I find it fitting that Amazon named their latest tablet computer the Fire. At $199 when it goes on sale in November, it is estimated by some analysts that Amazon will be losing $50 on each unit sold. But maybe thinking about fire sales is going a little too far.
In the real world of big business, it may seem strange to sell a new gadget at a loss, but Amazon is plying the old Gillette razor gimmick, which means they sell the core product cheap, hoping to make it up in profits from other merchandise sales.
So in this case, Amazon hopes you’ll load up your new Fire from their e-book library, and stream videos from their online service, not to mention all the other goods and services the company has available. Add it all up, and a loss will turn into a profit. At least that’s the hope.
Certainly printer makers have this marketing scheme down pat. You buy the cheap printer, and pay thousands and thousands of dollars for consumables over the unit’s lifetime. Now some of you no doubt buy those $50 starter printers, maybe expecting to just buy a new printer as soon as the ink is spent, but they get you on that too. Usually those printers offer cartridges with only a tiny capacity, so just buying them over and over again may not be so cost effective, not to mention where you’d store them once the ink is used. And, no, I’m only half serious here.
When you look at the Fire, it seems to closely resemble the failed RIM BlackBerry PlayBook, which is evidently because they are assembled in the same factory according to published reports, but why couldn’t they tweak the design a bit more? Amazon is using the Android OS, but it’s heavily laden with their own modifications, so it seems far removed from any other device using Google’s operating system.
The big negative is that the Fire has a 7-inch screen, and there’s no evidence whatever that customers will embrace that size. Steve Jobs has been vocal in stating that Apple decided not to build such a tablet because the display is just too small, with about 45% of the real estate of the iPad’s 9.7-inch display. You wonder if Amazon ever considered that, or perhaps they were hoping that, at $199, the Fire would be a relatively casual purchase, particularly for gift giving. With a starting price at $499, the iPad 2 is never a casual buy, even though the price is maybe half what analysts originally expected.
What’s more, for those who buy a Fire, what purposes does it serve best? Obviously, Amazon hopes you’ll store your reading library on it, and partake of their other products and services. The built-in Web browser sports a feature that Opera has already used, which is to render some pages courtesy of an intermediary caching server to speed up performance; yes, AOL did that too with their proprietary browser in the 1990s. But it will only come in a Wi-Fi version, which means you will have to rush to the hot spot if you’re on the road and need to get online. Curiously, the built in software doesn’t include such basics as a calendar, and there’s no mic or camera.
More to the point, the Fire appears best suited for reading, watching videos, and browsing. In other words, it’s a consumption device that merely expands upon the capabilities of the original Kindles. This is quite a contrast from the flexibility of a general purpose tablet, as exemplified by the iPad, not to mention the rich selection of software at the App Store.
As to how well it works in practice, it’s curious that the members of the media who attended Amazon’s rollout of the Fire weren’t allowed to actually use them. All they could see were canned demonstrations that seem to indicate good performance. But nobody will know for sure until the product is actually in the hands of reviewers. Contrast that to Apple’s penchant to let the media have hands on with new gadgets after many press events. Maybe Amazon is still fine-tuning the OS for performance? I don’t pretend to have an answer.
The real issue is whether you can call the Fire a direct competitor to the iPad. I think not, and not just because of the smaller screen size and the lack of key hardware features that are a given in a tablet these days. But people who cannot afford an iPad, or simply want something on which to read books, watch videos, and do some casual Internet serving, may lap them up in huge quantities. If anything, the companies who are building small Android tablets, such as Samsung, have a lot to fear from Amazon.
As to Apple, not so much. But truth be told, if there was any sales impact at all, I suppose Apple could just lop off $100 from the iPad’s purchase price and still make a decent profit. After all, the original development costs have been more than covered by now. Regardless, we already have pundits weighing on in an alleged tablet price war, as if selling something at a loss is the proper way to do business, even if you don’t have other products and services to offer to compensate for the loss. In any case, when it comes to the Amazon Kindle Fire, just color be skeptical.
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