After Hours

Amazon's Kindle Fire just nuked the tablet market: Winners and losers

Amazon just split the tablet market with Apple. The Kindle Fire is subsidized because you'll shop more. Apple will stay high-end. Every tablet maker in the middle is screwed.

This is a guest post from Larry Dignan of TechRepublic sister site ZDNet. You can follow Larry on the ZDNet blog Between the Lines, or subscribe to the RSS feed.

Amazon CEO Jeff Bezos took the stage Wednesday to unveil an arsenal of devices that are going to disrupt rivals like Barnes & Noble as well as Android tablet makers.

By rolling out the Kindle Touch (starting at $99), a regular Kindle ($79) and a Kindle Fire tablet ($199), Amazon introduced a subsidized model that only Apple can really match (statement). In a nutshell, we’re entering a near disposable e-reader/tablet era that will split the market between Amazon (consumption based profits) and Apple (high end brand profits). Every technology company caught in the middle is going to have some serious problems.

Also: CNET live blog | Amazon’s Bezos unveils Kindle Fire; color tablet computer | Amazon’s Kindle Fire; At $199, finally a viable college tablet | Amazon’s Bezos unveils Kindle Touch, $99; Kindle, $79 | CNET: Amazon unveils trio of Kindle e-ink readers | Nook vs Kindle Fire specs | iPad vs Kindle Fire specs All Kindle coverage

Here’s a look at the winners and losers in the wake of Amazon’s latest line-up of Kindles:

Winners:

  • Amazon: This tablet isn’t about hardware. It’s about consumption of Amazon services like music, streaming movies and apps. The Kindle Fire is an extension of Amazon’s store. How can Amazon price at $199 for a Wi-Fi tablet? Because you’ll shop more, consume more and be an Amazon Prime subscriber. The Kindle Touch and Fire equate to a lot more shopping and usage.
  • Android market share: Should Amazon’s heavily customized Android tablet take off it will go a long way to bolstering the operating system’s market position. Today the tablet market is all iPad all the time. Amazon will change that.
  • Apple: Amazon’s tablet isn’t an iPad killer by any stretch. In fact, Amazon’s aggressive pricing creates two tablet markets—high end and near disposable. Apple can hold its pricing. So-called iPad killers won’t be able to hold the market. In other words, Amazon and Apple just split the tablet market. There are $199 tablets (Fire) and $499 tablets (iPad). Anyone in the middle is toast.

Losers:

  • Android tablets: If HP’s TouchPad fire sale ruined the Android tablet market, Amazon just killed it. A color tablet at $199 will kill pricing for Android tablets. Rest assured, Amazon will cut prices later. In other words, $99 is the new price point in just a few months. It’s going to be ugly for select hardware makers. Here’s a scenario: You can buy a Kindle Touch (starting at $99) and a Kindle Fire tablet for under $300 and still undercut most tablet makers.
  • Barnes & Noble’s color Nook: Yes, Amazon was late to the color tablet/e-reader party. But Barnes & Noble will have to cut its price from $249. That will squeeze margins for Barnes & Noble, which doesn’t have the financial firepower to hang with Amazon. On the e-reader front, the squeeze is still on.
  • Android 3.0 Honeycomb: What does it say when the two bestselling tablets are hybrid e-reader/tablets running on a lesser version of Android. It says Honeycomb isn’t that great.
  • Research in Motion: If Amazon will sell you a PlayBook-like tablet starting at $99, what is RIM going to do. RIM lacks apps—no Angry Birds—scale and pricing. The PlayBook may be over.

