Tag: Kindle Fire

A Deep Dive Into The Morgan Stanley Holiday Quarter Survey

On December 16, 2012, Morgan Stanley issued the results of a consumer survey.

We surveyed 1,010 US adults between November 26 and December 3 2012. The sample is representative of US individuals (18+) by gender, age, income and geographic regions. Conclusions based on total sample have a maximum margin of error of +/- 2.5% at 90% confidence level.

(NOTE: All quotations are sourced from the Morgan Stanley report.)

1) TABLETS

The first and most obvious result of the survey was that tablets, as a whole, were going to be clear winners of the 2012 holiday quarter.

One-third of respondents own tablets today, compared to only 8% a year ago.

While this can come as no a surprise to anyone following the tech industry, it is important to note that, in terms of gift giving for this holiday quarter, the growth of the tablet has come at the expense of notebooks, desktops and especially e-readers.

2) E-READERS

Among consumer electronic gifts, tablets are the most popular, followed by smartphones, while e-readers experienced the largest decline.

— Tablets (50% in 2012 vs. 31% in 2011)
— Smartphones (26% in 2012 vs. 17%)
— E-readers (9% in 2012 vs. 31%)”

Tablets are the number one gift idea in consumer electronics this year, while it was a tie between tablets and e-readers last year.

iSuppli seems to concur with this sentiment, indicating that general purpose tablets are harming e-reader sales.

It appears that they e-readers may well be relegated to niche status as general purpose tablets – which also serve as e-readers – become lighter, smaller and lower-priced.

3) AMAZON KINDLE FIRE

While the Kindle Fire is not strictly an e-reader, it too seems to be suffering this holiday season.

Kindle Fire appeal seems to be waning as 16% of potential tablet buyers would pick the device vs. 21% in last year’s survey

Lower end tablets may be suffering from the effects of increased competition. While the Amazon Kindle Fire was the a hot holiday gift in the fourth quarter of 2011, it now has to compete with the Nexus 7, Windows 8 tablets and the iPad Mini. As a result, Kindle retention numbers dropped from an already low 40% to and even lower 36%.

If these numbers bear out, this has to be terribly dissapointing for Amazon. Last year, there was a burst of enthusiasm for the Kindle Fire line during the holiday quarter but that enthusiasm seemed to all but evaporate as soon as the quarter ended. This year, Amazon introduced several new lines of tablets and vastly improved the quality of their hardware offerings. Surely they anticipated increased, rather than decreased, enthusiasm for their products.

It is too early to tell for sure, but it is possible that we’re seeing a trend away from single purpose tablets and a trend towards higher quality, general purpose tablets instead.

4) SAMSUNG

Samsung phones made an impressive leap in rate of retention from 37% to 63%. (Note, however, that this still does not match the iPhone’s stellar 83% rate of retention.)

While Apple’s retention rate is by far the highest, iPhone users who plan to buy a Samsung device increased slightly from 3% to 8%, though this share came entirely from other Android vendors who saw less interest from current Apple users compared to a year ago. This reflects Samsung’s dominating position in the Android ecosystem and success in marketing itself as an iPhone alternative.

You simply have to be amazed at what Samsung has accomplished and in such a short time. But ironically, Samsung’s growth is not only coming at the expense of competitor’s like RIM and Nokia, but it is also coming at the expense of other Android manufacturer’s as well.

One of the strengths of a licensed operating system like Android is supposed to be diversity of hardware manufacturers. That simply hasn’t happened. While Microsoft distributed its software licences to thousands of hardware manufacturers, Samsung has become the one and only hardware manufacturer that matters to Android. We’ll have to save the discussion of the consequences of this unexpected development for another day.

5) MICROSOFT

The survey contains two interesting points regarding Microsoft’s recent tablet efforts.

First, Microsoft Surface is preferred by 12% of those planning to buy a tablet.

Second, while 81% of iPad users plan to stay with Apple, 8% plan to purchase Microsoft’s surface.

Additionally, a different survey indicates that Windows 8 is a very distant third, to iOS and Android, when it comes to developer’s platform preferences.

I think these results have to be terribly dissapointing to Microsoft. Some pundits were expecting a flood of defections from the iPad once Microsoft debuted its tablet offerings. That clearly is not happening.

Further, I had anticipated an initial burst of enthusiasm for Windows 8 tablets. The real question, in my mind, was whether Microsoft would maintain that initial enthusiasm. Instead, sales of Windows 8 tablets has been tepid, at best. Having 12% of consumers intending to buy your products is far better than having 0% able to buy your products, but I believe that it is far, far less than Microsoft was hoping for or expecting.

6) APPLE

It seems as though the bad press for Apple has been endless of late, but that negative view is not supported by the Morgan Stanley survey. They point to at least four reasons why Apple can be optimistic about sales this holiday quarter.

First, more survey respondents want to buy the iPhone 5 today than the iPhone 4S a year ago.

34% of consumers plan to buy an iPhone in the next 6 months, compared to 30% in last year’s survey

If I recollect, the iPhone 4S was pretty popular last year. And one would assume that even more enthusiasm for the iPhone 5 should lead to even more sales this holiday quarter.

Second, analysts keep opining that Apple needs to sell a cheaper phone but customers keep disagreeing.

More respondents plan to buy the newest iPhone model today than a year ago (86% vs, 82%), likely due to key hardware improvements in the iPhone 5: LTE, brighter screen, and lighter and thinner phone.

Third, the iPad Mini does not appear to be cannibalizing the larger iPad but it does appear to be bringing new customers into the Apple ecosystem.

We believe iPad Mini’s cannibalization risk to iPad 9.7” is manageable. 47% of iPad mini purchasers are new to Apple, according to our survey. This is only slightly lower than 56% for the larger iPad 9.7”, suggesting the smaller iPad is attracting new users to the platform in addition to some incremental or replacement purchases from the existing 9.7” iPads.

Fourth, Apple actually INCREASED its already industry leading retention rate.

Apple’s iPhone retention rate improved 10 points over the last year, and 83% of iPhone users today plan to buy another iPhone.

I find it hard to believe that Apple’s sales are going to suffer this quarter when both purchasing enthusiasm and retention rates are going up.

7) CONCLUSION

There is definitely going to be a shake-out in the mobile sector. There are just too many entrants with too little differentiation.

In phones, not only are Samsung and Apple rapidly increasing their sales numbers but their RETENTION numbers are also rapidly rising. This bodes ill for the likes of RIM and Windows 8 contenders like Nokia and HTC.

In tablets, Apple seems to be maintaining its grip on half the market while Amazon, Google, Microsoft and Samsung battle it out for the other half. Again, in the long run, retention numbers may be what matters most but it is too soon to measure retention for newly minted products like the Google Nexus 7 and the Microsoft Surface.

We’ll know far more in January when (some of) the numbers come out. But until then, the Morgan Stanley survey may give us a peek at what we should expect.

Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards

Gillette, Amazon, Google and Apple

— The Gillette business model is to give away the razor in anticipation of making profits from the sale of the blades.

— The Amazon business model is to give away the Kindle Fire for cost in anticipation of making profits from the sale of content and ads.

— The Google business model is to give away the Nexus 7 for cost in anticipation of making profits from the sale of ads and content.

— The Apple business model is to sell the iPad Mini for a profit…AND in anticipation of making additional profits from the sale of content and ads.

The razor blades business model

“(T)he razor and blades business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies (inkjet printers and ink cartridges, “Swiffers” and cleaning fluid, mobile phones and service contracts) or software (game consoles and games).

Though the concept and its proverbial example “Give ’em the razor; sell ’em the blades” are widely credited to King Camp Gillette, the inventor of the disposable safety razor and founder of Gillette Safety Razor Company, in fact Gillette did not originate this model.

The (razor and blades) marketing model may be threatened if the price of the high margin consumables in question falls due to competition. For the (razor and blades) market to be successful the company must have an effective monopoly on the corresponding goods.”

