Amazon’s announcement of their media tablet the Kindle Fire was long anticipated. I won’t add to the countless virtual column inches discussing whether it can be an iPad Killer (though I do agree with my former colleague Michael Gartenberg that it is competing more with the iPod Touch than it is the iPad). Instead I think it is worth comparing and contrasting Apple’s and Amazon’s strategic reasons for being in the tablet game.
As I stated in a previous post, Amazon (NSDQ: AMZN) and Apple (NSDQ: AAPL) are 2 of Digital Music’s Triple A (Android making up the third). Both have in their respective ways shaped online music more than any other company (Apple with iTunes, Amazon with online CD sales). Both willplay a major role in digital music’s, at the very least, mid-term future. But they are in digital music, and digital content more broadly, for mirror opposite reasons (see figure).
Put simply, Apple is in the business of selling content to help sell devices whereas Amazon is in the business of selling devices to help sell content. There is a poetic symmetry the identical yet polar opposite strategies of the two companies.
The differences have direct implications that are also mirror opposites:
- Apple can happily ‘just about break even’ on music downloads because of the way it helps sales of their high margin i-devices
- Amazon can happily price the Kindle Fire so aggressively that it is priced more like an MP3 player (and expect to lose money for the near term at least) because of the volume of sales of content it expects / hopes it will drive
Perhaps most importantly music, video, games, books and all other forms of content are crucial to the success of both. 20th century media business models may be tumbling around our ears but the fact that the future of the tablet market depends so heavily upon media products will be among the foundations for future growth.
» For 11 years Mark was a vice president and research director at Jupiter Research (later acquired by Forrester Research). He now blogs at MusicIndustryBlog.wordpress.com
This article originally appeared in Music Industry Blog.