Digital Content, Apps and 4G Connectivity Will Drive U.S. Tablet Sales

(Feb 8 2011)

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   Yankee Group Predicts Tablet Market Will Reach $7 Billion by 2015

   By Dmitriy Molchanov, Analyst, Yankee Group

   Tablet computers are set to thrive in 2011. Unlike their predecessors, today’s tablets have access to an environment rich with digital content, applications and 4G (or near-4G) connectivity services. Yankee Group’s latest U.S. tablet forecast shows:

   • Annual U.S. sales will more than triple between 2010 and 2015. Tablet sales will grow at a CAGR of 31 percent from roughly 8 million units in 2010 to 30 million units by 2015. To put this phenomenal growth into perspective, we expect consumer data-only devices such as USB dongles and data cards to grow at a CAGR of only 12 percent over the same forecast period.
   • The installed base of tablets will boom. Assuming consumers repurchase tablets once every three years, we forecast 63.3 million tablets in use by 2015-a little under half the device’s total addressable market.
   • The average tablet price tag will drop to just $237 by 2015. Reference models, open source OSs and economies of scale in touch-screen manufacturing will help cut the average selling price of tablets in half by 2013.
   • Sales growth will outpace revenue growth. Despite the tremendous pace of tablet sales, revenue will grow at a modest 7.25 percent CAGR to $7.2 billion by 2015.

   Applications, gaming and video are key drivers of tablet demand, although connectivity and e-books are less of a factor. Using data from our Anywhere Consumer: US Consumer Survey - Wave 1-12, 2010, we find:

   • Applications are king. Eighty-three percent of respondents say app selection greatly influences their tablet purchase decision. More consumers consider app selection highly important than any other factor listed.
   • Cellular connectivity isn’t table stakes. Only 65 percent of respondents say connectivity factors highly in their tablet purchase decision.
   • Consumers want better software, not better hardware. Consumers place far greater weight on software features, such as a tablet’s user interface and applications, than on hardware features like storage and screen size.

   Our survey also asks consumers interested in tablets (and those with no interest) how much time they spend with a variety of media types. We find:

   • Games will fly off app store shelves. Consumers interested in tablets spend nearly 25 percent more time playing PC or video games than do consumers indicating no interest in tablets.
   • Tablets attract heavy video consumers. Consumers interested in tablets spend 18 percent more time watching DVDs or video than do those indicating no interest in tablets.
   • E-books won’t attract the masses. Tablets have not hooked heavy readers. In fact, consumers with no interest in tablets typically spend 10 percent more time reading than do consumers planning to purchase tablets.
   • Consumers interested in tablets prefer social networking to browsing. Although consumers interested in tablets show no greater interest in browsing the Web than do those with no interest, they do spend 20 percent more time connecting to social networks.

   In the end, the key to the tablet market’s growth is the move to ubiquitous connectivity spurred on by 4G network rollouts.  This forecast documents the first signs of that change.

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