~ via Wikipedia

Three Flaws

There are (at least) three flaws in the Amazon Kindle Fire and the Google Nexus 7 business models:

1) No proof of sales;
2) No proof of profits;
3) No monopoly (proprietary) pricing available.

1) No proof of sales

The razor and blades business model works, in part, because when the razors are given away at cost or for free, they become ubiquitous, thus making it convenient for razor owning customers to purchase the company’s proprietary blades. There is no evidence to indicate that either the Amazon Kindle Fire or the Google Nexus 7 are selling well despite their subsidized sales prices.

It’s been estimated that the original Amazon Kindle Fire sold 4.7 million Kindle Fires over a 9 month span and that the Google Nexus 7 sold 3 million units last quarter. These numbers are estimates because neither Amazon nor Google are willing to release the actual sales numbers.

When you consider the fact that these are both subsidized products being sold at cost, those numbers are remarkably low.

2) No proof of profits

The razor and blades business model works, in part, because when the razors are given away at cost or for free, the profit is made from the blades. There is no evidence to indicate that either the Amazon Kindle Fire or the Google Nexus 7 are making substantial profits from the sale of content or ads. In fact, when you look at the company’s recent quarterly earnings reports, there is evidence suggesting that they are NOT making significant revenues or profits from tablet related content and ad sales.

3) No monopoly (proprietary) pricing available

The razor and blades business model works, in part, because the blades are proprietary and command the premium price neccessary to offset the lack of profit from the giveaway of the razors.

For the (razor and blades) market to be successful the company must have an effective monopoly on the corresponding goods.” ~ via Wikipedia

The Printer Example

Computer printer manufacturers have gone through extensive efforts to make sure that their printers are incompatible with lower cost after-market ink cartridges and refilled cartridges. This is because the printers are often sold at or below cost to generate sales of proprietary cartridges which will generate profits for the company over the life of the equipment.

The Game Console Example

(V)ideo game consoles have often been sold at a loss while software and accessory sales are highly profitable to the console manufacturer. For this reason, console manufacturers aggressively protect their profit margin against piracy by pursuing legal action against carriers of modchips and jailbreaks.

Atari had a…problem in the 1980s with Atari 2600 games. Atari was initially the only developer and publisher of games for the 2600; it sold the 2600 itself at cost and relied on the games for profit. When several programmers left to found Activision and began publishing cheaper games of comparable quality, Atari was left without a source of profit.

~ via Wikipedia

Neither the Amazon Kindle Fire nor the Google Nexus 7 have a monopoly on the content or the ads that they sell. They cannot command a premium price. In fact, if anyone can command a premium price on the sale of content, it is Apple because of their extensive distribution channels. While Apple is able to sell content in over 90 countries, the content sales channels for both Amazon and Google are extremely limited.

Cheaper is not necessarily better

There are rumors that Google may announce a $99 Nexus tablet next week. But in a subsidized model, cheaper is not necessarily better. In fact, it could be counter-productive.

The razor and blades business model works, in part, because when the blades are given away at cost or for free, they become ubiquitous, but there is no point in giving away the razors to men who love having beards. Similarly, there is no point in selling low-cost Amazon or Google tablets to customers who don’t buy their content or consume their advertising. Subsidized products attract bargain hunting customers and bargain hunters are as useless to Amazon and Google as bearded men are to Gillette.

The non-existent “Price Umbrella”

Apple is being criticized for selling the iPad Mini at $329 and leaving a “price umbrella” under which the likes of Amazon and Google tablets can grow and prosper.

There is no price umbrella. The Amazon Kindle Fire and the Google Nexus 7 are zero-margin products.

Let me say that again. Amazon and Google make zero profit from tablet sales.

No matter how much Apple lowers its sales price (and its margins) it won’t be taking any profits away from the Amazon Kindle Fire and the Google Nexus 7 because they already make no profits.

Now there is an argument to be made that lower Apple iPad Mini prices might reduce Amazon’s and Google’s tablet sales and therefore lower Amazon’s and Google’s tablet related content and ad sales. This presumes that lower iPad Mini prices would spur higher iPad Mini sales. If the iPad is supply constrained, (i.e,, Apple can’t make enough of them) this argument fails.

Further, both the Amazon and Google tablets are already selling poorly. And there is absolutely no evidence that Amazon or Google are making more than, or even as much as, Apple is in content and ad sales. Lower iPad Mini prices would have a negligible effect on Amazon’s and Google’s ethereal profits but it would have a significantly negative affect on the iPad Mini’s margins.

Giving razors to men with beards

“Never interrupt your enemy when he is making a mistake.” ~ Napoleon Bonaparte

Apple doesn’t need to lower its pricing to deliver “the tablet death blow” to its competitors. Apple’s competitors are doing a fine job of starving themselves of profits as it is.

When your competition is giving razors to men with beards and hoping to make their profits on the sale of blades, you don’t attack them – you ignore them.

7 Inch Tablets Employ An Odd Definition of “Success”

TROY WOLVERTON at the San Jose Mercury News, talks 7 inch tablets:

Just two years ago, Apple’s late co-founder and CEO Steve Jobs mocked small-screened tablets as “tweeners” that were too little to compete with the larger iPad but too big to compete with smartphones.

But after the success that Amazon and Google have had with small-screen tablets…

Whoa, whoa, whoa! Stop right there.

Success? What success?

Success is defined as: “the accomplishment of an aim or purpose.”

— Research in Motion, Samsung and other manufacturers introduced tablets with seven inch screens that flopped.

— It’s been estimated that Amazon sold 4.7 million seven inch tablets over a 9 month span.

— It’s been estimated that Google sold 3 million Nexus 7, seven inch tablets over the last quarter.

That’s not a “success”. That’s anything but a “success”.

Notice that the numbers for Amazon and Google are estimates. Their respective companies have not released sales figures. There’s a reason for that.

Also note that the Amazon and Google products are subsidized, which means that they are being sold at cost. What product wouldn’t sell well if it was sold at cost? Apparently, 7 inch tablets.

By way of comparison, Apple sells more that 5 million 9.7 inch tablets every month – at full price – and Apple is conservatively expected to sell 25 million iPads this upcoming holiday quarter. Again, at full price.

I have no doubt that the 7 inch tablet category is viable and I’m guessing that – starting on October 23rd – Apple is going to prove that in a big way. However, we need to stop talking about “the success that Amazon and Google have had with small-screen tablets” or we need to get a new definition for the word “success”. I’m leaning towards the former.

Battle Of The Tablet Business Models: Lessons Learned And A Look Ahead

RECAP

We’ve been looking at the tablet business models of Apple, Amazon, Google, Samsung and Microsoft. Today we wrap up the series by seeing what lessons we have learned and by asking ourselves what the various business models can tell us about the future of tablet computing.

Lessons Learned

Lesson #1: Subsidized tablet business models are a niche

The subsidized business models of the Amazon Kindle Fire and the Google Nexus 7 are very limiting. They can only be sold where their content is sold, they can only be sold to consumers who readily pay for content or consume relevant advertising and they will have little appeal to business, government or education. Even if they are fantastically successful within their confined market space, their markets will have little overlap with the tablets that focus primarily on the importance of apps.

Lesson #2: Subsidized tablet business models need to be measured differently and judged appropriately

We tend to judge all things tech by the number of units sold or by overall market share. We should, of course, be focusing on profit instead. Profit is the goal and profit is the standard by which tablet business models should be measured.

The subsidized tablets of the Amazon Kindle Fire and the Google Nexus 7 need to be judged, not by sales, not by market share, but by the profits generated by the sale of content and advertising. In a subsidized business model, nothing else matters.

