Amazon Fires up tablet space

Amazon this week formally announced the addition of four new products to its device portfolio: the Kindle (basic), the Kindle Touch, the Kindle Touch 3G and the Kindle Fire. They are all e-readers, with the exception of the Fire which is a tablet. The original Kindle e-readers have since been renamed the Kindle Keyboard and Kindle Keyboard 3G to avoid confusion. The lesser-spotted Kindle DX is still available too.

As tablet computers are media consumption devices rather than productivity tools Amazon is, by the nature of its core business, well placed to compete. It can offer high-quality hardware at a minimal price point, based upon its expectations for the future sale of content. “And this is exactly what it has done,” said Informa analyst Dave McQueen. The new Kindle Fire is priced at just $199. This is in stark comparison to $499 for both the entry-level versions of the Apple iPad 2 and Blackberry Playbook.

“Using its trusted brand plus growing content and ecosystem, Amazon today created new e-reader segments whilst dramatically dropping their prices to make way for a fully-fledged touchscreen tablet device, the Kindle Fire,” said McQueen. With a 7” screen the Fire is smaller than the iPad and is driven by the Gingerbread 2.3 Android OS. It is distinct from the Apple iPad in that the device is all about the personal cloud as synching and downloading is carried out wirelessly using free cloud storage. To iterate the importance of the cloud the company also announced a new browser technology, Amazon Silk, that has the ability to ‘predict’ what users are likely to click next and then start downloading the content.

McQueen believes that at $199, the Fire is sure to be a highly disruptive product in the tablet market, particularly in the lead up to Xmas, and not only with other tablet manufacturers but also those that have yet to embrace cloud services. It is arguably the use of the cloud that could be the real game-changer in the tablet market although the Fire is going to put a lot of competitive pressure on both the Nook from Barnes & Noble and other tablet manufacturers in the 7” space.

“The Fire is quite clearly a consumption device and will support side loaded Android apps. It will ship with 8GB of memory with no announced products to be launched with varying memory capacity. However, there was no announcement about inclusion of cameras in the device or 3G connectivity so it appears to be a straightforward business model. However, I’d expect further iterations and product differentiation to follow if the Fire proves successful, including a 3G version. And when will we see an Amazon smartphone?” asks McQueen.

Informa believes that Amazon will finally prove to the world that size doesn’t matter but value for money does, which will be a big lesson for RIM with its Playbook and for other players who have already tried to launch tablets with 7″ screens. This launch could mark the second phase of the market development for tablets, where product differentiation, brand competition, and price elasticity will be the main drivers.

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