Tablets wars: Apple is from Venus, Amazon is from Mars

73 Comments

They say Apple has met its first real tablet competitor. And no, it is not Samsung or Motorola. Instead it is from a company that started out selling books on the Internet: Amazon. And while there is some truth to that assertion, I wouldn’t put a lot of weight in the argument.

Under the stewardship of Jeff Bezos, Amazon is very much like Apple. It is not afraid to experiment (Amazon Web Services), disrupt (Kindle) and be ruthless (Amazon Prime). And like Apple, Amazon is a company with infinite patience. As Bezos once said, what makes his company different is its comfort with being wrong.

But before I get too far ahead, let me recap the news for you. Today Amazon announced that sometime later this year you can buy one or more of these devices:

  • A $199 Kindle Fire tablet
  • A $79 Kindle eReader
  • A $99 Kindle Touch eReader
  • A $149 Kindle Touch 3G eReader

The key device to be announced today is the Kindle Fire tablet. Writing for the Guardian, my friend Dan Gillmor sums it up best:

…this device, at just under $200, is to the iPad (about $500 in its least expensive version) as a cheap sedan is to a Lexus SUV: functional and useful, but nowhere near as elegant or powerful.

And just because it looks like a tablet doesn’t mean it is an iPad-killer, as some would have you believe. Just on the basis of features, it looks more like a competitive reaction to Barnes & Noble’s Nook and less like competition to the iPad. However, one has to take a step back and think of the strategic importance of the device.

As we learned from folks like Erick Tseng of Facebook and Michael Abbott of Twitter at our recently concluded Mobilize 2011 conference, the Internet is increasingly becoming a mobile-first experience. Our online behaviors are changing from browsing on the web to browsing on the go, whether on tablets or smartphones. If Amazon has to stay relevant, it needs to embrace this new world. It has chosen to do so by building an Amazon experience.

Fire sale

“What we are doing is offering premium products at non-premium prices,” Bezos told BusinessWeek magazine. “We don’t think of the Kindle Fire as a tablet. We think of it as a service . . . Certainly this is a for-profit business . . . Let’s put it this way. We are and always have been very comfortable at operating at extremely low margins.”

A few months ago, while appearing on Leo Laporte’s TwiT Internet TV show, I argued that sometime in the future, Amazon will create a physical retail space, mostly as a means for the company to extend its virtual franchise into the real world. Unfortunately, I was limited in imagining what could be a physical retail presence in our always-on, always-connected future.

With the new Kindles, Amazon has been able to define the hybrid retail environment. In fact, this reinvention of the retail experience will help the company not only keep fighting with newer competitors such as Apple but also take on today’s leviathans like Wal-Mart.

If you look at the price points of these devices, Amazon is willing to take deep losses in order to build market share and get people using its devices — fast. It needs to do so in order to ensure one thing and only one thing: that people keep buying from it what they need. Amazon has traditionally made money by selling physical goods: books, music and movies.

Given that we are increasingly shifting away from buying physical media and are instead opting for digital goods, Amazon is smart in its introducing the new Kindle tablet. The presence of these outlets allows us to buy more things more often and more easily. And that includes everyday stuff like toilet paper, soap, shoes and toys. Given that we have a new generation of children growing up using tablets, the very idea of “toys” for them might be quite different from what you and I experienced as tiny tots.

When I think of the new Kindle Fire (and whatever comes next), I see a strategic move that mirrors the introduction of Amazon Prime, the unlimited shipping plan that made it easy for us to buy more from the Seattle-based e-commerce giant. Morgan Stanley estimates that Amazon Prime customers annually spend about to four to five times the amount of non-Prime customers. There are about 12 million global Prime customers, versus a total of 144 million active users. My colleague Erica Ogg in a post earlier this month wrote:

should Amazon do a decent job selling tablets, it’s not necessarily going to be at the expense of Apple selling a lot of iPads. And that’s because the two are coming at the business from two different angles, and their customers have different expectations.

My colleague Ryan Kim, who was at the Kindle launch event in New York, had this to say about the device:

The Kindle Fire seems geared to not only help people play their content but shop for new things. The top option is a search field that can pull up stuff from Amazon store. Also, on the various media options below, users are able to get at their own magazines, books, videos and apps but a “store” button is usually present so people can quickly add to their library. There’s also going to be a shopping application, one of four main apps included in the Kindle Fire along with contacts, gallery and email.

By bundling a free one-month trial of the Amazon Prime service (that costs $80 a year and gives you access to over 11,000 videos and thousands of music tracks via streaming) and automatically subscribing Kindle Fire owners (unless they opt out), it’s clear that Amazon is thinking correctly about the money-making potential of the tablets.