Lesson #3: Conflicting business models are a sign of weakness

With the Nexus 7 and the Surface tablet, both Google and Microsoft have reversed their licensing models and embraced an integrated approach. There is nothing wrong with adjusting one’s business model to fit the times. There’s a lot wrong with having two conflicting business models.

Lesson #4: Platform Matters

Apple has the strongest tablet platform, by far, and it shows in their sales and in their profits.

Amazon seems to understand platform. However, subsidized business models seem geared more toward content than apps. The Kindle Fire is only a year old. We will have to wait and see how the Amazon platform develops.

Google doesn’t seem to get platform, even now. Their weak platform has not hurt them in phone sales (yet) but it’s crippled their tablet efforts. And with the introduction of the Google Nexus 7, Google has made it clear that they think that content, not apps, is what matters most.

Samsung almost certainly understands platform, but they have no control over the Android operating system nor do they control the way Android content and apps are sold. Their only choice is to suffer or get out.

Microsoft gets platform all too well but they are so very late to the game. The Windows Phone 7 platform went nowhere and Microsoft has to be terribly concerned that the Windows RT and Windows 8 tablets may share the same fate.

Lesson #5: Skate to where the puck is going to be

When the market is underserved, products move toward integration. When the market is over served, products move towards modularization. It seems to me that part of the problem with most of the current tablet business models is that their respective companies have misidentified where the market is over served and where it is underserved.

Apple: In my opinion, Apple is on the right path. Tablet hardware, software, and content distribution are becoming “good enough” and are in danger of being commoditized. Apps and ecosystem are still under serving the market and have a lot of room for growth. Apple is adding value and differentiating itself from its competitors by integrating hardware, software, content and apps into a single, cohesive ecosystem.

Apple’s problem is that they have traditionally not been very good at internet services. Look at MobileMe, Ping, Siri, Maps, etc. And internet services are the key to the future of mobile computing ecosystems.

Jonathan Ive is a genius who can design Apple’s hardware but he can’t design a database system that will work with iCloud. Tim Cook’s supply chain prowess turned Apple from a very good company into a great company. What Apple may need to thrive in the future is a Tim Cook for internet services.

Amazon and Google: I think that both the Amazon and Google subsidized strategies are fundamentally flawed. They are creating an integrated hardware and software product designed to add value via the sale of content. But content distribution has already been commoditized. It makes no sense to subsidize hardware sales in order to enhance content sales if the margins on content are de minimis.

Samsung: The problem with the current Samsung tablet model is two-fold. First, their hardware is only one part of the value chain. They do not control the software, content, apps or overall ecosystem. Second, the area where they add value – hardware – is rapidly moving towards “good enough” and commoditization.

Microsoft: In my opinion, Microsoft’s business model is focused on the wrong part of the value chain or stack. Windows RT and Windows 8 is all about creating a superior operating system. But the operating systems currently available from Google’s Android and Apple’s iOS are already more than good enough for most consumers. Microsoft is pouring all of its efforts into an area where consumers are already satisfied or over served. Windows 8 may or may not be a better mobile operating system than either Android or iOS but it is not so much better that it will compel the bulk of consumers to switch to it.

The Future

We obsess over tiny diferences between the hardware and operating systems of the various competitors but it is business models that dictate success or failure. Until those business models change, Apple has, and will retain, the lead in tablets. Both Amazon and Google have chosen to ghettoize their tablets. Their inability to generate substantial profits will be obscured by irrelevant sales numbers. Samsung tablets are nowhere and they have nowhere to go.

Microsoft is trickier. It first has to overcome the hurdle of creating a virtuous platform cycle. If developers can’t attract customers – if customers can’t attract developers – then nothing else matters because the platform will go nowhere. However, if Microsoft can overcome this initial, all-important hurdle, then they have a chance to be relevant. We should be able to gauge just how relevant they’ll be by this time next year.

Conclusion

The future of tablets will be determined by their respective business models. Yet most of the current business models are not even directed towards that future.

Battle Of The Tablet Business Models: Amazon Kindle Fire

RECAP

We’re looking at the tablet business models of Apple, Amazon, Google, Samsung and Microsoft. Today we focus on the Amazon Kindle Fire.

2.0 Amazon Kindle Fire

2.1 WHERE DOES THE AMAZON KINDLE MAKE ITS MONEY?

When introducing the new Amazon tablets, Jeff Bezos said:

“We want to make money when people use our devices, not when they buy our devices.”

Bezos’s description of the Amazon tablet business model would have been slightly more accurate if he had said:

“We want to make money when people BUY OUR CONTENT OR ACCESS OUR ADVERTISING, not when they buy our devices.”

Not as catchy, perhaps, but a tad more honest.

Bezos also said that he doesn’t believe in the razor/razor blade business model but I don’t know why because that is exactly the business model that the Amazon tablets are using. Amazon is selling their tablets (the razor) at or near cost and they are hoping to make their money from the sale of content and/or advertising (the razor blades).

Of all the tablet makers, Amazon is uniquely situated to make such a strategy work. While tablet makers like Apple, Google and Microsoft are interested in selling tablet owners tablets along with content such as music, books, television shows, movies and apps, Amazon is interested in selling their potential tablet customers EVERYTHING. Amazon has THE largest and most successful online retail store in the world. If Amazon can get you into their store and get you to buy things from their store, they win. To Amazon, the Kindle Fire isn’t so much a tablet as it is a vehicle designed take you to the Amazon store, keep you there and encourage you to spend your money there. It is just another form of advertising, marketing or promotion for the Amazon online store.

One of the brilliant “twists” to the Amazon strategy is that Amazon is saving money on software development by legally “poaching” their Amazon Kindle Fire operating system from Google’s open source Android. Google does all the work to create Android and then Amazon’s software engineers lift it whole and modify it to fit their specific needs. By the time Amazon’s software engineers are done modifying Android, their product barely resembles Android at all. In addition, they strip out all of Google’s money making properties and replace them with their own.

It must be particularly galling for Google to know that as they toil to make the Android operating system better and better, they are also toiling make Amazon’s competing tablet efforts better and better too.

2.2 WHERE DOES THE AMAZON KINDLE PROVIDE VALUE?

Amazon’s tablet hardware and software is much improved from last year’s offerings but where Amazon really brings value to their tablet customers is in the one-two combo of low tablet prices and an unsurpassed online shopping experience.

Amazon is able to keep their tablet prices low because they don’t intend to make any (or much) money on the initial sale of their devices. They can give their customers more tablet for less because they are making it up in content and advertisement sales. Amazon wants to lure you into their store with their tablet and then keep you there with their service and overall shopping experience.

And while it’s true that Amazon is making money off of you when you shop in their online store, people LIKE to shop at Amazon. Amazon’s selection is world class. Their prices are rock bottom. And their Amazon store software provides customers with one of the finest online shopping experiences anywhere.

A couple of quick analogies to drive home how the Amazon tablet business model works.

— If Amazon were a movie theatre, they would sell the tickets to the movies for cost and make their money on the sale of popcorn, soda and candy.
— If Amazon were in the game console business, they would sell their consoles at cost and make their money on the sale of the games.
— If Amazon were in the clothing business, they would sell T-shirts at cost, but they would put them in the back of their store in the hope that you would buy more of their other merchandise as you went to and fro in their establishment.

2.3 AMAZON KINDLE FIRE BUSINESS MODEL ADVANTAGES AND DISADVANTAGES

The advantage of the Amazon tablet business model is that their tablet prices are very attractive to a very large portion of the population. Further, Amazon doesn’t have to provide their customers with the latest or greatest hardware or software operating system in order to be competitive. Customers will overlook the Kindle Fire’s rough edges because they know that they are acquiring the tablet at bargain basement prices.

However, the Amazon tablet business model has some serious questions and some serious limitations too.

  • Business Model:

    • Does Amazon’s proposed business model even work?

    As we said above, Amazon is using the give away the razor (at cost) and make your money on the sale of razor blades business model. But that model presupposes that the razor blades are being sold at a PREMIUM.

