Amazon’s $199 Kindle Fire Threatens Apple’s Tablet Dominance With Pricing, Services

Written by Joe Ross. Posted in Featured, Trends

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Published on September 28, 2011 with No Comments

I’m not sure where to begin on this one. Amazon made some huge announcements today. First, they have announced the Android-based Kindle Fire. The middle device in the image above, this new tablet offering comes in full color with a capacitive touchscreen, WiFi connectivity, and a very customized Amazon-only Android skin. They also introduced the Kindle Touch, which also lacks the keyboard found on older models but maintains the e-ink display Amazon is so proud to say you can easily read in sunlight. Moreover, it rocks an infrared touch system for control and a sweet $99 price tag. And Amazon, not content with that awesome combination, will offer a $149 version with free international, no-contract 3G connectivity. Finally (yes, there’s more), today they start selling a $79 Kindle, also lacking a keyboard, but still WiFi-enabled.

There are plenty of places on the internet for you to get more information about the hardware and software Amazon used to build its new Kindle line-up, but hardware and software do not an iPad competitor make. We have seen many, many, many Android-based tablets released since the Apple dominated the market with its iPad, but none have challenged Mr. Jobs’ design aesthetic and mindshare. Apple have maintained dominance despite the iPad’s $499 price tag, even in the face of far more affordable devices. Part of that is due to cheap hardware and old, tablet-unfriendly versions of Google’s free-to-use Android operating system. But there is a much more important component in this equation, one Amazon is poised to claim for its own.

Amazon has content. They have lots of content. They have their Android Appstore. Amazon Prime members, who pay $79 per year for free shipping and some other analog perks, can also stream 11,000 movies and TV shows from Amazon Instant Video. That’s more than $2 less per month than Netflix, albeit with a smaller selection. Then there’s Amazon’s MP3 store, tightly integrated into Cloud Player, their website and Android app for streaming music you bought from Amazon anywhere, anytime. Cloud Player is part of Cloud Drive, a 5 gigabyte storage solution.

Then, of course, there’s the Kindle Bookstore. It was their first offering to present WhisperSync, which once synchronized reading progress and other stuff done on your Kindle. It will now do the same thing for video, music and other media on the Kindle Fire. The Kindle Fire’s new browser technology, called Silk, will use Amazon’s servers to compress web pages and optimize them for the Fire. Opera has done something similar for a long time, but Amazon’s approach is innovative in both methodology and the sheer power of their Elastic Cloud Compute server infrastructure. This means an end to staring at a screen while you wait for a web page to load. It means all the content of the internet, faster.

Amazon CEO Jeff Bezos, during the press event announcing all this new tablet goodness, repeated the phrase “premium products at non-premium prices” over and over again. I think what he really meant by “products” was more than just the tablets themselves, but the services I just described. Apple’s iTunes offers a great deal of multimedia, and often overlaps with Amazon’s offerings. But Amazon is a serious threat to Apple’s dominance because they can afford, probably through their enormously successful sales of “analog” goods—housewares, tools, groceries, clothing, etc.—to take a smaller margin and even a loss on their Kindle line just to get them into the hands of consumers. A $499 iPad is not an impulse buy (at least not for me, if it is for you, I hate you). A $199 Kindle Fire approaches impulse buy-land, and the same goes for their less advanced, lower-priced new additions to the Kindle line.

Apple has never been interested in competing on price, and would sooner close its doors than deliberately release a loss leader. That’s one of its strengths, but also one of its greatest weaknesses. Many companies have seen that weakness and tried to exploit it with crappy hardware and half-baked software. Amazon attacks with quality hardware, quality software, and the services to back them up, all at amazing prices.

The new Kindle line is a clear shot across Apple’s bow. The two companies can go toe-to-toe on multimedia services, but Amazon’s non-digital goods revenues and their willingness to slash prices and make up for it with other services gives them a distinct advantage. Of course, they’re late to the “real tablet/eReader combo” game, following both the iPad and Barnes & Noble’s Nook, but today’s announcement proves that they are in this for the long haul (consider the rumor Gdgt’s Ryan Block wrote about that the next version of the Fire may come out as soon as January of next year).

Fact: Apple won’t release a “cheap” tablet, and they won’t be able to match the free streaming bundled with Amazon Prime any time soon. So does this mean Amazon will emerge as the tablet maker who finally wrenched some market share from Apple’s massive claws? We’ll have to wait and see, particularly during the holiday season. But it’s good to finally have a real fight on our hands.

Your move, Steve.

Image by author, using images from Amazon.com.

About Joe Ross

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Joe Ross is one of the cofounders of KeyPulp. A law student, gadget geek and sci-fi fanatic, Joe also enjoys playing music, matching wits with kittens, and being proven wrong by his beautiful fiance. Note: Joe writes about legal stuff sometimes. None of that is legal advice and it should never be construed as such. | 

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