Has Amazon Changed The Tablet Game?

The new Kindle Fire represents Amazon’s first steps into the tablet business. The device itself is, for the most part, unremarkable technologically. It is really a bare-bones tablet that offers enough hardware support for the core activities people want from a tablet: consumption of content from Amazon. Yes, it’s an Android tablet, but the “Android” part has been buried pretty deep under a rich and integrated layer that Amazon has placed on top of it. Being Android means that Android apps, from Amazon’s own Android app store, will run on a ready-built commodity platform. This is, in my mind, a good thing, as it brings a level of integration and design to Android that has been lacking so far, and brings it up to (or at least close to) the level of iOS on iPad. It will continue to elevate Android’s awareness in the market, although it does bring “yet another UI” to the Android party, potentially adding to some of the confusion.

Before looking at the hardware and what the Fire is most useful for, I want to talk about one area where Amazon appears to have advanced the state of the art for mobile computing. The advance is Amazon combining their EC2 cloud services and the Fire’s browser to provide more computing power than is available on-device, with Amazon Silk. The Fire is basically a thin-client with some amount of local processing, but one that can offload the heavy lifting of rendering and processing web site data to the cloud. This has been talked about for a while now, and some attempts at a similar approach have been made in other mobile browsers. Amazon’s solution, though, appears to be the first to bring to bear truly massive computing scale to the problem.

Now, about the hardware: it has the same storage and basic computing power available from most entry level tablets (8GB of local storage, dual-core processor). It has a display size and form-factor similar to other tablets, and is on the smaller size of the spectrum for more portability. It has comparable battery life to other tablets. The list of hardware features is pretty short, though, and it is missing a lot of what’s available in other tablets: no options for more local storage, no cameras, no microphone, no 3G or LTE support, no GPS, no compass, no motion sensors, no SD-card or similar optional storage. It seems like a lot to missing, and for some categories of customers, the device simply won’t suit their needs. But, for a large swathe of consumers, I’m not sure it is really that big a deal.

Why? Because this device is aimed primarily at one thing: consuming content from Amazon. The Fire is about being able to listen to music, watch movies, read books and use apps. All of them bought from Amazon. The $199 price reflects the reality that this is a device that contains the bare minimum needed to get people a tablet, and get them one that integrates closely with Amazon’s ecosystem and core business activity. To augment the lack of options for more local storage, Amazon stores your data and content in it’s own cloud services. The device itself offers enough to support what a lot of consumers are going to do with the thing: listen to music, read books, watch movies, update Facebook, play games, browse the web. No 3G or LTE? Probably not a big deal, given how easy it is to tether devices to your smartphone, making your phone your mobile communications hub when you’re out and about. And the other missing hardware bits? I’m guessing that Amazon is going to bet that you’ll use your smartphone for a lot that (navigation, taking pictures, etc).

The Fire appears to be, like the other Kindle products, Amazon’s way of providing a cost-effective way for people to access Amazon content. By providing an entry-level device at an entry-level price, it removes (or at least reduces) a barrier to Amazon’s core product. Amazon really isn’t in the hardware game to be the leading provider of hardware. The price drop on the newest Kindle to $79, plus the low price on the Touch, aren’t about trying to capture hardware marketshare and maximizing profit margin on the devices. At the prices Amazon is selling them for, I suspect they are basically covering their costs, and perhaps making a small profit, but not a huge one. These devices aren’t about adding hardware revenue to Amazon’s bottom line, although they aren’t necessarily giving them away for a discount either. These devices are priced such that people who might be reluctant to by a Samsung Galaxy Tab or 8GB WiFi Apple iPad 2 because of price now have an option. If you just want to read books, for the cost of a couple of new-release hardcover books, you can get an e-reader that will last you for a few years. If you want to also watch the movies you bought at Amazon, then the Fire is a decent value at about half the cost of most other tablets. Sure, it has less than half in terms of hardware features. But, for many consumers, that won’t matter. They bought it to read the latest John Grisham novel or play Angry Birds on the train to work.

Amazon is primarily about content. They want to sell books, music, movies, apps and all other manner of “stuff” to people. Barriers to selling “stuff” makes it hard to generate revenue, let alone make a profit. Depending on others to provide access to your content comes with risk. The Fire, along with the rest of the Kindle line, is about Amazon managing the entry-level for accessing their content. They provide devices that are “good enough” at a price that is acceptable for most people. Except for Silk, the Fire isn’t the most advanced tablet in terms of technology. The new Kindle Touch offers a feature (a touch screen) that was available 2 years ago on Sony e-readers. It isn’t about setting a new bar for technology features. It is about having hardware and software that is more than adequate to the task. That task is about selling content.

So, will this give Apple a run for its money? Do we finally have a tablet that can compete with iPad? I suspect we do, and it isn’t just because of the price. It’s about a device that comes with a rich and well-integrated ecosystem that makes it useful and entertaining. In a head-to-head competition in terms of technology features, the Fire is really a bare-bones tablet. It contains the bare minimum for hardware needed to be useful. But the hardware isn’t the defining feature, and the price (while attractive) isn’t the only distinguishing element. By the end of this year, Apple will have sold about 75 million iPads since the device first came out, and this is a device that has an entry price of US$499. That represents anywhere from 60% to 80% of the tablet market (depending on whose numbers you use). There are cheaper tablets out there, but none have really made a dent in Apple’s sales, because it isn’t just about price. It is about “value”, and that value is in the apps (which Android has lots of, although primarily for phones and not tablets) and the content. Amazon has content, lots of it, and keeps adding more. Apple is really the only other content provider that is on the same scale as Amazon.

I expect the Fire to sell well, and it should give Android a much larger footprint in the tablet market. I also expect Amazon will eventually put their Amazon Silk-based browser on iOS and eventually make it available to any Android device. Again, it’s about content for Amazon, not primarily about moving hardware, and anything that makes Amazon content more attractive works in the company’s favour. I wouldn’t call the Fire a game-changer. It hasn’t rewritten the rules for tablets. What it could do is tilt the tablet landscape in Android’s favour, and what it acknowledges is that the content, and the not the device, is what really matters.

 

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