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Apple Bets on Books, not Video, to Sell New iPad mini

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Apple today announced the second iPad—which had been unofficially but, it turns out, accurately, dubbed the iPad mini in the weeks leading up to the announcement—as a way to compete against the growing popularity of the Kindle Fire tablet launched last year by Amazon.

Specifications are posted online at Apple's site, but the ones to pay the most attention to are the processor (A5, just like the iPhone 4S and new iPod Touch), wireless connectivity (Wi-Fi or LTE cellular), the front-facing FaceTime HD camera and 5 megapixel rear camera, and the soon-to-be-ubiquitous Lightning connector that replaces the old thirty-pin connector.

The pricing for an iPad mini, which is about 20 percent smaller than the full-size iPad (7.9 inches versus 9.7 inches), is higher than many expected, starting at $329 for a Wi-Fi-only 16GB version.

Apple isn't gearing the device towards streaming and web browsing, focusing instead on e-books in a  direct competitive attempt to unseat market leader Amazon, as well as fend off an attack from Google with its new Nexus 7 tablet.

"Our iPad mini has 29.6 square inches of screen space," said Phil Schiller, Apple's vice president of global marketing. "Nexus 7 only has 21.9 square inches of screen space."

We see three interesting aspects about Apple's attempt to place the iPad mini between the iPod touch/iPhone and the larger original iPad.

First, as noted in last year's biography of late Apple CEO Steve Jobs, the company struggled with how to translate the web viewing experience from the larger iPad screen to a more diminutive iPad. It appears that the company still has not "solved" this issue, even though the number of iPod touch and iPhone users that surf on these much smaller screens makes it clear that consumers will consume content on the closest screen at hand.

Second, Apple's move to position this as an e-reader directly competing with the Kindle Fire would come, one suspects, with a similar price point. However, Apple has never been shy about charging a premium, so the 7.9 inch iPad mini will come in between 10-20 percent higher than the Fire in Wi-Fi-only configurations.

Third, Amazon has moved in to the movie- and episodic-television-streaming market in a fairly serious way, as we highlighted last year at the advent of Amazon Prime Video. Effectively Amazon has created staying power with the combination of free streaming of particular movie and television content, in conjunction with the benefit of free two-day shipping of most physical products in the Amazon inventory.

Apple has no such tie-in, unless one counts the idea of being able to use apps across all three screen sizes (iPod Touch/iPhone, iPad mini, and full-size iPad). Even that tie-in approach is suspect as many developers offer different versions for the iPhone and iPad, and charge accordingly.

Having pointed out those three shortcomings in Apple's iPad mini positioning strategy, though, we're loathe to bet against Apple by saying the mini is either overpriced for an e-reader or underpriced as a tablet. The biggest cannibalization may occur within the new iPod Touch lineup, which may explain why Apple only used the A5 chip in the newest iPod Touches versus the industry-leading A6 chip that powers the iPhone 5.

Pre-orders for the iPad mini begin on Friday, October 26, 2012. And while it remains to be seen whether or not the iPad mini will be a huge success, Dan Rayburn reports that the webcast announcing it today was a huge fail.

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