There’s a catch in the price, however, and it’s causing quite a debate. All of the new Amazon Fire HD tablets include “special offers” which are essentially advertisements for Amazon goods and services.

This isn’t new. Kindle readers with special offers have been available since May of 2011: Instead of paying full price, a customer gets a discount on the device, which has ads. In my opinion — as the owner of a Kindle Touch with special offers — these are unobtrusive as they appear on the Kindle lock screen and at the bottom of the menu screen. I’ve never seen an ad in my content.

Others disagree and don’t want ads on their Kindles at all, so they pay extra. To each, his or her own. But here’s part of the ire I’m hearing about the new Kindle Fire HD tablets: Amazon isn’t offering a buy-out price to remove the special offers. Instead — at least for now — ads will appear on the lockscreens and home screens of the tablets. I hope Amazon reconsiders and offers the option of removing the ads.

Regardless, the situation is an example of how the digital economy is changing and challenging traditional business models. We’ve seen a similar approach with phones in the U.S. for years: Carriers subsidize the hardware in return for a lock-in of service. These carriers also add their own software and services — often not removable –on the phones. And consumers are totally reliant upon carriers to get software updates as well. In other words: You don’t have control over your phone and the subsidy is financial in nature.

People complaining about buying an ad-subsidized #Kindle Fire should never buy a smartphone with contract from a carrier again.—
Kevin C. Tofel (@KevinCTofel) September 08, 2012

Subsidies don’t always mean money, however. Information is currency in the digital age and that’s exactly what Amazon is using to subsidize the Kindle Fire HD hardware costs in order to make the price more attractive. I noted this potential change back in 2010 when I suggested that Google subsidize smartphones or mobile broadband service in return for similar information and ads.

It’s a shame that Amazon isn’t giving consumers a choice to remove the special offers with a small buyout. But as a consumer, you do retain some choice. If you feel the ads will be intrusive, you can choose to buy a different tablet. Again, I hope Amazon reconsiders; perhaps after it gets a feel for sales as compared to the unit costs to build the devices it will do so.

For now though, you take the good with the bad if you want a new Kindle Fire HD. And I doubt this is the last product we see use an information subsidy or ad-supported hardware approach. The Internet has changed the world and business models are changing with it.

Update: My hope was rewarded! Amazon changed its policy roughly 12 hours after this publication and you can now opt out of the ads with this addition to the product notes on its site: “If you would like to opt out of these special offers, you can do so through Manage Your Kindle for $15 after you have registered your device.”

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So how exactly did Barnes & Noble solve the problem of uneven light across the display? It’s not just technology magic, but science that makes it work.

Thanks to an iFixit teardown of the device, you can see how Barnes & Noble accomplished this, as well as view all of the many parts packed into the e-reader device. Along the top edge of the e-ink display are eight LED lights, evenly spaced apart.

These are the only lights used make the screen glow evenly and they’re only on the one edge. But the lights don’t shine directly down the display. Instead, the glass display has diffraction grating built-in, causing the light to be spread out across the entire screen surface, says the iFixit blog:

This diffraction grating bends and disperses the light throughout the screen. Barnes & Noble really did their homework on this one, because instead of a simple linear diffraction grating (think of a bunch of parallel slits), it appears that the diffraction grating varies throughout the glass to evenly disperse the light.

To illustrate how the glass display diffracts light across many angles, the iFixit team shined a laser through the screen’s edge. Normally, a laser appears as a single point as all of the light waves are tightly focused. Shining it through the diffraction grating however, shows how the screen spreads a beam of light out.

The solution is ingenious and I’d love to see it come to mobile devices because it would mean using fewer lights and therefore save power. Unfortunately, most smartphones and tablets are backlit, meaning the light comes from under the display, so this is an unlikely prospect for the future. Then again, I’m not a science expert, so maybe there’s an opportunity here!

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In a plot worthy of a Jorge Borges tale, Argentine authorities are warning that foreign books can poison readers.

“If you put your finger in your mouth after paging through a book, that can be dangerous,” explained one of the policy supporters to the Wall Street Journal.

To protect the public, the government is seizing foreign books and storing them in a central warehouse. It will not turn them over unless an owner shows up in person and proves that the ink contains less than 0.06 percent lead.

The result is that Amazon orders are going undelivered and, according to the Financial Times, holes are appearing in Argentine bookstores where foreign titles used to sit.

If there’s any bright side to this story, it’s that the Argentine government appears to have jumped through the looking glass for economic reasons and not cultural ones.

According to Rafael Mathus, the New York correspondent for Argentina’s Nacion newspaper, the book ban is part of a misguided import-export strategy.