20 comments
eddiedavid33
eddiedavid33

I live in the UK and there is no news on when the Kindle Fire might be available as yet. After watching the launch online and seeing the price of the Kindle fire I must commend Amazon for doing it's market research properly. They have recognised that there is a market space for tablets priced at that point. They can build at this price point because they will be tailoring the interface to include all of the Amazon services which is where they will more than break even on their costs for building the Amazon Fire. Other manufacturers building tablets have failed to recognise that they cannot compete with Apple directly. The HP sell off of their touchpad showed that the market is ready for alternative tablet devices but not at the prices that non-Apple manufacturers are asking, regardless of whether Android 3.x is as good or better than the current iteration of Apple IOS. Another point to note is that if and when the Kindle Fire is made available in europe, its price will be reflected in Euros or Pounds, that is 199 pounds or euros for the device rather than 199 dollars, more than breaking even on their build cost. Other Android device makers have already started to drop their prices. The key in this market which is dominated currently by Apple, is to offer an alternative, but to gain market share that alternative needs to be at a price point for customers which makes it worthwhile not buying an IPAD. I do own an IPAD myself but will be keenly watching what happens with the Kindle Fire potentially coming to european shores.

gwjones12
gwjones12

I live in Canada and have researched the Kindle Fire, it will not be allowed to download books, etc while outside the USA. So how many BILLIONS of people will be affected... and don't even have a chance to decide who wins and who loses. Just the resession bound USA.

AnsuGisalas
AnsuGisalas

If it can be rooted, and if it can be fitted with a new OS, then that changes a lot.

Mike.Shelton2
Mike.Shelton2

Before declaring the 1st generation Fire a huge success, we need to see how well it works and what folks think about it once they start using it. Even at $199, if the reviews say it sucks, then it will fail to be the game changer many are saying it will be. My guess, and from what rumors I'm hearing, are that the Fire may be a "stop gap" device that will be delivered in time for the holiday buying season, but it won't be the true game changing device. Amazon will likely use the Fire to test out their media streaming services and to determine how to profit from it. It's the 2nd and 3rd generation Fire devices that will likely bring the most market disruption.

PineappleBob
PineappleBob

How does the Fire compare to the BlackBerry Playbook? The PlayBook is geared less for consumer and more for the BlackBerry user with all the love and joy that is secure communications and the like. It does not kill RIM, it is merely a tablet form factor that is in the market, but not the same capabilities of the PB. And for that matter why would I buy a tablet simply to Amazon shop? I would consider the Fire for web browsing and other such trivial things but it would not make me shop more at Amazon.

DadsPad
DadsPad

The low $79 price for basic e-reader is with "special offers and sponsored screensavers", in other words, advertisements. With out the adds the price is $109. This applies thoughout the new pricing of Kindles. The Kindle 2 with keyboard and 3G that lists for $139, is still $189 for no adds. This does not apply to the Fire, but it is just WiFi, no 3G. If you do not mind adds at the bottom of the page and in you screensavers, pay the lower price, if you do not, you pay the higher cost.

dicostanzot
dicostanzot

$200 disposable ? I dont think alot of people have $200 around that they can afford lose. Disposable to me is like $25-$50. I guess its relative. The subsidize piece is right on, that's how that can do it that cheap, look at the kindle, $79 now that's getting towards disposable, I just paid $189 for mine less than a year ago.

ScarF
ScarF

I could nowhere find about the option to install an application for reading ePub format. Until than, no Amazon eReader or tablet for me. On the other hand, as an eReader user (only, and no tablet owner) I still don't like the LCD screen so I continue to wait for the color eInk eReaders.

josmyth
josmyth

If I invented an electronic toothpick, they would declare a consequent death of RIM. Why, exactly, does every new event in the tablet world have to signal the end of Playbook, or Android tablets for that matter?? The tablet market needs competition - let it happen!

RobertMoore12
RobertMoore12

My father-in-law has the kindle with ads and they only show at the bottom of his home page and the screen saver. No ads while reading. He likes the e-ink screen, too.

Zzyzyx
Zzyzyx

It is a totally different market out there. Those in their mid 30's and 40's bought PCs for thousands of dollars with the thought that it will last you for years and before you knew it the computer was out-of-date in 6 months. Now you buy computers for a few hundred dollars with plans to upgrade it once a year or two at the latest. Look at Music. I talk with the younger generations who buy an mp3 here and there like candy in a store. If they don't like it they just delete the 99 cent song. No biggie. You can add those 99 cent "apps" to the Music comment. Oh, and throw in Fourbucks coffee for everyone else. Do that five days a week for a year and you have $1000 bucks out the window. Only go half that amount of time? You still have $500. And let's look at phones. No one even bats an eye at upgrading their phone once a year... going two years is a killer. They throw down $100, $150, $199 a time for those. How many iPhones have been sold? "Jobs also said the company has sold over 15 million iPads, and has now sold more than 100 million iPhones. Thursday, 03 March 2011" No lack of people willing to pay the $199 for an iPhone. Disposable? Yes, absolutely! As for me, I'm a cautious spender, avoid debt, and look for value that will last. I can understand a generation who shares those values and doesn't see a $199 device as disposable.

