What iPad Killers Can Learn From Xbox

The tablet PC market has taken a strange turn in the back half of summer.
Theres no disputing that Apple s (NASDAQ: AAPL ) iPad still is the face of the
industry, with 30 million sold since hitting stores in April 2010. But while
Apple continues to dominate, competitors are finding roles to play. Reasearch In
Motion s (NASDAQ: RIMM ) BlackBerry PlayBook hasnt been a hit with consumers,
but it became the first tablet to receive Federal Information Processing
Standard certification in July, making the U.S. government a lucrative customer.
Hewlett-Packard s (NYSE: HPQ ) TouchPad tanked so hard that HP made a full
retreat from the portables business, but since retailers began liquidating the
device at a $99, it has sold out, leading some to think that HPs bow was merely
a feint . Even e-readers the technology that the iPad was supposed to have
wiped out by now are doing well. Barnes & Noble s (NYSE: BKS ) Nook business
has grown 140% year-over-year . When it comes to technology, there never has
been a shortage of titans one company or device that simply defines a market,
leaving its competitors to catch up. Apple has danced this number before with
its iPod media player. Sony (NYSE: SNE ) did it before Apple, with the Walkman
and Discman cassette and CD players literally defining the language people used
to describe portable music players. However, investors following the tablet
market of late 2011 shouldnt necessarily look at those examples as predictors of
whats to come. A closer model of how the market is diversifying is the video
game console market of 2004 to around 2006. Prior to that period, there was a
clear dominant device in the market: Sonys PlayStation 2. At the time, Sony and
its core competitors Microsoft (NASDAQ: MSFT ) and Nintendo (PINK: NTDOY )
offered very similar products. The PlayStation 2, original Xbox and GameCube
were indistinguishable from each other to the average consumer, much in the same
way that tablets like Samsung s (PINK: SSNLF ) Galaxy Tab and Motorola s (NYSE:
MMI ) Xoom are indistinguishable from the iPad. The PlayStation 2 dominated
thanks to its superior services. In that case, it was DVD playback and a
desirable library of games. In the iPads case, its the attractiveness of apps
like Facetime as well as the quality of the App Store and iTunes. The market
that later emerged, however, was much more evenly split, and it was because
Sony, Microsoft and Nintendo began offering very different things with their
devices. The Xbox 360 released in 2005 and sold itself by having not only
high-end graphics but also Xbox Live, an online network that combined for-pay
online gaming for users, social networking services and digital distribution of
goods. Nintendo, meanwhile, released the Wii in 2006, a technologically inferior
device that won over audiences with novelty in its case, a wand-like
motion-based controller, as well as curious games like fitness trainer Wii Fit .
At the same time, Sony released the PlayStation 3, which was intended as a
technological behemoth with support of the then-new Blu-ray disc format. During
the next few years, Nintendos Wii outsold its competitors nearly 2-to-1 on a
monthly basis, but since 2009 all three devices have remained competitive with
one another, suiting disparate audiences with specific wants. The tablet market
is beginning to head in this direction. RIMs PlayBook is finding its role as a
service device for government and business . Amazon (NASDAQ: AMZN ) is said to
be preparing its own tablet that will be significantly cheaper and less
technologically advanced than the iPad, making it ideal for curious parties
without $500 to spend on a flashy device. Given its history with the beefy Xoom,
Google s (NASDAQ: GOOG ) first tablet made with Motorola as a wholly owned
subsidiary might even pursue the ultra-high-end market looking for something
more advanced than Apples machine. For right now, the iPad is the tablet market
all on its own, but patterns from the past show theres always room for more in
the technology space. As of this writing, Anthony John Agnello did not own a
position in any of the stocks named here. Follow him on Twitter at