Watch out tablet-makers, Amazon’s new Kindle Fire tablets are hot!

Kindle Fire HD

Did you hear a sound at approximately 1 p.m. PT on Thursday afternoon? That loud boom was Amazon’s Jeff Bezos taking shots at both Apple and Google as he introduced a new line of Kindle Fire tablets with improved hardware and services. And just to make matters worse, Bezos outed an improved e-ink Kindle reader while also cutting the price on both the old entry-level Kindle reader and Kindle Fire. The battle for consumer attention just got turned up a notch.

What did Amazon announce?

First a quick recap on the slew of new and updated devices:

  • The entry-level Kindle drops in price from $79 to $69 and gains improved fonts and 15 percent faster page turns.
  • A new Kindle Paperwhite reader will cost $119 with Wi-Fi or $179 with 3G and boasts improved contrast and 62 percent more pixels. The touchscreen is capacitive and has a patented LED lighting system for reading in the dark. I’ve already pre-ordered one to replace my Kindle Touch.
  • Last year’s Kindle Fire tablet gets a minor refresh and a $40 price drop: For $159, the 7-inch tablet with 1024 x 600 display  and 8 GB of storage has a 40 percent faster processor, twice as much RAM, and longer battery life than the original model.
  • A new 7-inch Kindle Fire HD costing $199 gets a 1280 x 800 high-definition screen, 16 GB of storage, 11-hour battery life and 1.2 GHz dual-core processor.
  • A pair of 8.9-inch Kindle Fire HD models are available. First, the $299 edition brings the screen resolution to an eye-popping 1920 x 1200 display, 16 GB of storage and uses a faster 1.5 GHz dual-core chip. Another $200 investment gets the same model but brings the total storage to 32 GB and includes a radio for AT&T’s 4G LTE network along with a corresponding $49.99 yearly LTE service. While this plan sounds good and cheap, you only get 250 MB of monthly LTE data, which will go quick. And AT&T currently has 60 LTE markets as compared to Verizon’s more than 300.

All of the new Kindle Fire HD models support dual-band Wi-Fi (2.4 and 5 GHz) as well as MIMO radio technology, so if your home wireless router uses MIMO to boost the signal throughput, these tablets can offer faster wireless performance over the current iPad and Nexus 7, for example.

On the software side, Amazon has improved its Kindle Fire operating system, which is still built upon Google Android; although Android is hidden by Amazon’s custom user interface. Whispersync applies not only to books, but also movies and games, so Amazon will keep track of where you leave off on content or in a game. Immersive reading is a new feature as well. Since Amazon owns Audible, it pairs the audiobook service with ebook content: You can have your book read to you while you read it on the screen. Amazon’s X-Ray technology now expands from books to both movies and textbooks, showing a glossary of information on command.

How does this affect the tablet market?

Amazon’s play is interesting because it’s been a technology and service company for much of its early history. Only recently has it gotten into the hardware game; first with the Kindle and, more recently, with the Kindle Fire tablets. Contrast that with Apple, which was a hardware and software company early on and later got into services. Both companies are going after the same audience, but from opposite starting points. But both also have a good strategy as consumers aren’t just buying devices or gadgets; they’re now investing in platforms. Amazon and Apple each have excellent platforms for various forms of digital content and entertainment. That leaves some of the Android tablet makers in a tight squeeze, not only from Amazon and Apple, but from Google itself, which has recently built up the Google Play store.

Kindle Fire HD with X-RayAmazon and Apple share another key, but related, difference that will affect the tablet market: pricing. Apple takes the premium price approach and reaps healthy margins from the iPad. In contrast, Amazon undercuts competing products by selling them at or below cost and then making up profits on content sales. Jeff Bezos noted this Thursday when talking about the unexpectedly low prices for the new tablets, saying Amazon doesn’t want to make money when customers buy its devices, but as customers use its devices. That leaves other tablet makers between a rock and a hard place: They don’t have the content to justify Apple-like prices on their tablets, nor do they have the content to sell hardware at a loss and then make up profits later.

As a result, all of the Android tablet makers will feel pressure going forward. And perhaps only Google itself may be the third wheel of success in this market. Like Amazon, it has content: videos, books, music, movies and, of course, apps. So it can afford to sell hardware at a low- or no-profit margin and make some back on content sales as well as information gathered for targeted advertising. And like Apple, Google controls its platform to some degree thanks to the Google apps for Android, hardware partners for Nexus devices, and ownership of Motorola.

Regardless of how consumers vote with their dollars, Amazon made big splash in the “Tablet Sea” with its new products. They appear much improved over the prior generation, have compelling price points, and offer a supportive ecosystem of digital media. That may not bode well for Microsoft, which is very late to this game. Yes, the Surface tablet looks nice, but unless Microsoft takes an approach similar to its Xbox 360 hardware and relies upon software sales to bring profit, I can’t see how Microsoft competes on the consumer side. Enterprises may still want Windows, but plenty have already shown they’re content with an iPad or other tablet.

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