On September 6, 2012, Amazon unleashed several new versions of its Kindle Fire tablet, and at the same time dropped the starting price to $159. That is a significant price point, not because it challenges the likes of Apple's iPad, but because it opens up an entirely new market segment that previously would simply not have considered a tablet.
In other words, the new Amazon devices won't steal market share from Apple as the likely buyers of these new devices were never going to buy iPads or the iPad's higher priced competitors' tablets in the first place.
In the nine months since it began selling the Kindle Fire in November 2011, the tablet has captured 22 percent of tablet sales in the U.S., Amazon has claimed. The company has sold out of the devices, which indicates that Amazon purposefully halted production to provide a clear path for introducing its new models.
Rather than looking to compete with the iPad, the new devices will directly give new legions of Amazon's already hugely loyal customer base a simple means to finally buying tablets, and in the process opens doors for these customers to become ever more deeply entrenched in buying from Amazon. Obviously, Amazon sells its lower-priced tablets as a loss leader – profit margins are probably zero.
The company of course also hopes that by lowering tablet price points (while also increasing the overall capabilities of the tablets themselves), it will bring in many new users who do not own tablets and that aren't necessarily loyal Amazon customers. Most importantly, they also weren't likely looking to buy tablets.
The New Kindle Fire HD
The Kindle Fire HD will come in two screen sizes: 7 inches and 8.8 inches, and will have a front facing camera, dual speakers and 16 GB of built-in storage. The larger display is 8.8 mm thin and weighs only 20 ounces, while offering 1920 x 1200 resolution, 254 pixels per inch, and according to Amazon, a significant 25 percent less glare.
The cost? $199 and $299, respectively. These are prices that, for already loyal Amazon Kindle users, make upgrading to the next generation an enormously easy sell for Amazon – and we can anticipate Amazon doing exactly this. As users upgrade, the older devices also end up in the hands of new users. The price on the original Kindle Fire will drop to $159 from $199.
The new price points are extremely frictionless - the new Amazon tablets become almost no-brainers even for folks who were not previously interested in tablets - and more specifically for folks who weren't looking to shop through the tablet experience. Overall this is exciting news for Amazon, especially as we head into the holiday buying season - not only will Amazon expand its total Kindle user base, but the we can expect to see substantial increases not only in mobile-based shopping, but in overall revenues for Amazon.
This represents the real keys to the retail kingdom for Amazon.
Interestingly, Amazon claims that the Kindle HD now offers the best Exchange e-mail experience. There are also custom Facebook and Skype applications, which of course aim to take advantage of the new Kindles' front facing cameras. These are valuable additions to otherwise being able to access all that is available on Amazon's Web site, and in being able to play every possible multimedia alternative that is available to users.
Paperwhite – the New E-reader Standard
The company also unveiled a new touchscreen e-reader called the Kindle Paperwhite, which sports a self-lighting screen. The Paperwhite will cost $119 and start shipping October 1, 2012. A version with 3G cellular access will cost $179. Barnes and Noble's Nook delivers similar screen technology and currently costs $139. Amazon claims that the new e-reader has an eight-week battery life, even with the light on. It weighs in at 7.5 ounces, is lighter than a typical paperback and is thinner than most magazines.
The price certainly makes the case for acquiring the e-reader even in those circumstances where a user may already own a tablet. The e-reader screen is fundamentally different than what tablets offer, and delivers a pure reading experience one will not find even on a retina quality iPad display - if you want that true book or magazine reading experience the Paperwhite is the real new toy for you. We know we are going to acquire one.
The Competitors
In July 2012, Google - in partnership with Asus - began selling its $199 Nexus 7. It sports roughly the same dimensions as the original Kindle Fire but delivers a better quad-core processor, as well as a camera and updated version of the Android operating system. Amazon's version of Android is highly modified. The more interesting comparison here is that Google needs to make money from its tablet (at least we believe it does - and certainly Asus must make money on it), whereas Amazon, as we highlighted earlier, doesn't need to earn a dime from its hardware sales.
Apple is supposedly furiously working to deliver a seven inch iPad that must meet the aggressive new price points Amazon has drawn the lines on. It will be an interesting battle here - the desire for Apple's tablets rests entirely on the cachet of owning one and actually using it as a tablet. That is, it’s the "tablet functionality" that iPad users are after. This is entirely different from Amazon's loss-leader approach, where the tablet itself is of far less value than its ability to drive business to Amazon's stores.
For both Google and Apple, the challenge now becomes one of needing to offer similar capabilities in meeting the types of services that Amazon has now spent roughly 15 years honing. It will be a very tough sell for both Google and Apple to beat Amazon at the real game Amazon plays – it’s a game that Amazon has invented, and we're not sure either Google or Apple can pull it off.
All in all, we can say that Amazon – and Jeff Bezos – have pulled off some powerful new moves - all of them timed explicitly to meet the upcoming holiday buying season. Bezos and Amazon deserve kudos for upping the game and the ante. More power to them.
Want to learn more about today’s powerful mobile ecosystem? Don't miss the Mobility Tech Conference & Expo, collocated with ITEXPO West 2012 taking place Oct. 2-5 2012, in Austin, TX. Stay in touch with everything happening at Mobility Tech Conference & Expo. Follow us on Twitter.
Edited by
Braden Becker 
QUICK LINKS 