The asymmetrical war

Amazon’s primary business is selling us things  — lots of them — and getting them to us as cheaply as possible. And that includes physical and digital goods and services. That is its corporate DNA, and that DNA is going to influence all of its decisions — whether it is redesigning its website or defining new tablets.

Amazon’s revenues and profits come from selling goods and services. For Amazon, the tablet is the lure and e-commerce is the catch. Apple, on the other hand, makes money by selling hardware, lots of it. Apps and digital goods and services are a way to attract people to its hardware platform.

Apple makes a lot of money — as in real dollars — from its hardware. Amazon is going to lose a lot of money on this hardware-based reinvention of its core commerce business for a long time. This move should worry those who are already worried about Amazon’s minuscule profit margins. “At $199, we view the device as loss-making or neutral at best based purely on hardware,” JP Morgan analyst Doug Anmuth writes in a note to his clients.

The bottom line is that Amazon will be successful — at least more successful than Motorola or HTC — but it won’t come at the expense of Apple’s iPad or Samsung’s Android-based tablets. Or as John Gruber puts it:

Motorola, Samsung, RIM — they seem to be chasing the iPad on specs, building the best tablet they can manage at the same starting price of around $500. But they have no clear message telling people what you can do with them.

73 Comments

Kevin Ledgister

I think comparisons between the Amazon device and the iPad are moot. Most electronic book buyers do not cross shop with the iPad even though they have some overlapping functionality.

Apple has done a ton of research and they have concluded that a 10″ screen is required for a high quality, general purpose device. A 7″ Kindle has 55% less screen real estate than the iPad and that is going to limit its usefulness.

The Kindle is more like a motorcycle and the iPad is a car even though both are forms of transportation.

Hamranhansenhansen

Totally right. There are no 7 inch graphical PC’s. Never have been. Therefore there are no PC apps that can run on a 7 inch screen.

Nick

The one thing that the article misses is that actually apple make quite a bit of money though selling apps, music and videos via the iPad and iPhone. This is moving into amazon territory and amazons response is to provide it’s own device. It seems whoever owns the device controls the content and amazon sure don’t want to be edged out.

Hamranhansenhansen

No. Apple basically breaks even on apps, music, movies, books.

Here is how apps work:

– 70% to the developer
– 29% to the server farm, credit card processors, marketing, customer service, App Store management, developer programs, etc.
– 1% to Apple

Music:

– 90% to the record company
– 9% to the server farm, credit card processors, marketing, customer service, artist programs, etc.
– 1% to Apple

I’m not involved in movies. Not sure how they work. But it is almost certainly the same.

With the amount of money Apple makes selling computers, that 1% of media sales doesn’t really add up to much. It could go away any time and you would have to dig through their financials to see it had happened.

With Amazon, they are selling Kindles at a loss. So the only revenue is from the media. The downside of this is that there is almost no money in media. People don’t want to pay for it. So Amazon squeezes the publishers and artists really bad. They have all these ways that they give your work away for free. Like they will offer to put you on the front page of something, but say that all sales from that page are free, they won’t pay you for them. The idea is that it is an ad that you pay for with your royalties. Apple just puts you into a promotion and you see a huge amount of money appear in your bank account unexpectedly.

One thing I have to say is I find it hard to argue with Apple’s method. People love to pay for hardware because they can touch it, and they hate to pay for software and content, even though that is the primary thing they really want from the device. So Apple made this software/content mix that the user carries with them from device to device, and in a sense, the software/content becomes part of the hardware. Now the user wants to pay for it again. They see that buying a music album means it goes into their persistent collection and it follows them around forever, always at their fingertips, on all of their devices. It shows the user that the music they bought is more valuable than the music they heard on a streaming service. It demonstrates why they paid for it in the first place. Also, with Apple managing the cloud storage, it is so much easier than bootlegging and so much higher quality, it makes bootlegging look like too much work.

Norman Gillaspie

Anything that supports DLNA and can add a Digital television Tuner is a winner. I don’t think Digital Broadcast is available yet but I am sure it will be coming. Norman Transparent Video Systems

RSL

but when can I finally say good-bye to expensive cable/sat services to get simple ala carte viewing/streaming? Maybe Amazon is better positioned to make this happen sooner.

Hamranhansenhansen

You can say good-bye to cable about 5 years ago and use iTunes and Netflix.

Dino Busalachi

If Apple is from Venus and Amazon is from Mars I guess that means Cisco’s tablet the CIUS is from Earth. Glad I’m the right planet.