vjackerman
vjackerman

I agree COMPLETELY with dicostanzot.....I really don't understand this Apple runaway train either, all the followers can afford a $200-$400 new iphone whenever the "new" release is out? I don't think so. I just waited 3 years after (1 year) post Verizon contract to upgrade my smartphone, and now 'splurged' and bought a new Droid 3 for $175....and getting hooked into the 'proprietary' services of any provider can be bad, my Nook Color won't run the cool apps that Android has to offer (without rooting), and ScarF pointed out no ePub reader (yet) for the Fire....hmmmm.....

PineappleBob
PineappleBob

I read all kinds of books and documents in epub format on my Kindle. The only catch is that you must download an epub to your pc then use the usb cable to copy it to your Kindle and there it shows up as any Kindle bookstore book. I do not think they would have removed that feature.

nwallette
nwallette

People still buy BlackBerry phones, but from my viewpoint, that market is dwindling as well. It will probably be some time before RIM is hopelessly lost -- after all, the security and management of BES implementations still counts for something in a lot of businesses. But the Playbook? Thhhbpbppt. Thumbs down. There IS no competition.

CharlieSpencer
CharlieSpencer

I've never kept a computer less than four years, and have no plans to replace my two-year-old Vista box. I purchased my first cell phone (for about $50) about six months ago, and don't plan on replacing it until it dies. I don't care about having the latest and 'greatest', don't care if others aren't impressed by my possesions, and don't feel the need to get on the hardware replacement treadmill.

david
david

I still agree with dicostanzot, but Zzyzyx could be right, just doesn't reflect the way I spend my money. I don't buy simply because something may be "out of date" its got to stop doing what I want it to do first.

ed
ed

I just got a refurbed Nook Color from B&N for $149 and the first thing I did was pop Android on a 8gb sdhc , boot and play. I can always fall back to the base os and don't have to deal with my fear of bricking it by rooting. Maybe later I'll consider rooting, but for now, I get both worlds.

vjackerman
vjackerman

The sad thing is that this generation doesn't know value, being frugal, and getting good credit. Ask any gen x "er" over 18 how much of their income they are saving, what their goals are (like buying a house), the hated question "is it paid for?", and more. Anyone that "upgrades" a device like a phone or tablet every year or so either is independently wealthy, or these are just "toys". I got three good years of hard use out of my Blackberry, and so the $179 that I spent on it three years ago was money well spent, and am now enjoying my new Droid 3. I will make it last 2-3 years as well. Sorry everyone for going off on a tangent here, but this high-tech society is a runaway train right now....

mckinnej
mckinnej

While Zzyzyx has a point where the young-uns have disposable income, I saw some stats a couple of weeks ago where the under-30 crowd is pushing 40% unemployment. Hard to buy anything when you have no income, so I'm not convinced. On a slightly different track, we could be seeing the beginning of the next frugal generation in the vein of our depression era parents and grandparents. One can only hope.

vjackerman
vjackerman

Ed - I just got a couple of days ago a N2A Android boot card - I LOVE it! I 'splurged' and got the 32 gig version. I come from the old school Unix world of AT&T System V, Release 4 'daze'about 25 years ago, but didn't feel like messing around with burning a boot sd, plus, for the cost of the N2A, I got $40-$50 32 gig card anyway, and for a few $ more it was burned and ready to go. I have been extremely happy with it thus far, and it will access the Nook factory memory as well. I think I read on some posts somewhere that the Nook Color can be underpowered for this, and when I get too many apps open, it seems a bit sluggish, but I will just perform some optimization of startup programs, etc and go from there. But I highly recommend the N2A.

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