Apple’s incredible shrinking iPad

If the Apple event scheduled for later today isn’t getting the kind of media attention the company is accustomed to drawing, Apple has only itself to blame.

It certainly didn’t help that someone at Apple let a couple cats out of the bag Wednesday when photos appeared on Tunes of the devices reported to be the stars of the show: the iPad mini 3 and the iPad Air 2, both faster processors and TouchID. (See Are these Apple’s new iPads?)

But the iPad has deeper problems than that. While it’s still the best-selling tablet on the market, iPad sales actually declined last quarter while the rest of the category grew (albeit at a diminishing pace). What’s selling best in Asia are $50-$100 knock-offs used primarily as video players.

Within the Apple ecosystem, the company seems happy cannibalizing itself. As Twitter graybeard SammyWalrusIV noted earlier this week, the category Steve Jobs defined as occupying the space between the iPhone and the Mac is getting squeezed, especially since Apple began selling large-screen iPhones.

“Why buy an iPad when you could have an iPhone with a screen that doesn’t seem that much smaller than an iPad mini?,” Sammy asks rhetorically in his Thoughts on iPad. “Why buy an iPad when you can have a more powerful and just as easily transportable Macbook Air?”

Stratechery’s Ben Thompson, writing about his favorite iPad application — Paper — bemoans the relatively paucity of similar killer apps for the iPad, and he lays the blame on Apple:

The fact remains that Apple has incentivized developers to build shallow apps with customer-unfriendly business models. Specifically, by not enabling trials, which would allow truly superior apps to charge more for paid downloads, and most damagingly, not providing built-in paid upgrades, which would incentivize developers to build and iterate complex apps with the confidence they could capture additional revenue from their existing customers over time, Apple has made it a fool’s errand to build something like the aforementioned Paper. (See The Diminished iPad.)

“I personally will always own an iPad simply because Paper on the iPad does something for me that no other Apple device does; this simply isn’t the case for nearly enough people,” Thompson writes. “This is Apple’s fault.”

The iPad still has plenty of room to grow, especially now that IBM is peddling them to its customer base in business and government. Consumers may not buy a lot of Big Macs with their bulky iPads, but the addition of TouchID for fingerprint recognition and Apple Pay for secure transactions should help Big Blue sell into the enterprise.

Apple will be streaming today’s event on Apple.com/live and Apple TV starting at 1 p.m. ET (10 a.m. PT). JP Mangalindan will be on site, live-blogging for Fortune.

UPDATE: Jack Dawson has posted an interesting YouTube video that puts the declining iPad sales in an evolutionary context. If the iPad had come out when it should have, before the iPhone, we would not now be wondering why it’s being cannibalized by the iPhone. See: Further Thoughts on iPad Sales.