Aj

Amazon needs a Fire”Plus” model with Front and Rear cameras, at say $229 (by which time Fire goes down to $180)
and of course a FirePlus-3g model at say $279. That kind of
road map should set the specs right to compete with
GalaxyTabs and Ipads of the world.

Hamranhansenhansen

With a 7 inch screen, it cannot compete in the PC market. No PC ever had a screen that small, and so no PC apps fit on there. You can’t even view a full Web page or PDF, let alone run a full-size PC app.

Kevin C. Tofel

Actually, no. ;) While it wasn’t an ideal solution, there were a number of 7-inch PCs in 2006 to 2010 available: UMPCs. They all ran Windows (XP or Vista) in 1024×600 resolution, since that was the best/cheapest display they could get for that size. Most PC apps ran on there fine although some didn’t meet the screen resolution or CPU requirements. You could view a full web page or PDF on these, although it worked best in portrait mode, just like it does on smaller tablets and phones today.

Prince Thottan Davies

Just like iPod, Apple should come up with cheaper devices for the large mass of rapidly growing middle class demographics in the countries like China, Brazil, Dubai, South East Asians, India…They are more active in buying new devices than other demographics The demographic of middle class mass of above mentioned countries always look for cheaper devices which are affordable to them. Otherwise they will look for cheaper ones which are already in the market. So Apple has to consider this demographic more proactively and attract them before they drift away to cheaper ones. In this fashion; it can reinforce its market. A good customer value proposition will provide convincing reasons why a customer should buy a product, and also differentiate your product from competitors. Gaining a customer’s attention and approval will help in build sales faster and more profitable, as well as work to increase market share. Understanding customer needs is important because it helps promote the product. . Apple always comes up with a device which presents a well thought customer value proposition.
In the current scenario, it is effortless for Apple to compete with Amazon and introduce the cheaper device in the market soon.

PXLated

It seems many refer now to the iPad as a “premium” priced tablet. It’s not, in fact, for what it is, nobody else has been able to compete with it on price. The Fire is cheaper but it’s (for now) just a media buying/viewing device with weaker specs. So, to me, there is no Apple vs Dell in this at all.
It will be interesting to see if Amazon takes this further so it’s more than a Sears catalog in a nice little package. The fact that a forked version of android lives somewhere deep inside could enable android-based apps/games but would that be a distraction from the Amazon catalog and buy, buy, buy mission? I could see Amazon leaving it as is or expanding. Will be interesting to see.
Would hate to be one of the official Google/Android partners right about now.

Prince Thottan Davies

Just like iPod, Apple should come up with lower price devices for the large mass in the countries like China, Brazil, Dubai, South East Asians, India…In this fashion; it can reinforce its market. Apple always comes up with a device which presents a well thought customer value proposition. Hence it is effortless for Apple to compete with Amazon and introduce the cheaper device in the market.

Hamranhansenhansen

They already did that. iPad is a low-end Mac. It sells in the $500 PC market. We may see last year’s iPad at $399 like we see last year’s Windows notebooks for $399, but you are not going to get much lower than that without leaving parts out that the user would have to buy later anyway (e.g. Windows Starter.)

Brian Joy

I think it’s largely the media and commentators who are making the comparison with Apple. What Amazon has done is extended the tablet market downwards to include people who would never have bought an iPad in a month of Sundays. So they are not competing with Apple but in my view have created a whole new lower end market.

Reddy

+1 for “They have created a whole new lower end market.”

Here is simple math. BMW SUV are great , but how many people can afford it and even in that affordable pool how many people REALLY want it . Compare it to Corolla/Civic Cars , most people can afford who need a decent car.

Ipad = BMW Luxary SUV = 1x sales
Kindle fire = Corolla/Civic car = 10x sales

Hamranhansenhansen

No. There is no tablet market. There are tablets in the media player market, tablets in the phone market, tablets in the PC market.

What Amazon has done with Kindle Fire is extend the Kindle line upward into high-end media players (around $200) to compete with NOOK Color and iPod touch.

What Apple has done with iPad is extend the Mac line downward into low-end PC’s (around $500) to compete with Windows notebooks.

It’s very, very simple.

> Ipad = BMW Luxary SUV = 1x sales
> Kindle fire = Corolla/Civic car = 10x sales

No. Not only is that not true, but that idea is probably the most dangerous thing that Kindle Fire faces. If people buy it thinking it is a PC, they will be disappointed. If people buy it thinking it will be a media player, they are likely to be very happy with it.

