keyboard. Beyond tweets and text messages, it’s severely inconvenient. Although Apple jumpstarted the tablet industry with a 10″ 4:3 aspect ratio device, we’ve seen strong demand for smaller, cheaper, widescreen devices. This 7″ tablet demand reflects their ability to meet the need for consumption-oriented devices. In fact, we now see (or accept rumors) that Apple will join the smaller tablet market, strongly supporting the idea that the screensize and price form a market niche/sweetspot.

Based on this, I contend that the 7″ tablet market will significantly splinter from the 10″ market over the next year. The second factor comes from the significantly greater capabilities of Microsoft’s 10″ Surface tablet. Specifically, the Surface will be able to run a full-fledged OS, and can be paired with a dedicated physical touch keyboard (that probably lacks tactile/haptic feedback). Together, this supports creation-oriented computing, (word processing, spreadsheet… sheeting, graphics processing, even light programming) which has historically been the domain of the desktop and laptop markets. Professionals looking for a device that allows them to do light work on the train, while waiting for meetings to start, or at a coffee shop, and also read a book, watch a movie or play a game in bed, will find these large tablets to be very compelling. Moreover, their professional-sized pocketbooks can support this higher-priced market, where a student’s or homemaker’s wouldn’t. The 7″ tablets and 10″ tablets will effectively cater to separate market sweetspots, and the Surface tablet pricing appropriately anticipates this.

This wouldn’t infringe on the ultaportable laptop market. Those devices are pricier and designed for heavy computing, with no intention of providing a consumption-oriented experience. Also, I believe this market fragmentation will fare better than that of the netbook years ago, which were too low-powered (and ridiculously artificially limited) to sustain its market. It really depends on how well these new devices can support the creative needs of professionals. If it can run a decent text editor, msbuild my smaller projects, and decently host them locally in IIS Express, I’d be all over it. …Well, if I weren’t so fully committed to bootstrapping my startup right now, that is.

Update: So those prices ($499 starting) were in fact for the Surface RT, the version that will run only a stripped down consumption-oriented version of Windows 8. If the machine can run (or be “coerced” into running) the development tools I mentioned above, I would be enticed. However, at this price point, I think the audience is much smaller. The device will run a specialized version of the Office applications, but without the more general capabilities afforded by the full-fledged OS, it might not appeal to a critical mass to sustain itself in the marketplace. Starting price for Surface Pro be more than $250 above the starting price for Surface RT. That feels to me like the edge of the sweet spot for a creation-oriented 10″ tablet.

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