    Famously, Amazon’s margins are razor thin (no pun intended) – as low as four percent. What good does it do Amazon to give away tablets for cost if they’re only making 4% profits on the sale of their content? It makes little sense. Yes, 4% is better than nothing and yes, they’ll make it up in volume but, as we’ll see, giving away tablets at cost is hardly risk free.

  • Who, Where, How and What:

    • WHO

    “The logic of selling a product which has a profit model unrelated to the cost of goods sold is tricky. The incentives are different. The risk is not selling too few but selling too many.” ~ Horace Dedeiu

    Apple, Samsung and Microsoft don’t give a damn about WHO they sell their tablets to. They make their money up front, at the time of the sale. But Amazon has to be terribly careful WHO they sell their tablets to, WHERE their potential customers live, HOW their customers use their tablets and WHAT kind of demographic that potential tablet owner hails from.

    WHERE

    The Amazon store is currently only available in the United States, France, Germany, Italy, Spain, and the U.K. This means that few people outside of those countries would have any interest in purchasing an Amazon Kindle Fire. More importantly, Amazon has no interest at all in selling an Amazon Kindle to customers who don’t reside in those countries. In fact, they have a strong interest in NOT selling their tablets to those who cannot buy their content.

    Remember, the Amazon tablets only make money from the sale of content or advertising. Contrary to the business models of Apple, Samsung and Microsoft, tablet sales numbers do not directly affect Amazon’s bottom line in any way.

    And don’t expect Amazon to suddenly expand their services into other countries any time soon The Apple App Store opened in 2008 and Apple currently sells Apps in some 150 countries. But after a decade of expansion, iTunes still only sells content in 62 countries. Content distribution is hard. If it weren’t, Amazon would already be selling their content in far more countries than they currently are.

    Simply put, Amazon’s geographically limited content distribution means that Amazon tablets can only compete with Apple, Google, Samsung and Microsoft in the United States and France, Germany, Italy, Spain, and the U.K. For those who are predicting that Amazon’s business model will destroy or put a serious dent in the business models of Apple and others, this should serve as a severe reality check. Even if Amazon does well in the geographic areas that they serve, Amazon tablets will do little to damage the overall sales numbers of their competitiors.

    HOW

    What Amazon tries to do with the brand is ensure that the Fire is in the hands of its most ravenous consumers. ~ Horace Dediu

    Amazon is also interested in HOW their customers use their devices. It you buy an Apple, Samsung or Microsoft tablet and throw it in a drawer and never use it, those companies still make their money. If you take an Amazon tablet and throw it in a drawer, Amazon makes no money. So it’s not enough for Amazon to get their tablets into the hands of consumers, they have to get their tablets into the hands of consumers who will continue to use their tablets and continue to buy Amazon’s other goods and services.

    This is analogous to the newspaper business. Newspapers could have dramatically increased their distribution by giving away their papers for free instead of charging for them. After all, newspapers made their money from the included advertisements and classified ads, not from the sale price of the newspaper. However, if newspapers were free, people who were not really interested in reading the newspaper would acquire them and use them for all sorts of unintended purposes such as lining bird cages or burning them for fuel.

    Newspapers had to charge enough to drive away those who weren’t going to read the newspaper but not charge so much that they drove away their target audience. The Kindle Fire has the same dilemma. It needs to be priced high enough to scare off the cheapskates but low enough to attract the bargain hunters. That’s a very tough, very tricky balancing act.

    WHAT

    Finally, the Amazon model of giving away hardware cheap does not attract the most desirable customers. It does Amazon no good to attract lots of customers if they are money-grubbing, coupon-clippers who refuse to later purchase Amazon’s products or respond to Amazon’s ads. It’s not enough for Amazon to sell their tablets. They have to sell their tablets to people who have money and who are willing to spend that money in the Amazon store.

  • Upgrade Treadmill:

    • During the Amazon Kindle Fire introduction, Bezos also said:

    “We don’t need you to be on the upgrade treadmill. If we made our money when people bought the device, we’d be rolling out programs left and right to try to get you to upgrade. In fact, we’re happy that people are still using Kindle Ones that are five years old.”

    Well, OF COURSE Amazon is happy that people are still using old Amazon Kindles. That’s their business model.

    Amazon makes no money from the sale of their hardware so they’re thrilled to have you continue to use their old hardware. They would like nothing more than for people to use their old hardware for as long as possible so that they don’t have to incur the expense of making and distributing newer hardware. However, this approach has some serious drawbacks and some serious risks.

    First, tablets are a fairly new device category. Tablets based upon Apple’s touch metaphor are only two-and a half years old. Accordingly, the hardware is still rapidly improving.

    While Amazon would like nothing more than to sell you a tablet and have you use it for 7 years — the same way that Microsoft, Sony and Nintendo sold their patrons game consoles and hoped that they would use them for 7 years — Apple, Samsung and Microsoft are following the exact opposite approach. They are iterating their hardware just as fast as they can.

    With tablets, as in smartphones, consumers have shown a willingness to rapidly upgrade their hardware and then sell or pass down their legacy devices to others. Bezos speaks of the “Upgrade Treadmill” as a negative but no one is forcing consumers to buy new tablets. They WANT to buy new tablets in order to take advantage of the latest and greatest hardware and software advances. Although it is in Amazon’s best financial interest to slow down the upgrade cycle, I doubt that consumers are going to stand for that. At this stage in the tablet’s evolution, upgrading is a boon, not a curse.

    Second, while a five year old device may be great for Amazon’s business model it’s terrible for Amazon’s platform efforts. Developers want to develop for a platform using a single operating system. (They never get that wish, but that’s what they want.) They want to provide their customers and potential customers with cutting edge software and they can’t do that if they’re forced to support 5 year old legacy devices. Amazon’s platform efforts are already far, far behind those of their tablet competitors and their business model makes it very unlikely that they will ever be able to catch up.

  • Apps:

    • Amazon may have more content that its rivals, but when it comes to Apps, they are woefully behind. Amazon is upgrading their App portfolio as fast as they can but the total number of apps available to Kindle Fire patrons is still relatively low.

    Further, Amazon has few large screen tablet optimized apps. Smartphone apps may be stretched to work on a 7 inch tablet but as tablet size increases, the need for tablet optimized apps increases too.

    Creating a thriving platform is hard. Ask Amiga in the eighties. Ask Windows Phone 7 now. Developers want to make money and they’re not going to make money if their platform is attracting penny-pinching scrooges who don’t want to buy content but do want to hold on to their tablet hardware for 5 years or more.

  • Limited Appeal:

    • The proposed Amazon tablets will be appealing to many consumers but it will also be unappealing to many more conservative groups. No government, business or scholastic organization is going to want to buy tablets that depend on advertising and which direct their constituents to the Amazon online store. Imagine, for example, legislators, or lawyers or students being given an Amazon tablet. It would be totally inappropriate for their purposes.

    Amazon’s business model lowers the price of its tablets and broadens its appeal to the masses. But Amazon’s business model also precludes it from ever being adopted by organizations. This is a significant limitation that seriously crimps Amazon’s potential overall market penetration.

  • Distribution:

    • Amazon’s distribution channels are extremely limited. Most of their sales comes from their existing online Amazon customers. While this is a large pool, it’s a finite pool and it makes it difficult for Amazon to reach out to new, potential customers.

    Further, Amazon’s distribution opportunities are actually becoming even more limited. Companies like Target and Walmart have recently stopped carrying Kindle devices because of perceived unfair competition.

    Many, many people will buy a tablet unseen, untouched, and online. But the vast majority of people will not. Amazon’s unique distribution channel might be viewed as both a blessing and a curse. But mostly, it’s an impediment to the growth of their tablet sales.