The biggest problem that Android tablets have faced is users buying them to be PC’s and being disappointed that they are phones. And as many as 50% of them are returned, it is like wholesale slaughter. I have seen exactly 2 Android tablets in the wild, both in 2 different pawn shop windows in Silicon Valley of all places.

Here is how your BMW/Toyota idea really works:

• MacBook Air or MacBook Pro = BMW = 1x sales ($1000)
• iPad or Windows notebook = Toyota = 10x sales ($500)

• Kindle Fire or iPod touch = BMW motorcycle = 1x sales ($200)
• Kindle or iPod shuffle = Toyota motorcycle = 10x sales ($75)

We can see this working when we look at Apple and we see MacBook Air selling about 2 million per quarter and iPad selling about 10 million per quarter, but iPad is still new and it is growing faster than the Mac. In a year or 2 (if trends hold,) it will be 5 million MacBook Airs per quarter and 50 million iPads.

As much as Kindle Fire is more fun for techies, if you ask a Kindle user what they think, they are talking about how the Kindle buttons are better for page turning than touch, and how gray is better for battery life than LCD. It would not be surprising to see the $79 Kindle sell 10 times the Kindle Fire. Especially because the supplies of the gray screen are likely very plentiful, and the supplies of the LCD are probably not. Apple buys up almost all manufacturing capacity of the kinds of parts they use, and although they don’t use 7 inch screens, that is just half a 10 inch screen (they are measured diagonally, 7 inch is 46% of the area of 10 inch.)

Jeremy

I, like the other commentators here, agree that the future of the tablet computing industry lies in mass market adoption. The iPad stands as a premium tablet, where one has to pay premium prices for. And, intelligently, Amazon has refused to play the premium game with Apple.

The right questions brings on the right focus, and because of that I believe Amazon will succeed because of that. Bezos et al. probably noted that you just cannot ‘kill’ the iPad, just as the Android smart-phones didn’t ‘kill’ the iPhone. Merely, you create an alternative for consumers. Prime example; Verizon (+ Motorola/HTC etc.) came out with their Droid range as an alternative to the AT&T + iPhone-combo to cater to their subscribers that wanted a smart-phone but didn’t want to switch over to AT&T. What happened? Mass adoption of Android was triggered.

There is a vast un-tapped market of people that do not want to spend 500+ dollars on a tablet. I don’t need market research to tell you that. Amazon has noticed this. Coupled with the fact that they’re the world’s largest online retailer and have a strong digital ecosystem, they’re not out to be an iPad-killer, but rather a VALID and MUCH cheaper iPad-alternative.

In this sense, I think Amazon has got it right. It’s all about the price. I can only point out to the recent $99 HP Touchpad buying craze to prove that. With the cheaper tablet market almost completely void of real competition, I think this one is for the taking.

Hamranhansenhansen

You’re mixing up PC’s and media players.

> The iPad stands as a premium tablet, where one
> has to pay premium prices for

No. Windows tablet PC’s are $1000. OS X tablet PC’s are $500. iPad is the low-end tablet PC, not the high-end. It’s literally half the price that everyone expected it to be, because tablet PC’s cost $1000.

> Droid
> Mass adoption of Android was triggered.

No. Mass adoption of Android has been low-end free phones, feature phone replacements that do not compete with iPhone, not high-end $200 phones. iPhone 4 has been on Verizon for only 10 months and is already the most popular high-end smartphone on their network.

> There is a vast un-tapped market of people that
> do not want to spend 500+ dollars on a tablet.
> I don’t need market research to tell you that.

If you are talking about media player tablets, then of course nobody wants to spend $500 on a media player. You can get an iPod for $200! How could anybody else sell a media player for $500?

If you are talking about PC’s, then people are very used to paying $500 for a PC, or even more. And they are used to getting a really crappy one with viruses and almost no software and the office suite costs $200, and it weighs a lot and is a pain in the ass to use. An iPad has much better quality, much cheaper and better software, free in-person support, no viruses, and is smaller and lighter and easier to use.

For decades, people have been asking for a $500 Mac. Now it is here. Nobody is complaining about the price, except for those who think it is a $500 media player. It is not. It’s the cheapest and best tablet PC ever made. iPad is low-end.

Kindle Fire is a high-end media player. If you are looking for a media player, you look at iPods and Kindles, those are the Coke and Pepsi of media players.

Karl Klept

As a media consumption device, the Fire will obliterate iPad. iPad will need to either strengthen it’s case that it’s your next computer or come out with a lighter, cheaper iPad.

Hamranhansenhansen

iPod is Apple’s media consumption device, not iPad. iPad is a tablet PC that is currently obliterating HP and Acer.

