iPad owners (like myself): beware of the competition

Amazon’s Tablet Leads to Its Store

By JENNA WORTHAM and DAVID STREITFELD

The New York Times, September 28, 2011
 

Emmanuel Dunand/Agence France-Presse — Getty Images

The Kindle Fire has access to Amazon’s library of 18 million e-books, songs and movies and television shows, and can run Android applications that have been approved by Amazon. 

With a glossy 7-inch color touch screen and a dual-core processor, the Kindle Fire, a new mobile device introduced by Amazon on Wednesday, sure looks like a tablet, and one not so different from the Apple iPad.
But Jeffrey P. Bezos, Amazon’s founder and chief executive, has another word for it.
“I think of it as a service,” he said in an interview on Wednesday. “Part of the Kindle Fire is of course the hardware, but really, it’s the software, the content, it’s the seamless integration of those things.”
Amazon is counting on its vast online warehouse of more than 18 million e-books, songs, movies and television shows, as well as access to a selection of Android applications, to help it beat competitors like the iPad and the Nook from Barnes & Noble. Previous Kindles were only e-book readers with black-and-white screens.
The access to content is important as Amazon transforms its business into a digital retailer and responds to consumer demands for mobile devices, lest it wind up in a retail graveyard like Borders, a former peer.
“It will appeal to a different set of customers who are magazine readers and cinema fans,” Mr. Bezos said.
The other advantage Mr. Bezos is counting on is price: the Fire will sell for $199 while the cheapest iPad sells for $499. Amazon began taking orders for the Fire on its Web site on Wednesday; it will start shipping them Nov. 15.
Mr. Bezos took the stage on Wednesday at a news conference held in Manhattan to show off the Kindle Fire. The tablet, which weighs less than a pound and can fit comfortably in the palm of a hand, builds on the company’s popular line of e-readers.
Amazon is hoping it appeals to a broader audience that also wants to browse the Web and stream music, movies and video from a mobile device. The Kindle Fire also has access to a virtual newsstand that includes content from magazines like Wired, Vanity Fair and Cosmopolitan.
Amazon custom-built the Fire’s mobile Web browser, called Amazon Silk, so that it loads media-rich Web pages faster by shifting some of the work onto Amazon’s cloud computing engine, called EC2. “It’s truly a technical achievement,” Mr. Bezos said.
The Kindle Fire’s 8-gigabytes of memory is capable of storing 80 apps and either 10 movies, 800 songs or 6,000 books. The tablet also includes a free cloud-based storage system, meaning that no syncing with cables is necessary.
The Kindle Fire is missing some things the iPad 2 has — most notably, a camera and a microphone for video calls. The Fire can send and receive data only over Wi-Fi, not cellular networks.
The device’s $199 price tag is less than half that of many tablet computers on the market, including the HTC Flyer, which also features a 7-inch screen but sells for $499 at Best Buy. The Kindle Fire will also compete with the Color Nook e-reader, developed by Barnes & Noble, which has enjoyed healthy sales at $249.
Amazon can afford to charge less because it hopes to make up the difference by selling books, movies and popular television shows. Customers may also be more inclined to pay $79 a year for Amazon Prime, which gives them access to Amazon’s movie streaming service and free shipping, which in turn, encourages more shopping at Amazon.com.
Because Amazon sells its family of Kindle devices through its own Web site, it does not need to share revenue with another retailer. And in most states, customers do not have to pay sales tax on those devices.
“If you price your products in such a way that no one can compete with you, that has to be a good thing in the end,” said Scott Devitt, an analyst at Morgan Stanley.
On Wednesday, Mr. Bezos also introduced two new touch-screen Kindles, and a slimmer monochrome-screen Kindle, that range in price from $79 to $149.
Apple has secured a strong lead in tablets, selling more than 29 million iPads in the product’s first 15 months on the market. Mr. Bezos says that he expects shoppers will put both Kindles and iPads in their carts.
By entering the magazine-selling business, Amazon has also planted a flag in a digital marketplace that has so far been dominated by Apple.
With another player — particularly one that is as large and influential with consumers as Amazon — magazine companies could suddenly find that they have a useful bargaining chip when it comes to negotiating with Apple.
The price of magazine subscriptions on the Fire are higher than what readers would pay in print. Condé Nast, publisher of magazines like GQ, Vanity Fair and Glamour, is selling most of its publications for $20 a year, nearly twice what it charges in print.
Several magazines will be priced even higher, like The New Yorker, which will be $60 a year on the Fire. “It helps us establish that higher price point at our new benchmark,” said Bob Sauerberg, president of Condé Nast.
Mr. Bezos is confident in the company’s strategy. “Some of the tablets that have come on the market, the reason they haven’t been successful is because they weren’t services,” he said. “They were just tablets.”
Analysts say that the new family of devices will corral users into a tightly walled garden around Amazon’s content and devices and may secure a new dominance for Amazon as an online retailer and technology company. Music is streamed using Amazon’s Cloud Player, while movies and television shows are viewed through Amazon Instant Player. E-books rely on the Kindle app.
Owners will have access only to Android apps approved by Amazon and distributed through its Amazon Android Store. Even the Fire’s software, based on a Google Android framework, is disguised under a custom layer built by Amazon.
“From a customer point of view, its unrecognizable as Android,” said Mr. Bezos, who said the company chose not to work closely with Google to develop the Fire, unlike most hardware markers that build products on Android.
“The Kindle feels more locked down than the iPad,” said Ross Rubin, an analyst at the NPD Group, the market research firm.
More than most companies, Amazon thinks in terms of years and decades rather than quarters.
The original Kindle was meant to remove the retailer’s reliance on the physical book at a moment when a successful e-reader appeared inevitable. Amazon decided it was better to cannibalize its own future than let a competitor do it.
With the Fire, every dollar Amazon loses on the device could be more than made up for by the data gained. The Silk browser, by virtue of being situated in the cloud, will record every Web page that users visit. That has implications for privacy and commerce.
“Amazon now has what every storefront lusts for: the knowledge of what other stores your customers are shopping in and what prices they’re being offered there,” Chris Espinosa, an Apple engineer, wrote on his personal blog.

Jeremy W. Peters contributed reporting.