    Summation

    Jeff Bezos has made it clear that he’s all in with tablets. I admire him as much as anyone in tech and if anyone can make Amazon’s strategy work, he’s the man who can do it. But, as we’ve seen, Amazon’s business model holds more questions than it provides answers. Pundits will gauge Amazon’s efforts by the number of tablets sold but the number of tablets sold is meaningless. The only thing that matters to Amazon is how much content and advertising revenue those tablets generate. And since Amazon is notoriously stingy with its revenue and profit numbers, it may be a long, long time before we know whether the Kindle Fire’s business model was brilliant or just bizarre.

    We’ve now looked at the Apple and Amazon tablet business models. Tomorrow, we look at Google and the Nexus 7.

    What I Like About Amazon’s Kindle Strategy

    For the 12 years that I have been studying the technology industry, within my role as an industry and market analyst, I have tried to understand the strategic elements of this industry that often go overlooked. This is probably why I have spent so much time thinking about the strategic role hardware plays in Amazon’s business model.

    We have written quite a bit here at Tech.pinions about how Amazon’s business model is potentially disruptive, but more importantly a foreshadow of a model we may see more of in the future. Namely, how hardware as an extension of a service may represent the ideal way to consume said service.

    While on stage at Thursday’s Kindle launch, Jeff Bezos continually emphasized that Amazon at its core is a services company. In this regard Google and Amazon are very similar. They are both fundamentally services companies. They are also similar and unique, in that they both approach software and hardware with a services first mentality. What I mean by that is that they start thinking strategically with their services, then to software, then to hardware. Other companies in the industry take a hardware first approach. Some take a software first approach. Apple being vertical in all areas of personal computing puts equal emphasis on hardware, software, and services, and in this regard are unique as well.

    For Amazon, starting with a services first mentality, allows them to do things others simply cannot do. They build hardware not to make money but to be the best platform for their services. This allows them to create compelling hardware but offer it at a lower cost than a similar company making identical hardware but needing to make money off the hardware itself. This scenario is the only one where I feel price as a competitive advantage is valid. Generally speaking, a hardware only company whose goal is to be the first to the bottom of the price pyramid, is going to be the first to go out of business.

    Amazon has the fundamental business of being a services company to back up and justify a hardware as a service strategy. It is not a strategy that will work for everyone. And even though I find this strategy compelling, it is not the one I like the most.

    The strategy Amazon is using that I do like the most is that they are solely focused on a certain type of customer–the Amazon customer. With every generation of Kindle product, Amazon has constantly made things better for their customers. This type of strategy generates loyalty and trust; Something Amazon has with their customer base. Not only is Amazon focusing on their customer, they are also constantly learning about their customer. Customers needs may change, develop, mature, etc., and constantly learning and observing how to develop better solutions for their customers is a very smart approach and one Amazon is doing well.

    This is what stands out to me most when I look at Amazon’s product portfolio. Each product is designed to focus on a set of problems and offer solutions to those problems, which are important to a specific set of customers. This customer centric strategy is one that I feel will clearly resonate with Amazon’s customer base.

    Because of this strategy, I feel that it is easy for Amazon’s customers to perceive value. They will look at the Kindle offerings and somewhere in there find things that they value and consider investing. And because of Amazon’s hardware as a service mentality, the price barrier to entry is lower.

    It is clear that companies that are taking an ecosystem approach to their products and solutions are in strong positions for the future. Consumers are beginning to invest in ecosystems whether they know it or not. Ecosystems are sticky and Apple and Amazon have two of the strongest ecosystems in my opinion.

    I feel Amazon has one of the stronger strategies to compete with Apple, who is the clear market leader in tablets. Amazon is in this for the long run. They understand the tablet market is a marathon not a sprint. They understand it is a very big market which can sustain more than one player. But by focusing on their customers needs I think they have the right strategy for the long haul.

    Kindle Fire Free Time and the Future of Family Computing

    Tablets are one of the more uniquely positioned personal computer products I have ever seen. Largely because they have aspects of personal computing traits the same way a notebook does. However, they also have a more shared screen or communal set of traits which notebooks do not have. Desktops have evolved in a way where they have become more of a communal or family PC. But they are big, stationary, and most households only have one. Tablets however are more mobile and for that reason get passed around to other members of the family more easily. Just look at how many parents pass their iPads to kids to use in a variety of ways and you can see how a tablet can also be a shared personal mobile computer.

    Tablets start to get very interesting when you think about them in the context of a family or a larger community. This is exactly the kind of thinking Amazon has begun and the beginnings of this trend can be found in a new experience they launched with the newest Kindle Fire’s called Free Time.

    Kindle Free Time is a customized experience on both new Kindle Fire’s for kids. It comes with parental controls built in that allow parents to monitor and set limits with the child’s screen media time. For example, a parent can set no time limit for reading (because who doesn’t want their kids to read more) but set a limit for how many minutes a day the child can play games or watch videos. Non children’s content is locked out of Free Time mode and the browser is as well. The color theme on the screen is blue, where the main Kindle Fire mode is black. This way the parent can quickly glance at the tablet and make sure the child is still in Free Time mode and hasn’t hacked the password.

    This kind of thinking around software customizations for a shared computing mode is encouraging for me as I look at ways personal computing solutions evolve to support family computing models.

    I still debate in my head heavily the degree that tablets are personal computers vs. shared computers. I think the answer is that they are both and software that allows this multi-modal experience will be well received by the market and in particular families. Interestingly it is Amazon’s creation of the Whispersync network that will enable this. I can envision a scenario as this strategy evolves where it doesn’t matter whose Kindle Fire HD I pick up, I can just log in and pick up any game, movie, book, etc., right where I left off. This is not how it works today but thinking in terms of communal and family computing, I think it will evolve this way.

    I hope many tablet manufacturers and platform providers are taking note of Kindle Free Time and begin to think more about family computing modes with their solutions.

    Android’s 7-Inch Tablet Future

    It wasn’t a secret that Google was going to announce a 7-inch Nexus tablet made by Asus and running Nvidia’s Tegra 3 chipset. And announce it Google did yesterday to much applause and fan fare. As we and a great many anticipated the tablet is designed as pure media tablet rather than a general purpose tablet like the iPad. As we watched the demo it became clear the Nexus 7 is targeted right at the Kindle Fire and nothing else.

    I have been thinking a lot about what Android’s future in tablets may hold and I believe we now have the answer. Android’s sweet spot for tablets may be 7-inch pure media and entertainment slates. These devices will be built and optimized specifically with entertainment not productivity in mind. They will also be very low cost and derive a significant amount of value from cloud services. This also fits right in line with Google branding their store “Play.”

    This makes sense if you think about the fact that the most successful Android tablet to date, the Kindle Fire, is a 7-inch pure media tablet. With the iPad, and now on the eve of Windows 8 tablets all targeting the 9.7 to 10.1 tablet screen sizes with more general purpose tablet strategies, I anticipate the larger screen Android tablets to struggle.

    Android has struggled as a tablet solution in the general purpose segment due to the immature nature of Google’s tablet ecosystem. Apple remains dominant in this area and it seems like many firms strategies are to avoid competing with Apple entirely. This is clearly the direction Google is taking with the Nexus 7.

    With that context I want to point out two areas important for this segment. One that favors Amazon and one that favors the Nexus 7.

    Cloud Services and Consumer Trust
    The Kindle Fire commerce ecosystem both in terms of digital media and consumers trust in Amazon as a commerce vendor are key areas where Amazon has an advantage of the Google right now. Amazon has over 100 million credit cards of consumers on file who all trust Amazon as a vendor. I don’t believe Google has released how many accounts they hold but I guarantee you it isn’t nearly as many as Amazon, or Apple for that matter.

    Amazon has a more mature ecosystem when it comes to digital media and consumer trust for commerce. This is an area Google is attempting to strengthen with the Nexus 7. During the announcement of the Nexus 7 the statement kept being made that the device was built for the Google Play store. Google is clearly hoping that this device will generate more trust for their commerce platform and strengthen their commerce ecosystem.

