The fanfare around the Amazon Kindle Fire has been fascinating. Firstly, that the market seemed to be comparing it to the Apple iPad. Well, really that people seem to compare everything to the Apple iPad – and inevitably the iPad comes out on top. But let’s be clear: even with Apple’s mighty buying power, the cost to customers is still $499-$829, which makes it a premium device.
Despite what people say, the iPad is a device that the relatively well-off purchase as a toy. You see it on sofas, in cafes and in meetings and Apple have sold a shedload of them – and some estimates are as high as 46m units in 2011. The iPad outsells the entire Mac range put together.
But this makes it a niche product. And along came a bunch of other devices. HP’s TouchPad. RIM’s Playbook. All also premium devices, from organisations without Apple’s buying power and design capability. Oddly, when you compete with a fine product but without the financial backing, you are unlikely to succeed – and the market agrees.
Google have fared a little better than RIM and HP but over the whole Android range of devices from Samsung, Motorola, LG, Acer, etc. – only 11m are expected to sell in 2011. Because they all directly compete with Apple and – well – Apple do it better.
Along comes Amazon, who have had success with their Kindle e-Reader. It’s pretty unclear how many they have sold this year (CEO Jeff Bezos prefers to focus on e-books sold), but it was 8m last year. Sights of a Kindle are pretty common especially on public transport, where it is a fantastic and convenient means to read.
So Amazon know how to sell devices, and it’s by creating commodity devices that are cheap and sold at very low margin – so Amazon can upsell its massive content backcatalog.
And along comes the Amazon Kindle Fire. It’s no iPad Killer – be serious. But it’s $199! It’s small, it’s cute and it’s cheap enough so that the market is no longer niche. $199 is cheap enough so that the market is opened up to a huge amount of people who could never justify spending $400-800 on a toy.
Probably the Kindle Fire is sold at very low margin or a loss, but Amazon have a business model that already works for the Kindle and you can bet that the model will work just fine for the Fire.
The Kindle Fire will sell as fast as Amazon can make them. I can’t tell you how many that will be but I heard they can produce about 5m this year. Next year – you can bet the Kindle will outsell the iPad in terms of volume, although not necessarily in terms of revenue or profit.
And having that number of devices out there suddenly opens up the tablet market to being a much more interesting place – one where there isn’t just a single dominant player. And whilst they don’t compete for retail sales, they will compete for sales of content like e-Books, Movies and Music. With Amazon’s purchase of Audible’s audio book back catalog, they are clearly positioning themselves as a very interesting cloud content provider.
Which should finally make things interesting.