At the tail end of last year, I had an interesting discussion with Andrew Eisner, Director of Community & Content for Retrevo, one of the world’s largest consumer electronics shopping and review sites. Andrew is a gadget expert extraordinaire, and a blog he had written, “Over 100 Tablets Introduced; Why You Can’t Name Any,” caught my attention.  

The piece provided some fascinating insights and data into the tablet wars and what lies ahead in terms of pricing and tablet size (9.7 inches vs. 7 inches) and consumer attitudes towards each.

It also contained speculation as to what Apple might do going down market and Amazon might do coming up market. However, it was his assertion below that caused me to give him a shout: 

Unlike the Android (News - Alert) smartphone market where carriers subsidize phones and make money on monthly fees, Android tablet makers can’t undersell Apple because the profit they make on their hardware is all they get...Amazon and Barnes & Noble can vastly undersell Apple by sacrificing profit on the hardware in return for high margins on the content and services.

Eisner was pointing out the value of ecosystems, and the classic “give them an inexpensive razor and make money on the blades,” that has served Apple, along with Amazon and Barnes & Noble, well. He also used it to highlight the problem anyone without a store, i.e., the other 100 tablet makers, will have in competing if they can only compete on the price of the devices.

Eisner agreed with me that this was a classic example of the famous “Prisoners’ Dilemma,” the popular game theory exercise. This is where hypothetical prisoners must decide on what their best path to serving less jail time is based on rewards and penalties associated with ratting out a collaborator or remaining silent and trying to guess what that collaborator might decide to do. 

In this case, it would be in Google’s (News - Alert) best interest, for instance, to allow the device manufacturers of the Android ecosystem to share in the spoils of the Android market so they can compete against the iPad on price. However, Google’s acquisition of Motorola (News - Alert) Mobility would seem to dictate that it not do so. Google has said that it intends to fully support, whatever that means, its Android hardware partners but that certainly seems problematic. As someone once told me, the term “joint venture” in Chinese when roughly translated means “same bed different dreams.” 

Android is, in essence, a joint venture, and while the likes of Samsung, Sony and HTC (News - Alert), etc., may share the same bed, they certainly have different dreams. With Apple ready to support HTML5 and Amazon riding a hot hand based on its leveraging of its store assets, whether this turns out to be a two-horse race or not may be determined as early as Christmas of next year. 

As Eisner said, “In 2012, what we do know is that Apple is going to make the iPad better. This means things are not going to get any easier for their competitors in the device business.” That is a prediction for the New Year that you can probably take to the bank. How Google will react, given the intense scrutiny it is getting from regulators around the world, the seemingly never ending saga surrounding intellectual property issues in this space, and the yet to close Motorola deal, is a dilemma where the prisoners are yet to be determined. 

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia, HP, Siemens, Nortel (News - Alert), France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.