    Retail
    This is an area where Google 7″ tablets may have an advantage over the Kindle Fire. Google has not yet stated when or if the Nexus 7 will ever appear in retail but you know other OEM will come out with 7″ media tablets who will get them in retail.

    Retailers have been understandably conscience of Amazon’s commerce strategy with the Fire being potentially disruptive to their own brick and mortar store strategy. If that trend continues you can imagine more retailers not carrying the Kindle Fire and filling that hole with other OEMs Android 7″ media tablets.

    To the extent that retail will be important for this segment the advantage goes to Google in this area.

    I am not sure the extent the tablet market is ready to segment into specialty tablets but if they keep their prices low and overall time investment low then I think they have a chance to become companion media devices.

    Of course if Apple jumps into this segment with a 7″ tablet I will have to re-consider some positions I am taking currently. However, if Apple does this it will only validate the 7″ media tablet segment at which point I would expect OEM investments in the category to ramp extremely quickly.

    Kindle Fire: The Most Divisive Product of 2011

    A month after its launch, Amazon’s Kindle Fire continues to be an extraordinarily polarizing product. Lots of people like it and it appears to be flying off the shelves (though it would be nice if Amazon supplied some actual numbers to back up its glowing sales reports.) But a significant element of the tech world has nothing but contempt for the 7″ ereader/tablet.

    Kindle Fire photo
    Amazon's Kindle Fire

    The split in opinion reflects an analytical division that has colored the debate since Amazon announced the Fire in September. Some folks see it as poor (if smaller and much cheaper) version of Apple’s iPad, while others view it as a more limited device dedicated to the consumption of Amazon content, particularly books.

    The latest round of discussion was  triggered by a New York Times Business Day article by David Streitfield. The piece leaned heavily on criticisms by usability guru Jakob Nielsen of the Nielsen Norman Group, who declared: “I feel the Fire is going to be a failure.” But Nielsen is no great fan of the iPad  either. Though he has praised the hardware design, he has been sharply critical of both iPad apps and web sites optimized for the tablet. And his criticism of the Fire’s display of web pages in a bit odd, that pages designed for a 10″ display don’t work well on a 7″ screen. People who buy a Fire looking for a general-purposed web browser are going to be disappointed.

    Streitfield’s article immediately inspired Fire defenders. In a post aptly titled “The Kindle Fire is a Kindle Killer, Not an iPad Killer–That’s Why It Works,” Search Engine Land’s Danny Sullivan wrote:

    The Kindle Fire originally disappointed me. While it had the form factor I wanted, it was heavier than I wanted to hold. I’d also grown to love the e-paper format of the regular Kindles. But for the past two weeks, the Kindle Fire has grown to push aside my use of the other Kindles.

    Why? For one, the screen is nice and being backlit, I don’t have to purchase a light to read at night. Consider that for the cheapest basic Kindle for $80, you’re going to spend another $60 for a case that integrates a light, if you want to read it at night. That’s $140 right there — getting pretty close to the Kindle Fire’s $200 price and gaining so much more.

    …

    The Kindle Fire doesn’t replace my iPad, but it sure has replaced my Kindle Keyboard. That’s the killer factor here. I think the Kindle Fire will pull more and more Kindle users into the tablet world, where for just a little more money, they get books and more — and for a lot less than buying an iPad.

    At TechCrunch, John Biggs wrote:

    The Kindle Fire is Amazon’s Trojan Horse. It’s made for the mass of men and women who have been looking into this whole tablet business and like what they see. But it is, first and foremost, a reading device and to fault it for not playing Angry Birds well or offering a sub-par Netflix experience is to ignore its primary goal: to inject the concept of Amazon content downloads into a consumer base that is increasingly inundated with video, audio, and ebook sources.

    And Technologizer’s Harry McCracken, writing at Cnet, said:

    For now, mentioning the first Kindle Fire in the same breath as the Edsel is even more of an overreaction than assuming that it was going to be an instant blockbuster. With tech products, following through on a product’s promise is at least as important as getting things right in the first place–and Amazon, unlike some of its tablet-making rivals, has a strong record when it comes to doing just that.

    I’ve been using a Fire for about a month and I mostly am very happy with it. My biggest complain, shared with most users who have written about the Fire, is the relative insensitivity of the touchscreen. To the extent that is a software problem, I hope it will be addressed in an update Amazon told Streitfield to expect in a couple of weeks. Another prime candidate for an update is the rather fidgety nature of the home page that can make it hard to select one item from the ever-growing panel of favorites at the top.

    Another urgent item for correction is a point made by many writers and commenters on the Amazon site. As currently configured, the fire has * no parental controls. The built-in one-click ordering lets anyone who picks it up, say your children or a total stranger, order books, videos, or music without any authentication.

    The hardware is what it is and there won’t be any change until a second-generation Fire comes along, most likely in the first half of next year. But even then, don’t expect miracles. Amazon’s top priority is keeping the price low, not producing iPad-like near perfection. That means there will continue to be hardware compromises. But it also means that Amazon can continue to address a price-sensitive market  interested primarily in a media consumption tablet.

    The Fire will never make folks who know and love the iPad happy. The good news is that it doesn’t have to.

    *–The original version said the Fire does not offer a password lock. This was incorrect and I thank Michael Gartenberg for pointing out the error.

     

     

    My Experience with the Kindle Fire and Nook Tablet

    I’d like to start this topic off by making a point. The way most reviewers review technology products is helpful for those to whom technology is well understood and non-threatening. However, I would argue, that the way most reviewers review and compare products is not helpful for the way the average non-techie consumer processes information to make an informed buying decision. In all reality, the group that I am speaking of, the non-tech elite, most likely don’t read any of the reviews from tech sites anyway. Instead they talk to trusted friends and family and more importantly they go into stores and feel the products out for themselves.

    That being said, those consumers who are interested in either the Amazon Kindle Fire or the Barnes & Noble Nook Tablet are not first and foremost shopping for a tablet (to them a tablet is an iPad). They are in fact shopping for an e-reader, that happens to have a few more bells and whistles but first and foremost a good e-reader. Clayton Christensen said it best in the Innovators Dilemma “consumers hire products to get jobs done.” Consumers interested in either the Kindle Fire or Nook Tablet are interested in hiring either of those devices to get the job done of reading electronic books, magazines, and periodicals. Therefore as point number one both devices should first be judged or “reviewed” on the basis of how good of an e-reader they are. Having the ability to play a few games, browse the web, access movies and videos, etc are all secondary features to wanting the best e-reading experience.

    Related: Why Kindle Fire Reviews are All Over the Place

    Instead of reviewing these two devices in the traditional sense, I wanted to focus on my experience and observations using them both side by side. To do that I decided to focus my thoughts on comparing the two devices based on the most common use cases I see the average, non-techie, non-early adopter, mass market consumers interest in these two devices to be.

    Reading E-Books

    Both are capable e-readers. Neither are the best pure e-readers on the market but as far as e-readers “plus” go they are both capable. I will, however, say that the Nook Tablet is the better e-reader of the two. Reading a standard book is a check box for both devices. However the differentiator as a reader for the Nook Tablet is the experience reading and interacting with many of their interactive books and magazines.

    What Barnes & Noble has been doing by making magazines more interactive, with extra features and bonus multimedia content, or social sharing of reading material is the best example of what the future interactive reading experience should be with this type of content.

    One of my favorite reading experience features are “enhanced” books. These are books that more and more publishers are releasing that include extra content like exclusive videos, audio, as well as other interactive content related to the chapter.

