Kindle Fire boosts Amazon’s digital content distribution aspirations

Kindle Fire
The Kindle Fire tablet from Amazon
While Amazon’s new Kindle Fire tablet is being hailed as an iPad competitor by some, the real play here may be to take on iTunes and Apple’s dominance in digital content distribution.
Following months of anticipation, Amazon introduced its first tablet yesterday at the competitive price of $199. The Kindle Fire comes with features designed to make it easy for users to consume media such as movies, music and books via a mobile device. 
“The actual story has less to do with the devices announcement and more to do with the progression that Amazon is taking to being a content development network for mobile devices that are outside of Apple’s ecosystems,” said Jeff Orr, group research director for mobile devices at ABI Research, Oyster Bay, NY
“I see Amazon potentially taking a bite out of iTunes,” he said.
Marketing opportunitiesYesterday’s announcement also included the new Kindle Touch and Kindle Touch 3G, which feature tap zones instead of buttons. The Kindle Touch 3G comes with free 3G service and carries a $149 price tag while the Kindle Touch is priced $99.
There is also a new Kindle that does not have a touch interface but is smaller and faster than previous versions. It is being offered for $79 and comes with special offers and ads to support the lower price.
The news opens up opportunities for marketers trying to reach mobile users.
“Amazon has been successful with its advertising experiments since the existing Kindle models that come with advertising are their most popular models,” said Chia Chen, senior vice president and mobile practice lead for Digitas, Boston. “The 'discount' on the new Kindle models are a little bigger, which suggests that Amazon is more certain about getting that discount back from advertising.
“The addition of AmazonLocal deals into the Special Offers delivered to Kindles opens up opportunities for local, and, presumably, smaller businesses to participate,” he said.
“Ultimately, Amazon's Kindle devices -- excluding the Fire -- are going to be better for advertisers with valuable and relevant offers. Amazon has been in the business of using content to get people to take action and the Kindle with Special Offers is a logical extension of that approach."
While some estimates have suggested that Amazon will sell between 2 and 5 million Kindle tablets this year, this might be tough to achieve with the Nov. 15 ship date announced yesterday, per Mr. Orr. The Kindle Fire could be pre-ordered starting yesterday.
Price pointThe Kindle Fire has a 7-inch screen, dual-core processor, weighs 14.6 ounces, features 169 pixels per inch and a touch interface. It also takes advantage of digital storage locker Amazon Cloud and comes with free storage.
Users can watch movies and wirelessly synch them so they can continue watching on other devices.
Additionally, users can read with music playing in the background.
Besides the price point, Amazon's abiltiy to offer digital content is one of the important differentiators here for Kindle Fire.
As such, Mr. Orr thinks it will little impact on sales for the iPad, as it provides a broader computing experience.
"In the case of other products that are out there, you are generally on your own to find the content while iPod Touch users can download content from iTunes," Mr. Orr said.
“What Amazon is offering in terms of content is very much on par with what iTunes is delivering with a content library,” he said.
“Providing the hardware gets Amazon further toward being that preferred partner for content distribution on mobile devices that are not vendor specific,” he said.
The $199 price tag for the Kindle Fire is in step with the trend toward lower-priced tablet devices, which we have seen recently from Research in Motion and Samsung, among other manufacturers.
“There is a huge group of consumers interested in a tablet experience that don’t have the resources to buy something like an iPad,” said Rhoda Alexander, director for monitor research at IHS iSuppli, El Segundo, CA.
“I think it will have repercussions across the entire system,” she said.
Amazon appears to be intentionally trying to keep the price down for Kindle Fire by leaving out features such as a 3G connection and a camera.
"Amazon is trying to hit a certain price point with Kindle Fire and they are quite consciously making trade offs," Ms. Alexander said.
"What they have instead is a very competitively priced product, an existing customer base that has also bought Kindle and they have the content piece to go along with it," she said.
In comparison with the iPad, which has a more general computing application, the Kindle Fire is positioned for digital media consumption.
Kindle Fire users can browse the Web. It will also offer apps but this most likely will not be a significant part of the offering.
“The Kindle Fire has some red flags in terms of what are they going to do with app development for it,” Ms. Alexander said.
“I see the Amazon tablet as being a content delivery device more than anything and not necessarily an app driven purchase,” she said.

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