Ben Bajarin is the Director of Consumer Technology Analysis and Research at Creative Strategies, Inc, a technology industry analysis and market intelligence firm located in Silicon Valley.
As is to be expected, many in the media are commenting on the extremely aggressive pricing of the Kindle Fire as the most disruptive element of the product. I, however, beg to differ. I make this point often: Price is important, but it isn’t everything.
Imagine for one second that the Kindle Fire was released as is at $199 but didn’t have the Amazon services like books, movies, music, and e-commerce. I would argue that without these services, even at $199, the product would fail. Without Amazon’s services, it would be just another 7-inch tablet. It is because the Kindle Fire is tied to Amazon’s excellent services ecosystem that the Fire is even remotely interesting. Amazon has brought something to the tablet space that is fresh and different.
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They have identified what many other tablet manufactures have not: namely that Android by itself tied to Google’s services in a tablet form factor is not what the mass market wants. More importantly, Amazon brings a wealth of digital content that is easily accessible and consumed as a part of their solution. These things combined with a custom-designed version of Android is what separates the Kindle Fire from the sea of sameness that is Android tablets. For that reason alone I give it a good chance at succeeding.
The Kindle Fire Is Not an iPad Killer
Despite what the media and other pundits are saying or compelled to say, any smart market strategist will tell you that the Fire is no iPad competitor. It is targeting a different consumer than the iPad. Amazon was smart and is focusing on their strengths, instead of trying to be something they are not(which is Apple).
Other companies have simply been trying to copy the iPad—and to no avail, as most, if not all, Android tablets have been a failure in terms of mass market adoption.
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Amazon is not trying to copy the iPad or really even compete within the same realm as the iPad. Instead they are carving out a niche for themselves and differentiating their hardware with the Amazon services.
Amazon has targeted a certain type of consumer: one who is already a loyal Amazon customer and wants a best-in-class e-reader that also has limited tablet functionality and a great media-consuming experience.
Throughout Amazon’s demonstration of the Fire, they never once showed how you would use it to check e-mail or write a school paper, or how it would be used by small business and enterprises or doctors or lawyers. Instead they focused on consuming media from Amazon’s services. Trying to be all things to all people would be a failing strategy for Amazon. Only Apple is currently succeeding with such a strategy.
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I expect the Kindle Fire to do well but I don’t expect it to hurt iPad sales in the slightest. Instead, I do expect it to have a significant impact on the other Android tablets in the market. Other manufacturers of tablets will be forced to drop their prices to compete. The problem is that they are not tied to a robust services ecosystem, therefore the hardware is the only way they make money. Because of that, they will bleed cash and suffer significant losses.
Amazon can hit the lower price points because they didn’t create the most elegant hardware on the market and because they will make revenue up as Kindle Fire consumers consume content sold by Amazon.
Could Amazon License Their Version of Android?
I have been having this debate with myself as to whether or not Amazon actually wants to be in the hardware business. Looking back on the first Kindle, and even the Kindle Fire, Amazon is not making devices that are objects of desire, design-wise. This is important because it again highlights the point that services matter to Amazon more than the design of the device.
There are, however, many other vendors trying to make tablets with a focus on design. One of the things that will be interesting to watch is whether Amazon licenses or gives away their version of Android (which benefits Google in no way) to current Android vendors who are losing money hand over fist making Android tablets.
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This way, Amazon builds demand for their services and content in a tablet form factor with the Fire, builds momentum, and then lets other people participate in hardware tied to Amazon services.
Amazon could even allow other hardware manufacturers to participate in the upside of services revenue so they can keep costs down as well. Amazon already has a revenue sharing business model in place, so it’s not a huge stretch to imagine such a scenario becoming reality.
Again, this would do further damage to Android tablets and to Google. Amidst all of this, it is important to note that Amazon’s version of Android has stripped all benefit to Google and put all the benefit in Amazon’s corner. If they let other manufacturers in on their services it could be a win-win for all involved, as it could be very disruptive.
I do believe the Kindle Fire is disruptive but, again, not because of the price. It is the Amazon services that separate this product from the pack. I applaud the fresh thinking from Amazon and look forward to more services innovations from them in the future.
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Ben Bajarin is the Director of Consumer Technology Analysis and Research at Creative Strategies, Inc, a technology industry analysis and market intelligence firm located in Silicon Valley.