Ian Sterne

My issue with this is the matter of trust. It looks like there could be issues with the silk browser and security. Also Amazon is in a similar position as Google and Facebook in that the client is not the person that bought the tablet but Amazon and its partners trying to sell you stuff. This business model, unlike Apples profit from hardware model, tempts these companies to share far more of your personal information then many may be comfortable with. We will see if people are comfortable with this idea as time moves on.

Alex Kinsella

Hi Ian,

Alex from RIM here. We’re glad to see you take security as seriously as we do. It’s our bread and butter. If you’re interested in learning more about how the PlayBook sets itself apart on this front, check out this piece by CIO Magazine highlighting the superior security capabilities of the PlayBook compared to other tablets: http://bbry.lv/jYycee.

Cheers,
Alex, RIM Social Media Team

ronald

If one comes from a desktop, this might be fine.
If one comes from a tablet this might be outdated in 6mth.
I think the tablet space will involve into data manipulates data, sensor data that is[location, multi touch, gyro …].
So there is a tablet augmented desktop[mobile desktop with all the limitation], and then there will be sensor augmented data processing[which we have to figure out]. Depends on what one needs and/or wants.
Example: The inventor of cool: Etienne Mineur

Tyler

While the Fire may not compete directly with the iPad, this move by Amazon does put Apple right back where they started as the more pricy, and less-necessary, option. Amazon just made themselves the Dell of the tablet world (the Dell of 10 years ago).

Hamranhansenhansen

No. Apple is the Dell of the tablet PC. There are $1000 tablet PC’s running Windows, and there are $500 tablet PC’s running OS X. So far, no other tablet PC’s. Windows 8 looks like the next one.

In media players, Amazon has carefully skirted going head to head with Apple by focusing on books while Apple focused on music. So neither one is Dell or Apple. Amazon has a full range of Kindles, and Apple has a full range of iPods.

Today, Amazon is moving into movies and into color books, and Apple is in all likelihood going to kill the iPod next week. So Amazon is likely to have the media player market open up for them a bit. But then again, the media player market is being crushed by phones at a wholesale rate, so whether the death of iPod matters or not, we will see.

Nicholas

They are different devices, and I’ll bet that this is actually Amazon’s entry into music. This or a yet smaller version that accesses such content.

The problem for both platforms is that they ultimately converge on content creation. It is inevitable. How will Amazon respond? How will Apple respond to such an effective attack on the iTunes empire? Apple sadly built this battle by trying to corner the market on content, when the devices are what make the money.

Hamranhansenhansen

Amazon loses money on hardware, makes money on content. Apple makes money on hardware, breaks even on content. They each take a mirror approach.

Apple’s media players come out of a music player heritage, and it shows. Amazon’s media players come out of a book reading heritage, and it shows.

I would love to hear how you think Apple tried to corner the market on content, because Amazon is the only one of the 2 that had exclusive content deals, where the publisher had to publish only with Amazon and nobody else. Amazon is the only one of the 2 who uses a proprietary content format (Kindle book) that can’t be read by a non-Amazon player. All of the content sold in iTunes Store is just universally playable world standard ISO MPEG4 audio video that plays on every PC and mobile in the world. The player is in the hardware, just like MPEG2 players were in DVD Player hardware.

Like I said, Apple breaks even on content. If you have purchased the device from them already, they don’t care where you get your content. Even after the launch of Kindle Fire, the best place to read a Kindle book is in the Kindle app on iPad.

Chris Potter

Amazon’s share won’t come at the expense of Apple, it will come at the expense of hardware manufacturers (HTC, Samsung, RIM, etc.) and by growing the market with its low entry price point (witness demand for the $99 touchpad).

The hardware companies will continue to fight with Apple on specs, but this is going to be a losing battle as they don’t offer the service ecosystem that drives the value proposition of Apple’s tablets. They could cut prices and buy share, but none of them are shipping in the volumes that would allow them to drive costs down and preserve a bit of a margin. Without a service business it’s hard for a pure play hardware manufacturer cut hardware prices.

There really isn’t anyone else that can profitably follow Amazon’s model, because it can offset low margins on hardware with its ecommerce business. Hardware companies don’t have a business model that will let them hit this price point, while Apple won’t go after this price point because its DNA is about preserving high margins and offering superior product design.

What we will see is a tablet market that is dominated by two companies. Apple on the high-end and Amazon on the low-end. Both are sitting pretty and there is no reason for them to face-off directly.

Tim

Also – Sony’s content offerings have been overlooked by the masses, but have hugely improved this year. The integration across Sony devices could work well (if anyone cared of course!)