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Zinio

Selection:

Zinio is the oldest, most mature magazine platform on the iPad, and as a result has the largest selection. The music and photography sections are well stocked. The only writing magazine available I like is The Writer (Writer’s Digest is missing) and for Apple-related magazines Macworld magazine is available, but MacLife is not.  As an aside, while Zinio does carry adult magazines, those are not available on the iPad app due to Apple’s guidelines. Where Zinio’s selection truly shines is the large back issue catalog — Digital Camera World has issues going back to 2002. News and tech-related magazines tend to have a short shelf life, but for arts magazines I love I can go that far back. The News section seems well stocked, but, oddly, the the Russian version of Forbes is the only one available.

The  shopping experience is very unobtrusive. Since Zinio’s primary business is selling magazines, it’s very easy to browse the store and purchase magazines from either your browser or app. Zinio does a good job at organizing the magazines into sections, so you can browse just by Photography or Music sections. It would be nice to see another sub-level where I could sort by just guitar-oriented magazines.

Zinio has the highest up-front cost of the three options because most subscriptions are for the year, and individual prices are close to newsstand prices.

Reading Experience:

The first few releases of the app were rough going with each page taking a while to come into focus, but with the latest version of the app, I barely notice it on an iPad and never notice it on an iPad 2. The text has a nice weight and the images look fine. You can sort your reading view by issue release date or title, but you can’t group them by section. The quality varies on the table of contents between magazines. Some magazines just show you the content page; others have an interactive table of contents, making it easy to get to the article you want to read. There is an option to display a lengthy article in an easy-to-read text format, but it not used nearly enough. You can bookmark pages, but not highlight passages.

Macworld magazine in the Zinio app

Amazon

Selection:

Of the three options, Amazon has the poorest digital selection with roughly 420 Kindle magazines available. Amazon’s Arts and Entertainment digital magazine section has only 120 magazines; Zinio’s Photography section (also under its Arts section) has 118 magazines alone. That said, there are a few magazines like Guitar World that are available on Amazon, but not Zinio. Searching the store is a bit of a hassle. The default sections are too broad making it hard to narrow your selection. Also the keywording isn’t implemented well; searching on Photography did not bring up Digital Camera World, but searching on Camera did.

There are also no back issues available. This is a problem if you get into a new interest and want to get a backlog of magazines. As I mentioned in the Zinio section, it’s nice to get into a new hobby like photography and be able to scour the back issues.

In terms of pricing, I found Amazon to be the most consumer-friendly. Most magazines can be subscribed to month-to-month for about $1 to $2.99 and a free 14-day trial is available for all magazines. Unlike Zinio, you do not have to purchase a full year upfront.

Reading Experience:

Your magazines are well-integrated into the Kindle app, showing up in both the All Items view and the Newsstand tab. I found the page layout view to be the poorest of the three, with the text being slightly heavier than Newsstand and Zinio; it’s about halfway between regular and semi-bold. Against  a white background it’s not bad, but it really looks poor against a color. What is nice is Amazon’s Text view for magazines is much more useful than Zinio’s. It’s supported on each page and you can customize the layout and fonts.

Finding old issues you want to download, again, isn’t clean. All of your old issues are in a Periodicals: Back Issues folder. Back Issues also seem to go into the Archived section of the Newsstand tab. What’s a little weird is if you archive a magazine it only shows up in the Archived area, not also the Periodicals: Back Issues folder.

Mac|Life magazine in the Kindle app

Newsstand

Newsstand isn’t one service. Instead, it’s a collection of magazine apps that are grouped by Apple into their Newsstand folder in iOS 5. While each app does have its own idiosyncrasies, there are  some common themes I’ll be mentioning here.

Selection:

The selection for Newsstand roughly falls between Kindle and Zinio with around 1,620 Newsstand apps available. However, it’s in searching the thing falls down on its face. You can either search the store for the magazine and then refine the search for Apps only, or you can scroll through the entire Newsstand catalogue. It’s darn near impossible to browse a section. Shutterbug magazine will show that it’s in the Photo and Video section, but clicking on that section shows me all of the Photo and Video apps; not just Newsstand apps. You also cannot search and purchase through the web.

Most magazines are available for monthly $1 to $2.99 subscriptions with a few I’ve seen having a minimum of a three-month subscription. There are no free trials. Back issues vary from app to app; some only go back to when the app was launched, some go back over a year.

Reading Experience:

For the most part, reading a Newsstand magazine is on par with reading a PDF of the magazine. While that’s largely true of Zinio and Amazon, at least they offer niceties like the table of contents and a text view; the Newsstand apps I’ve tried do not. Also, there is no bookmarking or text selecting. Newsstand apps take a second or so to focus in on my iPad, but it’s better on my iPad 2. However, unlike the Kindle app, the text looks fine in page layout view.