    Many of the magazines on the Nook Tablet also features enhanced experiences. People magazine for example, one of the more popular magazines in the United States, has loads of bonus and interactive content built into their Nook magazine reading experience. Besides People Magazine, since I don’t read it, the one I found quite compelling was Sports Illustrated. SI includes many new interactive features not found anywhere but the Nook platform. Again many of these same interactive or enhanced magazines exist for the Nook Color but they are much snappier, crisper, and generally better on the Nook Tablet.

    These enhanced magazines, books, and more are one of the reasons the Nook Color was hailed by nearly all the “tech reviewers” as the best color e-reader out there, hands down. The Nook Tablet has brought all those same features into the Nook Tablet with a better screen and more snappy experience with the content.

    One final point. I was able to accomplish something that is near impossible with the iPad and the Kindle Fire on the Nook Tablet, and that was read outside in the sunlight. Despite the bright and vivid display of the Nook Color you can also easily read and use it in sunlight. It is the ONLY tablet on the market today where this is possible.

    As a Media Player

    If you are an Amazon Prime subscriber at $79 dollars a year then you have access to about 10,000 streaming movies and TV shows accessible on the Fire. Interestingly, the catalog offered for streaming to Prime subscribers is nearly identical to the streaming offered through Netflix’s on demand streaming service. Therefore if you are a Prime subscriber and not a Netflix subscriber than the Kindle Fire would make more sense. However if you are a Netflix subscriber the streaming catalog options are nearly the same, therefore accessible on both devices. Therefore what Prime video streaming gives you on the Fire you get on the Nook Tablet with Netflix.

    A point on the Netflix experience, the Nook Tablet includes a secure silicon layer that is required for movie studios to allow movies to be played in higher resolution. Therefore in a side to side comparison of Netflix video the Nook Tablet looks better.

    Truthfully I do not use Amazon’s services for music and videos so it is hard for me to qualify the value in the Fire’s access to their music and movie stores. What this brings out though is an interesting observation due to the fact that I am a heavy iTunes user and deeply entrenched into Apple’s ecosystem. In that regard the Nook Tablet actually fits better into Apple’s ecosystem than the Fire does. It is easier for me to move existing non-DRM music, movies and more to the Nook Tablet due to its larger storage capacity and easy of sync with my MacBook Air. Interestingly enough, the Kindle Fire didn’t even come with a PC sync cable, perhaps for obvious reasons.

    The last thing I will say on this subject is that much of the Amazon media player experience is based on a streaming model. For that reason Amazon’s media services are good but only work when on a wi-fi network. Because the Nook Tablet has more local storage and allows me to easily move music, movies, and more to the device I can use it to consume media even when not connected to the Internet.

    Running Apps and Browsing the Web

    Realistically 90 percent of the apps in the Android App store are no good anyway which is why I don’t make a big deal of a lack of apps in the case of the Fire or Nook Tablet. What matters more importantly is that the right apps, or quality apps are there. Keeping in mind if a plethora of apps is your reason for buying a device there are other options. Again emphasizing my assumption that for those truly looking into the Fire or Nook Tablet a plethora of apps is a moot point. More importantly do they have the right apps?

    In that regard they both have the most important app for the 7″ form factor, the web browser. Because of that both access Facebook, Twitter, and many popular services delivered through the web. In fact with the 7″ and above form factor many of the most popular apps are better in the browser. It should also be noted that the Kindle Fire does not actually have the Facebook App, what it has access to is the HTML version of the Mobile Facebook site, which look nearly identical to the Facebook app on smart phones.

    Both have e-mail apps but I don’t believe e-mail is going to be in the top several jobs these devices are hired for so I didn’t set my email up on either of them. I have a smartphone and a PC for that job.

    The Ecosystem

    Ed Baig in USA Today said it best:

    The fight between the companies largely comes down to which ecosystem you want to buy into, because books you purchase from one provider are not compatible with the other.

    Which ecosystem is the right question. In my opinion, as I stated above if you are in Apple’s ecosystem, using iTunes to manage media, the Nook Tablet will fit better in that ecosystem. If you are already heavy into Amazon’s ecosystem, meaning you are a Prime member, use Unbox, and a number of other Amazon’s services then obviously the Kindle Fire is a better bet.

    Barnes & Noble doesn’t have a way to get first release movies and DVD’s yet on the Nook Color where Amazon does. If renting, buying or streaming first run movies is important to you the Kindle Fire has a solution today where Barnes & Noble will most likely have one in the future.

    One other point about the ecosystem I would like to point out. Barnes & Noble has created a more family and kid friendly experience with the Nook Tablet. When looking for content–like apps–for example I can actually filter my choices to look for apps that are good for kids. I can even easily pick different kids age groups and search for apps for kids within that age range. That was a very cool experience, especially since I have my kids use all my technology quite a bit. I like the family friendly approach integrated into the Nook Tablet.

    Again it all comes down to which ecosystem you have bought into or want to buy into.

    The Price

    Many in the media have knocked the Nook Tablet for its $249 price point. It appears those people believe that cheaper is always better. I wholeheartedly disagree. I believe consumers perceive value in a number of different ways and the price tag is one of many points to consider. Because of that, if a consumer was genuinely shopping and compared the visual experience of both devices as a reader, video player, and web browser they would conclude the Nook Tablet is a better experience and thus worth the extra $50.

    The faster processor, more memory, vivid screen and more make for a more pleasant experience when using the Nook Tablet over the Kindle Fire.

    Conclusion

    I’ll be completely honest, if I had to choose to spend my own money on the Kindle Fire or the Nook Tablet, I would choose the Nook Tablet. Based solely on using it as a reader for books, magazines, periodicals and more. The Netflix experience and my ability to move my own personal music and videos on it and the responsiveness and speed of the device present a much more elegant experience.

    The big question you may be asking is now that I have used both side by side what would I recommend to friend and family to buy for this holiday season. My honest answer is this: If you are an “Amazonite” meaning you buy all your e-books from Amazon and also use their unbox services for music and video then the Kindle Fire makes the most sense. On that point however, if you are sold out to Amazon and want something that does more than be an e-reader, I strongly recommend waiting for version two of the Kindle Fire expected in the first half of next year. The Kindle Fire is “good enough” at all the things expected however it is not the best at any single experience in the e-reader “plus” category.

    If you simply want the best e-reader plus for this holiday season then I recommend the Nook Tablet as it retains many of the great features of the Nook Color but is snappier and with a better display. If the $50 price tag is too hard to swallow, and again you want the best e-reader with some extra features then I strongly recommend considering the Nook Color at $199.

    The Tech.pinions Amazon Kindle Fire Review Roundup

    Well the reviews are out and it seems like they are mostly positive. Other than a few user interface gripes it appears most reviewers believe the Kindle Fire to be a worthy Android tablet competitor but not much of an iPad competitor. From our own experience with the Kindle Fire we tend to agree on both fronts.

    For an in depth analysis on the Kindle Fire and the potential impact on the tablet landscape check out Tim’s analysis after using the Kindle fire both on the road and at home.

    Here are some of the more notable reviews and a few of their highlights.

    Joshua Topolsky at the Verge

    This isn’t an iPad-killer. It has the potential to do lots of things, but there are many things I have yet to see it do, and I wonder if it will get there given the lean software support.

    It’s a well thought out tablet that can only get better as the company refines the software. It’s not perfect, but it’s a great start, and at $200, that may be all Amazon needs this holiday shopping season.

    Tim Stevens at Engadget

    The Kindle Fire is quite an achievement at $200. It’s a perfectly usable tablet that feels good in the hand and has a respectably good looking display up front.

    When stacked up against other popular tablets, the Fire can’t compete. Its performance is a occasionally sluggish, its interface often clunky, its storage too slight, its functionality a bit restricted and its 7-inch screen too limiting if you were hoping to convert all your paper magazine subscriptions into the digital ones. Other, bigger tablets do it better — usually at two or three times the cost.

    So, the Kindle Fire is great value and perhaps the best, tightest integration of digital content acquisition into a mobile device that we’ve yet seen.