Jeff M

I’m not sure in this case is appropriate to raise a “Kindle Fire vs iPad” arguement. I’m wondering if in this case given the price point, that people won’t choose one over the other, but more like decide whether maybe there’s room for both? I have an oven, but I also have a microwave that has a conventional oven setting. Each do a bunch of stuff completely different, but there is overlap. Sometimes I use the oven, sometimes I use the microwave. The Microwave only cost me $300 so it was economically feasible to have both, and use each one for its strengths. Maybe in this case, a large quantity of iPad owners would buy a Kindle Fire too (or vice versa), especially given the book content ports across both devices. Just a thought.

Jack C

As other comments have noted, the device is fairly lean, so much so that Amazon may not be subsiding the hardware much, if at all.

The notions that Amazon’s tablet isn’t a competitive threat to Apple and high end Android tablet companies is preposterous. It is the sort of “analysis” that could only be given away for free. Are serious people really suggesting that the meat of the future tablet market is premium devices?

No this device isn’t an iPad killer, at least in the sense that Fires won’t wake in the middle of the night and destroy iPads in their sleep-mode. It will, however, help relegate Apple to a premium category, is a monumental threat to growth, and puts the onus on Apple (and most of the rest) to justify its price point.

The only thing worrisome about the Fire is just how pushy the “shop” component will be in the user experience. If the tablet can provide web, email, multimedia, social, games, etc. (i.e., everything the average user cares about) without coming off too strongly as a device designed for shopping, then it will be extremely alluring.

Jason Thibeault

I couldn’t agree more. In fact, the Kindle Fire really signals a clear segmentation in the tablet market: e-readers, media devices (like the Fire), and tablet computers (like the iPad and upcoming Windows 8 devices).

I penned a blog post exploring just that:

http://blog.jasonthibeault.com/index.php/2011/09/28/what-the-kindle-fire-means-for-the-tablet-market/

What’s more interesting, though, especially about this device is how well Amazon has integrated the cloud into it (text-book lending service, notes in the cloud, Kindle software platform with cloud-based delivery and synchronization). I think there are a lot of killer uses where a device like this clearly trumps the iPad:

http://blog.jasonthibeault.com/index.php/2011/09/28/can-amazon-change-the-face-of-education-with-the-kindle-fire/

This device is clearly a game changer. I won’t give up my iPad for it (as I want a more robust tablet computing device and, frankly, I’m married to iTunes; that’s the real battle: Kindle vs. iTunes) but I’d recommend it to a lot of people.

@jnthibeault

Hamranhansenhansen

Kindle Fire competes with iPod, another media player. Kindles and iPods have dominated the media player market for years now.

What you are failing to appreciate is that Kindle Fire has 46% of the screen area of iPad, and 1% of the features. It is equivalent to an iPod. There are 2 kinds of apps: 9-10 inch “PC” apps, and 3-4 inch “phone” apps or “widgets.” 99.9% of all graphical apps ever made fall into these 2 categories. Therefore we need to have 2 categories of devices to run these apps: 9-10 inch PC’s, and 3-4 inch phones. What apps does a 7 inch device run? The 3-4 inch apps, but blown up. They cannot run the 9-10 inch apps, they are too big, the developer did not imagine a 7 inch device because no graphical PC has ever had a screen that small.

> Are serious people really suggesting that the meat
> of the future tablet market is premium devices?

No.

There is no “tablet market.” It simply does not exist. Touch is just a newer kind of mouse. When lasers replaced balls in mouses, we did not have a “laser mouse market.” We just had the same old PC markets as before, only now some PC’s had laser mouses and some had balls. Markets are defined more by use cases and price points. A PC with laser or ball mouse is still a PC, and some people will pay $500, tops, no matter what kind of mouse.

So there are devices in the PC market which are “tablets,” and there are devices in the phone market that are “tablets,” and there are devices in the media player market that are “tablets.” But no “tablet market.”

iPad is not a premium Kindle, it is a low-end PC. Kindle Fire is not a low-end iPad, it is a high-end media player.

Here are the markets:

– low-end media player: about $100 (iPod shuffle or nano, Kindle)

– high-end media player: about $200 (iPod touch or classic, Kindle Fire)

– low-end PC: about $500 (iPad, various Windows notebooks)

– high-end PC: about $1000 (MacBook Air, various Windows tablets)

What is confusing you is that we are about halfway through the transition from mouse/buttons to tablet. So yes, some media players have touch and some do not. Some PC’s have touch and some do not. Lumping all the touch devices together like they are all the same product does not make sense. There are Windows tablet PC’s that cost $3000. There is an iPod nano with touch for $149. These are extraordinarily different devices. Same with iPad and Kindle Fire. They are absolutely not the same device.