While Newsstand does a decent job of grouping magazine apps together, the entire reading experience feels kludgy. If you have a lot of apps, it’s hard to find out which ones have recent copies since the app stays in the same place in Newsstand even after a new issue has been downloaded — although some of the apps show a “new issue” flag on the app. You can turn on notifications and badges, but I limit my notifications to alerts that are truly important.

An obvious point that bears mentioning is that Newsstand is the only one of the three that’s not cross-platform. One of the draws of Zinio and Amazon Kindle is they do work on non-Apple devices. If you also have a Kindle Fire in addition to your iPad, Newsstand is not the choice for you.

Mac|Life magazine in Future's Newsstand app

Where my purchases go

When I look for a magazine, Zinio still remains my first destination since that’s where the bulk of my library resides. After that, I look on Amazon for a Kindle version. If it’s not on Kindle but is on Newsstand, well, frankly I make a decision if I really need the magazine that badly. There are two reasons I choose the Kindle second, even though the quality is the poorest of the three: it shows up with the rest of my books in the Kindle app, so I only have two apps that I need to look towards for reading — and it is cross-platform. One thing I’m trying really hard to do is make sure the content I consume is cross-platform. With iOS, I know I’ve got some lock-in on apps, but since Zinio and Amazon have gone out of their respective ways to make sure my content can be read on different platforms I know I can read my books and magazines on a Kindle Fire if I get one.

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The company will focus on selling its Kindle line of tablets and e-readers and exclusive books from its Amazon Exclusives line. The store will be small and will also sell other high-end items as well as accessories such as cases, screen protectors, and USB adapters.

Big turning point?

The move into retail, if it proves true, would be a big turning point for Amazon and one that ultimately makes sense though the move doesn’t seem intuitive considering Amazon’s online roots. The company has made a practice of stealing away business from physical retailers, whose aisles end up being showrooms for Amazon shoppers. Amazon even provided a $5 discount during the holidays for shoppers to find products in stores and buy them online. Now, Amazon could be competing in the same market, though not necessarily on the same level. It could just run its stores as showrooms and ship physical products to users by mail rather than fulfill sales immediately.

One of the reasons Amazon has shied away from pursuing retail stores is to avoid charging taxes, something it must do in a handful of states. But increasingly, it looks like Amazon is accepting taxes as inevitable and so there may be fewer barriers to moving into a retail stores. It signed a deal in September with the state of California to start accepting online sales tax starting this fall.

Compelling reasons

Now some would wonder why Amazon would start paying rent on stores and getting into that market when it does so well online. But I think there are a number of compelling reasons to do so.

The upside is that Amazon can let people get hands-on with their products, and they can provide a high level of customer service, especially for its Kindle line of tablets and e-readers. That’s been one of the successes behind Apple’s retail store strategy, giving top-notch customer support through its Genius Bars. Barnes & Noble has also been stressing this point with its Nook devices, which are getting their own display areas in stores and dedicated support. Though Kindle devices appear to be doing better than Nooks, the fact that Barnes & Noble is doubling down on Nook sales and support shows that Amazon will likely want to have some kind of answer.

Amazon has signed deals to get Kindles in a lot of existing retail stores but having its own boutiques could be a way to really highlight its products. That could be helpful for its Amazon’s publishing line of books, which Barnes & Noble and others have said they won’t stock in-store. Amazon is reportedly looking at expanding the number of products it makes under its own name. The current combination of online sales and partnerships with retailers can work for the time being but if Amazon moves into smartphones and other goods, it doesn’t want to vie for shelf space in Best Buy. It will want to have its own showcase for goods.

Extending the Amazon experience

My colleague Om Malik actually predicted Amazon would open a physical store during a taping of This Week in Tech last June, saying it would ultimately extend the Amazon experience. The idea is that consumers can still buy online through Amazon but physical stores can be where Amazon reinforces the buying and discovery experience and gets into communities. As Om pointed out, it could be a place where Amazon highlights a recording artist or a place for authors to do their book tours. Here’s what he said:

Amazon will have to do it as it will become more and more important in our life. As a company it needs to kind of have that local presence and also remember we are living in a world where we have an iPhone or a smartphone in our pocket all the time. So for the retailers itself, it’s a very comparative market; there are certain apps which can basically let you check the price and order it online, while you’re looking at it in a store. So the stores have to think in terms of what is the plus experience they can offer, so that people come to the store and buy their thing. And the same is with Amazon too. They need for people to keep buying from them but they need to create a whole experience around it…

I think you’ll look at what Barnes & Noble is doing right now is that they are creating more and more experiences around their store. They’re shutting down the ones which are not working but they are creating more of an experience and less stocking books there, and I think that’s exactly what I’m trying to tell you guys. That’s where, where Amazon will end up. If not, Amazon somebody else will end up trying to do that, because that is important for the whole ecosystem of books, music, and those kind of things.

