Saturday, October 1, 2011

Kindle'd!!!!! FIRED up Amazon

THE tablet computer has been the most talked about piece of technology since Apple launched its iPad in March last year.

Profitable and aspirational, that device sparked a rush from rival manufacturers eager for a slice of a new market.

This week it was Amazon’s turn, and the Kindle Fire looks set to be the first gadget to have a real chance of sales on the scale of the 50m the iPad is set to sell worldwide in 2012.

In fact, however, the two tablets are very different: where Apple’s device sells from $499 in America and £399 in the UK, the Kindle Fire will be just $199 – no Asian release details have yet been made public. The difference is down to the firms’ contrasting approaches: Apple seeks some profit up front, while Amazon may be losing up to $50 per device because it sees the Fire simply as a means to the end of selling digital music, films, apps and games. Analyst Gene Munster says: “Apple is monetising the hardware up front with a 30pc-plus gross margin on the iPad.”

In short, Amazon is not suggesting its tablet is simply a device – chief executive Jeff Bezos told technology blog TechCrunch that what he was launching was in fact “an end to end ecosystem”, offering consumers the opportunity to purchase huge amounts of content. In that sense, like the original Kindle, the Fire is an old-fashioned loss-leader.

Bezos, who is also Amazon’s founder, said the full-colour, touchscreen device, would be a premium product “at a non-premium price”, and called the new Fire “an incredible achievement”.

Certainly, no rival has managed to produce a device of the quality of the iPad for significantly less than Apple’s prices. When HP, however, decided to leave the tablet market, demand for its discounted TouchPad massively outstripped supply and demonstrated a huge public appetite for tablets at the right price.

Munster claimed the Kindle Fire’s 7in screen size put it at a disadvantage to the iPad’s 10in format. Amazon, however, has seen its older Kindle sell well because its similar small size makes it more portable.

For Forrester analyst Sarah Rotman Epps, Amazon’s tablet strategy is set to succeed. She praised the company’s approach, writing that “Amazon is competing on price, content, and commerce”.

While Rotman Epps concedes that “Amazon still lacks a convincing global strategy compared with Apple”, because the Kindle Fire will only be available in the US, she believes that “Amazon will sell millions of tablets, and the rapid-fire adoption of the Kindle Fire will give app developers a reason – finally – to develop Android tablet apps.”

But the company, crucially, is doing so not by competing with Apple directly. Amazon’s ambition is mass market adoption, leaving Apple with its traditional, massively profitable niche. It will be an uphill battle.

Blog referenced by Mr. Warman, Consumer Technology Editor


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