> puts the onus on Apple (and most of the rest) to justify
> its price point.

That is easily done. iPad is $500, while Kindle Fire plus a $300 notebook PC is more like $500. iPad has top notch build quality and in-person service and the cheapest PC software titles in the world, while Kindle Fire and a notebook PC is 2 cheap devices, and the PC has incredibly high software and support costs, which can easily be more than the $300 price itself.

The only people who think iPad is expensive are people who think it is a big iPod. It is not. It is a small MacBook Air. It’s a full PC. That is what users buy it for, that is what they expect, that is what they get.

Similarly, the only people who think Kindle Fire is cheap are people who think it is a small iPad. It is not. It is a big Kindle. It’s a media player. The top level menu goes books, movies, music, games, like the menu on an iPod classic. The top level menu on iPad and other PC’s is apps.

Peter H Pottinger

The ironic thing about this kindle “fire”, is that its success will be determined by how easily it can be rooted and jailbroken. lulz.

Tim Kruggel

In the “can’t we all get along” column, I just want to say that this is excellent for the consumer. They get a good device for a good price. It forces Apple (and all the others) to compete on pricing and deliver more and better content. Overall a win for the consumer. This is capitalism at it’s best.

Hamranhansenhansen

You’re right, except Kindle Fire competes with iPod, not iPad. Kindle Fire puts pricing pressure on iPod touch, which is $29 more and has a much smaller screen, although it has almost the same number of pixels and it has 2 cameras.

Matt Eagar

I don’t think the margins on this product are as low as everyone imagines. Yes, they have priced it based on the assumption that they will generate revenue from media sales. However, there are other Android tablets that sell for less than $200 wholesale (look for products from Coby). Amazon has no middleman, so if these hardware companies can turn a profit at $180 or less, then Amazon should be able to make at least a little margin at $199.

Om Malik

Matt

It depends on how powerful or leading edge they want the device to be. More cutting edge means that Fires are going to cost more. [I certainly wouldn’t call Coby a premium tablet. ]

Lincoln Maurice

Arguably he’s right, though: volume does mean reduced costs in long run manufacturing. For every additional month you manufacture something, the costs drop between 5-15% m/m (depending its complexity). Which perplexes me as to why computer manufacturers continue to have tiny, marginal increments on models quarterly when they’d make much more money selling y/y models, like Apple does. Most consumer electronics have a slim margin, but as long as it’s in the black, it’s still profit and therefore sustainable. If you tried to sell Fire in stores, you’d probably go broke, since Amazon is selling without storefrontage, the markup for which can range between 15-30%, for which the net effect of a websale is either to flatline the profit for yourself, or pad for yourself and allow a profit for the retailer (Amazon does the former, for those who haven’t noticed yet).

Hamranhansenhansen

The bill of materials is over $200. Just buying the parts costs them over $200, then they have to assemble, which is another $10 apparently. So they need users to come back and buy media to make any profit.

Sami Mäki

Kindle Fire will most likely be loved by hackers due to its low price (similar to discontinued TouchPad). I’m sure we can soon run other OSs with it :)

Hamranhansenhansen

If so that is Amazon’s worst nightmare. They are paying each Kindle Fire buyer about $10 to take it off their hands. If you root it and don’t use it to shop, that is going to really hurt them.

Petter Kolseth

Good comments but I agree that the iPad is more Mars than Venus. Meanwhile, I’m happily reading my Kindle books on the iPad Kindle app. Syncs well with my iPhone and Mac as well. Amazon got me hooked without any new hardware.

L I M E

Isn’t that the truth. They are certainly competing for world domination.

MarketingXD

Wrong way round. Amazon Kindle appeals mainly to woman (Venus), but Apple iPad appeals mainly to men (Mars)
http://www.emarketer.tv/Article.aspx?R=1008507

I think this is because the iPad is too clumsy to carry in a handbag and Women read a lot more books than men, so they favor the smaller and more reader-friendly Kindle.

PXLated

Hmmm – I know more women with iPads than men and just the opposite for the Kindle – My observation in my local coffee shops too.

Kyle Lyles

I agree with you 100%. In my many travels, I hardly ever spot a male with an iPad. Tablets have almost no value for content creation. For a guy to haul around a phone (My Bionic’s screen is a mini-tablet anyway) AND another device just to suck your brain, isn’t the way the western world works.