Online sellers face challenges too

I agree that Amazon needs to think about building out its whole service. It’s not an online seller, it’s a seller. And that means you work to provide the best selling experience possible. Also, shopping apps like ShopSavvy are working hard to point out that they can surface cheaper deals than Amazon most of the times and some of those deals are in physical stores. It’s not just physical retailers that face a challenge as smartphone buyers get more savvy. It means that all retailers need to step up and provide not only low prices but a good experience too.

I first imagined that Amazon could eventually move its distribution centers into bigger cities after dealing with the tax question and then set aside some space within its warehouses to open stores. But it seems like Amazon is thinking about being even more ingrained in the community, being in locations where I assume shoppers are plentiful. I think it makes sense not to go with big locations, but smaller store fronts that let people interact intimately with a handful of Amazon products. Consumers could develop an even deeper relationship with Amazon, which could be crucial if Amazon keeps putting out more of its own branded goods.

Biting off too much?

The strategy is not going to threaten Walmart any time soon. I don’t think Amazon wants to go the big box route, as Jason Calcanis reported in December. I think it will stay modest and look at selling things that extend Amazon’s name and brand.

We’ll have to see what Amazon does ultimately. It has razor-thin margins and struggled through a tough quarter, in part due to its very competitive pricing on Kindle Fires. Opening stores may be tough when shareholders and analysts want more profits and may not see much return on this investment — Amazon offered guidance on a possible loss in the coming quarter. But Amazon has also shown that it relishes the chance to be a disruptor and knows that innovation takes a long time to grow. It’s already started testing out click and collect lockers where users can get Amazon deliveries.  And it received a patent on for a mini-building design in 2009. It could be that the new store remains just a test and not a long-term bet. But I still think it’s likely that we might see local Amazon stores when all is said and done.

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Seventy-four percent of survey respondents said they were “Very Satisfied” with the iPad in an earlier November survey, while only 54 percent said they were “Very Satisfied” with the Kindle Fire in the January survey. The average of Very Satisfied customers for all other tablet devices combined was 49 percent. Why the 20-point gap between the iPad and Fire? It came down to what many users seemed to feel were missing features, according to ChangeWave.

The major dislikes that survey respondents listed for the Kindle Fire included the lack of a hardware volume button, the absence of a camera, short battery life, a lack of cellular connectivity and the size of the Fire’s app library. Cost and screen were favorite features among Kindle Fire owners.

Apple’s focus on user experience seems clearly to be better at winning the admiration of users post-purchase, while Amazon’s focus on offering a low-cost device seems to ultimately leave customers feeling like there’s something missing. That strategy appears to have worked well in the short term. One analyst said earlier this week that Amazon may have shipped as many as 6 million Fires during the last quarter of 2011. But long-term, Apple may have been right when it suggested in December that strong Kindle tablet sales might eventually help boost iPad demand.

Consider that the features tablet users indicated a desire for in expressing their dissatisfaction with the Kindle Fire are all features the iPad currently offers; there’s a clear path of where to get what they want out of a tablet already in place. And if Apple does decide to keep the iPad 2 around as a lower-cost offering when it unveils the iPad 3, the Fire’s No. 1 selling feature won’t seem nearly as much of a marked advantage.

On the flip side, Amazon could also address those deficiencies in future iterations of the Kindle Fire, should it find cost-effective ways of doing so. But Apple will continue to push the experiential envelope at the same time, and so far whatever it provides seems to set the standard in terms of tablet buyer expectations. Pleased customers are loyal customers — as ChangeWave says, it’s found that satisfaction is highly linked to future sales, so Apple’s big lead here is definitely a key measure of success.

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While most of the questions on Amazon’s earnings call on Tuesday night focused on the Kindle Fire business, Justin Post, an analyst with Bank of America Merrill Lynch, tried to get Amazon to drill down into that 67 percent head count growth, which — he pointed out —  was “quite a bit higher than units or revenue growth.” But Amazon CFO Thomas Szkutak didn’t bite. “The majority of those increases are in our operations and customer service area . . . it’s in support of the growth,” Szkutak said.

