Apple’s Larger iPhones Are Already Slowly Killing the iPad

Source: GetPocket.com

Ever since Samsung kicked off the large-screen smartphone craze with its line of Galaxy Note phablets in 2011, the worldwide smartphone market has increasingly trended toward phablet-sized devices. After making an incremental screen size increase to four inches with the iPhone 5 in 2012, Apple finally succumbed to consumers’ demands for a large-screen iOS-based smartphone and released the 4.7-inch iPhone 6 and 5.5-inch iPhone 6 Plus in 2014. With the screen size of the iPhone 6 Plus only 2.4 inches smaller than the iPad mini, some industry watchers began to wonder if the latest iPhone models might start to cannibalize the sales of the iPad by making the tablet’s larger screen size redundant for new iPhone owners. Although there has been speculation that iPad sales might be impacted by the debut of two larger-screen iPhone models,  it was assumed that the evidence for this trend would not be seen until the sales data for the current quarter was compiled, since Apple’s latest iPhone models have only been on sale for a little over two months.

However, new data compiled by the company that makes Pocket — an app that lets users save “articles, videos or pretty much anything” for offline consumption — provides the first evidence that this cannibalization may already be underway. According to the company’s data, iPhone 6 and iPhone 6 Plus owners are increasingly using their large-screen devices in lieu of the iPad. As seen in the charts above, the company compared the media consumption habits of people who own an iPad and an iPhone 5S to people who own an iPad and an iPhone 6 or iPhone 6 Plus.

According to the company’s data, users who own both a 4-inch iPhone 5S and an iPad view 55% of content on the iPhone 5S and 45% on the iPad (model not specified). On the other hand, users that own a 4.7-inch iPhone 6 and an iPad view 72% of content on the iPhone and 28% on the iPad. The correlation between screen size and media consumption habits becomes even more apparent when it comes to the 5.5-inch iPhone 6 Plus. For users that own an iPhone 6 Plus and an iPad, a full 80% of all content is viewed on the iPhone, versus only 20% on the iPad.

Photo by Justin Sullivan/Getty Images

In case there was any doubt about the direct link between a smartphone’s screen size and the percentage of content that is viewed on the device, the company also pointed out that the 80-20 split seen between the iPhone 6 Plus and the iPad mirrors the media consumption rates of users that own both an Android smartphone and a tablet. As previously noted, large-screen smartphones have long been available from various Android-based vendors, which explains why more Android users tend to view more content on their smartphones.

So what does this mean for the future of the iPad? While it remains to be seen how much of a sales boost Apple’s recently released iPad Air 2 and iPad mini 3 will give the company’s tablet product line, the media consumption habits documented by the maker of the Pocket app suggests that sales of the iPad may soon be cannibalized by the iPhone in the same way that sales of the iPod were cannibalized. Since the iPod’s digital media playing functions were subsumed by the iPhone’s capabilities, consumers saw less reason to own a separate device dedicated solely to digital media playback and storage. As a result, sales of the iPod have plummeted over the past several years. According to Apple’s latest earnings report, iPod sales saw a year-over-year decline of 48% in fiscal 2014. In fiscal 2013, sales of the iPod slipped by 21% compared to the previous year.

Besides the fact that both the iPod and the iPad appear to be products that have had their functions made redundant by the iPhone, there are also other parallels to draw between the two products. Although the iPhone didn’t offer better digital media playing functions than the iPod, it still managed to cannibalize its sales. The recently discontinued iPod classic offered 160GB of storage, more than the 128GB of storage offered by the highest capacity iPhone models. However, most iPhone owners were willing to sacrifice the extra storage space for the convenience of having a digital media player that could also be used to make phone calls, receive messages, and browse the Internet.

Photo by Pablo Blazquez Dominguez/Getty Images

Similarly, there is no question that the iPad remains a better device for viewing content. While the 5.5-inch screen of the iPhone 6 Plus is a big improvement over the 4-inch screen of the iPhone 5S, it is still considerably smaller than the 9.7-inch iPad Air or even the 7.9-inch iPad mini. However, just like they did with the iPod, users appear willing to ditch a superior functionality offered by a standalone device in favor of the convenience offered by owning just one mobile device that can provide the same function at a “good enough” level. The importance of convenience over functionality was highlighted in the Pocket app company’s study that found that iPhone 6 Plus owners viewed 67% more content more content on their devices over the weekend than iPhone 5/5S owners did. The company concluded that this was due to larger-screen iPhone owners leaving their iPads at home, while iPhone 5/5S owners continued to rely on two devices for their media consumption needs.

While the Pocket app company’s study looked at the consumption habits of Apple users who own both an iPhone and an iPad, the trends uncovered in the study suggest that iPhone 6 and iPhone 6 Plus owners who don’t own an iPad already, would be unlikely to buy one now. Some larger-screen iPhone owners may have even specifically purchased their devices instead of an iPad because it provides a tablet-like user experience. In other words, if sales of the iPad aren’t already being cannibalized by the iPhone 6 and the iPhone 6 Plus, it will be soon.

With the growth rate for worldwide tablet sales already on the decline due to the devices’ lengthening lifecycle, the cannibalization of Apple’s iPad by the larger-screen iPhone models may happen even faster than it did for the iPod. According to latest data provided by market research firm IDC, Apple is forecast to remain the world’s biggest tablet vendor in 2014 with a 27.5% share of the tablet and 2-in-1 market. However, Apple’s share of the worldwide tablet market also shrank to 22.8% in the third quarter of 2014 when compared to the year-ago quarter, when the company held a 29.2% share.   

Despite the glum outlook for the future of Apple’s iPad sales, the California-based company doesn’t appear to be worried. Apple CEO Tim Cook even mentioned the cannibalization of the iPad during the company’s fiscal fourth-quarter earnings call. “I am sure that some people will look at an iPad and an iPhone and decide just to get an iPhone and I’m fine with that as well,” said Cook according to a transcript provided by Seeking Alpha.

And why wouldn’t he be? Any money that Apple may have lost from the cannibalization of the iPod’s sales by the iPhone obviously didn’t hurt the company’s overall profitability, but simply shifted the revenue into another column on its earnings report. There may even be a long-term advantage to having the iPad’s sales cannibalized by the larger-screen iPhone models. Since smartphones generally have a shorter lifecycle than tablets, Apple may actually make more money in the long run from a repeat iPhone buyer than it would from a loyal iPad buyer.

Follow Nathanael on Twitter @ArnoldEtan_WSCS

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