Women can toss the iPad into their bags and use them while waiting at the doctor’s office, or anywhere else their time is wasted.

I see Kindles with males on planes, and loads of business books being read on them.

For me, I use my Bionic and for content creation, a netbook provides me with a physical keyboard to do actual (GASP!) work, and if I want to watch a movie on a plane, also do that just as well as a tablet. 9 hours of batt life too – all at a price less than that of a tablet.

Longtallsally

Dunno about men vs. women, but lugging around one more thing in a handbag just makes the chiropractors richer, trust me.

Hamranhansenhansen

> Tablets have almost no value for content creation.

Honestly, I beg you to please stop. Please, please stop. You are hurting the Internet.

iPad is just a PC. It not only runs PC apps, it runs PC apps from the Mac, the content creation PC. Not baby Java versions that are entirely rewritten, but just the same damn Mac app with the mouse interface chopped off, and a touch interface put on. Underneath iPad’s touch interface is the same damn OS X from the Mac, again, with the mouse interface chopped off and touch put on.

How does running iMovie on an iPad make it any different that running iMovie on the Mac? How does iMovie suddenly have almost no value for content creation because it is now EASIER to move your movie clips around when editing HD video? How does running Keynote on an iPad make it any different that running Keynote on the Mac? How does it now have almost no value for content creation because it is easier to reorder slides and now you also have a virtual laser pointer showing on the second display? You are still using the best presentation client in the world bar none.

There are thousands of music and art tools that make you sound like a complete idiot.

Plus, iPad has about 1000 apps that wirelessly control apps on a Mac. For example, there is a drawing surface for Photoshop, a mixing surface for Logic Pro, an interface for Spectrasonics synthesizers, various DJ interfaces, pianos, guitars, drums. I routinely control a whole professional music studio wirelessly with MIDI-over-Wi-Fi from an iPad sitting on top of a piano or music stand.

What’s more, I have written hundreds of songs on iOS, not even just on iPad, but mostly on a tiny iPhone, running an app called FourTrack, which is based on a Mac app. Running it on iOS not only did not make it have almost no value for content creation, it actually made it BETTER because now the mixer sliders all work, even if you slide 2 or 3 or 4 at a time, and the transport controls are “real” you don’t have to press space bar for stop or anything like that, you press “stop.” And because it is in my pocket, I can do things like go away from a weekend and find myself singing a new song to myself and I can get my iPhone out and in 20 minutes record a demo of the song that I can share with musicians or anyone else I am working with. A 4-track recorder is what The Beatles used to make “Sgt. Pepper.” And there are many, many pro audio hardware accessories for iOS devices.

So please, stop perpetrating this bizarre and stupid myth that tablets have almost no value for content creation. It’s absurd and it’s false and it’s borderline malicious at least.

nat muk

I concur. I had an option of the Apple Ipad or Samsung Galaxy & chose the Galary so I can keep it in my purse. As women we are already carrying along a lot of JUNK to begin with :)

Robert Varipapa

Bezo has a little over a year to pull this off, before Amazon has to start charging sales taxes in California and elsewhwere.

Chipp

Did you actually just quote Gruber to defend your hypothesis? I was actually thinking you made some good points right up until then. Geez.

Hamranhansenhansen

Same reason some people hate Steve Jobs: turns out he was right.

Lincoln Maurice

You could quote Hitler on some things are still be relevant. Just because you dislike someone or even their entire belief structure doesn’t actually make their objective statements incorrect.

Peter Mullen

I just can’t help thinking this is a brilliant move for Bezos and Amazon. Apple set the bar with a premium priced unit and seemingly going after the general print web. Bezos lowering the bar for mass market adoption going after books, commerce, music, effectively flanking the Apple strategy…changing the game. All I can think is holy effing moly.

Om Malik

Peter

I agree with you mostly except for your Apple comparison. I do think it is a brilliant move on Amazon’s part and doesn’t surprise me at all.

Lincoln Maurice

I don’t think they’re lowering the bar, they’re addressing a different market with a different size, application, and purpose. That’s like saying “Wow, Hyundai have a $12,999 car, BMW are going to go broke demanding $84,999 for their car now.” No, BMW’s profit margins are higher and while there are fewer on the road, there’s more prestige. If anything, this will make the iPad more of a prestige item and potentially enable Apple to raise their prices to improve profit margins, further distinguishing the iPad as the true victor, even though its platform is worlds apart. If anything was going to compromise Apple’s dominance, it was Android as a whole market, but it hasn’t happened because they’re offering an unprestigious, albeit probably better functioning, unit at the same price. It’s dumb.

Comments are closed.