Amazon's recent launch of the Kindle Fire, priced at $199, and the entry of the low-end Kindle at $79 is a very interesting strategy.
When Apple launched the iPad in 2010, it built upon the architecture and infrastructure of the iPhone, which launched in 2007. Even the iPhone built upon the success of the iTunes infrastructure which supported earlier iPod models. Amazon is likewise dealing from a position of strength, building upon the technology of the Kindle ereaders, and Amazon's existing delivery and hosting infrastructure.
Amazon ships much more than just Kindle books. The Amazon MP3 store has been an iTunes competitor for several years now, and was the first to offer music without Digital Rights Management (DRM) technology. Amazon now also offers instant movie downloads as rentals or purchases, as well as Android application sales. Amazon offers a comprehensive alternative to the Apple iTunes infrastructure, and the Kindle Fire is another key part of this strategy.
The next key step of the Kindle Fire's introduction is how Amazon differentiates this new tablet from the iPad. Like several other tablet manufacturers, Amazon is launching a smaller 7 inch tablet. While this form factor is not unique (the BlackBerry PlayBook, the Samsung Galaxy Tab, and the HTC Flyer all fit this size), Amazon has also cut the price point for the Kindle Fire. At $200, it is clear that Amazon is entering the low-end of the space, not directly competing against Apple at the moment.
When you consider the HP Touchpad fire sale in August, where a drastic price cut finally saw another tablet outselling the iPad, there is clearly a market for a lower-end tablet. One where Apple isn't actively targeting.
If Amazon can successfully lay claim to this part of the market, you can expect to see future attempts at Amazon launching into the higher upscale market that the iPad now claims. One thing is for certain, Apple is watching Amazon very closely.
Amazon may have a razor-thin margin on the Kindle Fire, but the important thing to note is that it will drive sales to the Amazon store, where the real money is made. Just as Apple takes a 30% cut on sales on the Apple App Store, I expect Amazon will take a healthy cut off anything sold through their online store, while at the same time depriving the Apple economy of sales.
Amazon sent a clear message to other tablet manufacturers: This time, amateur hour really is over.
- Can the Kindle Fire disrupt the tablet market? Not so fast (venturebeat.com)
- Amazon Kindle Fire vs iPad 2 and others (techtimely.wordpress.com)
- Amazon Kindle Fire: profit or loss for retailer? (news.cnet.com)
- Watch out iPad: Even indirect Fire can cook Apples (slashgear.com)
- Amazon, RIM tablets look alike--that's where it ends (news.cnet.com)
- Amazon vs. Apple? No, it's Amazon and Apple vs. Everyone Else (mobileopportunity.blogspot.com)