Given Amazon Web Services’ push into enterprise computing, smart money is that a good chunk of those workers are supporting AWS users, not selling or otherwise dealing with Kindles or book sales.

Earlier this week, Amazon announced new premium support options for EC2. The company added Amazon-fielded support for third-party software including Windows and Red Hat Linux operating systems and Apache and IIS web servers running on Amazon infrastructure.

According to the AWS blog post by AWS evangelist Jeff Barr:

If you have Gold or Platinum Premium Support, you can now ask questions related to a number of popular operating systems including Microsoft Windows, Ubuntu, Red Hat Linux, SuSE Linux, and the Amazon Linux AMI. You can ask us about system software including the Apache and IIS web servers, the Amazon SDKs, Sendmail, Postfix, and FTP. A team of AWS support engineers is ready to help with setup, configuration, and troubleshooting of these important infrastructure components.

As most in the enterprise IT world can attest, support engineers do not come cheap. And with a customer base as large as Amazon’s, it will need quite a few. The margins may be higher on sales of such enterprise services, but they also require a greater deal of customer support. And customer expectations for that support are much higher. Enterprise IT companies like EMC, Oracle and IBM know this. They typically offer a range of support options, including on-site hand-holding if needed. It is unclear to some whether Amazon does.

Currently, Amazon Platinum tier service costs either $15,000 per month or 10 percent of total AWS usage for that period, whichever is higher. (The Amazon support pricing is posted here).

There is a healthy debate about whether Amazon, which built its empire on the razor-thin margins of bookselling (and some would say Infrastructure-as-a-Service offerings) really wants to enter the world of higher-margin enterprise software and services, which require a higher level of hand-holding and support than Amazon has offered in the past. This news about bulked up support for AWS  is a sign that it does intend to go there.

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The numbers, which are pulled from application sessions among all Android tablets, compare usage in November and January. The Kindle Fire represented just 3 percent of usage in November, when the Tab ruled the roost with 63 percent. In just two months’ time, the Galaxy Tab had slipped to 35.6 percent, a hair below the Fire. Flurry tracks usage in thousands of apps, covering 20 percent of all consumer sessions on more than 90 percent of all Android devices each day.

While the Tab and Fire are essentially tied, the figures give a good sense of how the Fire has come on in since its launch. And it shows how the Fire is helping pump up the overall Android tablet market. Strategy Analytics said there were 10.5 million Android tablets shipped in the fourth quarter, good enough for 39 percent of the market, compared to 29 percent a year earlier.

Flurry said downloads spiked on Amazon App Store in January and usage soared on the Kindle Fire.  Total Android tablet sessions in January more than tripled compared to November, said Flurry, with Galaxy Tab sessions increasing by more than 50 percent. The Fire numbers are even more impressive considering the fact that Flurry estimates that the number of active Galaxy Tabs in the market is more than twice that of the Kindle Fire.

The Fire is also driving more paid downloads, according to Flurry. Examining the top 5 paid apps that ranked in the top 10 apps in both the Amazon App Store and Android Market, Flurry found that the Fire drove 2.5 times more paid downloads than the Galaxy Tab. This falls in line with what I’ve heard from Kindle Fire developers.

The Kindle Fire is for real and it’s now becoming the standard bearer for Android, even if it hides the operating system under its own UI. It’s pretty remarkable what Amazon has done in such a short period and shows that its focus on media consumption, low price and simple purchasing makes it a very appealing device in a sea of iPad wannabes.

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There are definitely some limitations in the AlwaysOnPC solution that are helping to keep the company’s costs down. Instead of a connecting to a Microsoft Windows instance, users will see Fedora Linux on the Kindle Fire. The desktop environment is locked down as well; you’re not going to install apps on this virtual desktop. Firefox and Chrome are both installed, complete with useful browser extensions such as Evernote’s web clipping service. OpenOffice, of course, takes the place of Microsoft Office. Sound and video streaming aren’t yet supported either.

Even with such limitations, however, for Kindle Fire owners who have casual but important PC needs, an app such as this could be extremely useful. It’s smart, for example, that the app supplements the 2 GB of included disk storage with integrated Dropbox support. A conference call with document or presentation sharing is available through Zoho Meeting. And Java applet support allows for apps such as Runescape and PartyPoker.

I haven’t tried the app, and reviews vary, so I’d recommend the free five-day trial available on a PC or a Mac before buying. Regardless, AlwaysOnPC joins OnLive Desktop and other virtual computer apps that are fast finding their ways to tablets. The PC isn’t going anywhere soon, but as noted before, the trend is moving towards mobile devices, as sales of tablets and sales of PCs are heading in opposite directions.

Image courtesy of Flickr user timwilson

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