    Mark Spoonauer at Laptop Magazine

    The Kindle Fire isn’t an iPad killer, but it is a killer deal. At $199, it’s really hard to beat the package Amazon has put together. Assuming you’re willing to carry a smaller 7-inch device, it combines an easy-to-use interface and one-tap access to loads of content in a well-built design

    Lance Ulanoff at Mashable

    It is the closest tablet I’ve seen yet to an Apple iPad: a consistent, well-thought out marriage of hardware and services that offer an almost frictionless environment for app purchase and content consumption. This is why the iPad has been so successful and why I think the Kindle Fire, despite its imperfections, is a winner, too.

    Perhaps the most powerful review comes from David Pogue of the NY Times. Powerful because out of all the reviews his may be the most influential with the everyday consumer. Therefore Pogue’s review may arguably be the one most mainstream consumers, who don’t read gadget blogs, may read and use to inform their decision about whether to buy a Kindle Fire.

    David Pogue of the NY Times

    Your heart leaps. “This is incredible!” you say, contemplating the prospects. “It’s like an iPad — for $200!”

    But that’s a dangerous comparison.

    For one thing, the Fire is not nearly as versatile as a real tablet. It is designed almost exclusively for consuming stuff, particularly material you buy from Amazon, like books, newspapers and video.

    Most problematic, though, the Fire does not have anything like the polish or speed of an iPad. You feel that $200 price tag with every swipe of your finger.

    The Fire deserves to be a disruptive, gigantic force — it’s a cross between a Kindle and an iPad, a more compact Internet and video viewer at a great price. But at the moment, it needs a lot more polish; if you’re used to an iPad or “real” Android tablet, its software gremlins will drive you nuts.

    Then again, Amazon tends to keep chipping away at the clunkiness of its 1.0 creations until it sculptures a hit. Or, as they say in the technology business: “If you don’t like the current crop of e-readers, just wait a minute.”

    The Kindle Fire may pose a real test for Amazon. This device is clearly a risk on their behalf advancing away from their traditionally successful Kindle E-reader model. Obviously Amazon is not standing still and the rumors are they will have more tablets in 2012. The first Kindle’s evolved quite quickly and Amazon embraced their customer feedback and refined the Kindle experience. If they want to take the Kindle Fire to the next level they will need to do the same with their tablet strategy.

    Despite what the reviewing media says the real test is with the mass market. We will know what mainstream consumers think about the Kindle Fire soon enough.

    Analysis: How Amazon’s Kindle Fire Will Impact The Tablet Market

    I have been using the Kindle Fire for a while now and I am quite impressed with this new entry into the tablet space. Although one of Amazon’s major goals was to make this a great eBook reader, the fact that it runs on Android and can run Android apps, has a Web browser, and developers can write apps specifically for the Fire inevitably makes it a solid entry in the tablet market.

    Some of my research colleagues had originally placed the Kindle Fire in the eReader category, but this does the Kindle Fire a grave injustice. This is a tablet in the full sense of the word and it will especially be competitive with Android tablets. Also, it is very clear that this is positioned only for a consumer audience. Unlike Apple’s iPad, this product would not translate well into a business markets as it stands today. A side note to this is that since it does have an LED screen, reading a page in direct sunlight is as difficult as it is on an iPad now.

    I will not be doing a full review in the technical sense of the Kindle Fire as many of the gadget blogs will do that better than I could. However, before I discuss its impact on the market, I do want to point out a few things I like with the Kindle Fire and at least one thing I think would make it better in future versions.

    When you pick up a Kindle Fire, the first thing you will notice is how brilliant the screens color and resolution is. It appears that Amazon spared no expense with this component. And its touch sensitivity is as good as I have seen on any of the higher end tablets on the market today. I have been using the iPad from day one and I have a personal preference for a tablet with a larger screen, but I was surprised to find how much I enjoyed reading books and perusing Web pages on this 7 inch form factor. Also, apps like Pulse worked the same as on my iPad, only in a smaller window.

    But this also underscores a key issue that consumers need to think about when buying a Kindle Fire. This is really optimized for content consumption and NO content creation. When Apple introduced the iPad, they emphasized its use in content consumption. But within six months on the market, users began to find ways to optimize it for productivity and in some cases, real content creation. In fact, I often use the Zagg Bluetooth keyboard with my iPad and use it as a laptop replacement on many short trips I take. I would never consider doing something similar with the Kindle Fire.

    While the Kindle Fire can run localized apps, especially downloaded games, its 6.5 gigs of actual available flash memory means you are highly limited on what can be downloaded for use when disconnected. However, when connected to a WIFI network, the Kindle Fire really shines. You can watch streamed video, stream music in real-time and gain access to apps with Web content.

    One small gripe I have is where they locate the on/off switch. It is on the bottom of the device and is awkward to turn on and off in this position. On the next model I hope they put it on the side where it would be easier to access.

    The Kindle Fire is the best of the 7-inch tablets bar none. The Android tablet vendors should be very concerned. At $199 Amazon is most likely taking a loss on each product but making it up when people buy books and other products in the Amazon ecosystem.

    These devices tied-to-distinct eco-systems underscores another truism that I believe will drive market demand for tablets and other types of digital devices in the future. In fact, I’m not sure that there is an actual tablet market. Rather, the actual revolution-taking place in our tech industry is that the real market drivers going forward will be for broad ecosystems of apps and services that are optimized for various devices, one of which is a tablet, that can be plugged into this ecosystem and are designed to work especially well with these devices.

    If you have used multiple Apple devices, such as the iPod, iPhone and iPad, this should have become obvious already. While you may be attracted to Apple’s cool looking products, they are really front ends to a rich ecosystem of apps and services that are designed to work extremely well with these dedicated Apple devices.

    The iPod, iPhone and iPad are important vehicles designed to work perfectly with Apple’s ecosystem. And now, Amazon’s Kindle Fire is their first real hardware play that follows in Apple’s footsteps. Using this logic, I believe that Amazon will someday create other devices optimized to fully tap into their ecosystem such as a 10 inch tablet, perhaps a Netbook or UltraBook or even a smart phone. Keep in mind, this is not that big a stretch in thinking. If Amazon is smart, they find ways to drive more people to their ecosystem with optimized devices and expand their growth and fortunes in the same way Apple is doing with their device and ecosystem strategy.

    Interestingly, although it uses Android, this is not an Android ecosystem they are tapping into. This is an Amazon walled garden that just happens to be on top of Android. And from this point on, it is their hardware, their software, apps and services they will build on. I once thought that Amazon did not want to be in the hardware business and really wanted to just get more vendors backing their ecosystem. But just like Apple, I believe they now realize that the idea of letting others take advantage of their ecosystem would be foolish. Instead, I believe they will build up their hardware prowess and use this as a key way to lock or tie their customers to a total hardware, software and solutions strategy going forward. And, I firmly believe that in the very near future, people will be buying into ecosystems of hardware, software and services, not devices, especially ones that are not optimized to work well with specific rich ecosystems.

    So how will the Amazon Kindle Fire affect the market for Tablets?

    As I stated earlier, it will have a major impact on Android tablet vendors. At the very least they will be forced to try and get their devices into Amazon’s price range. However, Amazon’s ecosystem is a key part of the Fire’s draw and in that sense, it leaves most of the Android competitors out in the cold. Yes, these competitors can tap into the Android world of apps, but they are still fighting Google on version provisioning as well having to work with an app store that is not curated. Also, most of the Android tablets coming to market are all the same, while Amazon differentiates through their eco system.

    As for Windows 8 tablets, our current view is that these will be targeted more towards business customers. But unless Microsoft develops a rich ecosystem of their own for the Windows 8 world, Amazon and Apple will always have an edge.

    As for competing with Apple, the Kindle Fire is not a threat at all to Apple’s iPad in business. To date, this is still the market leader and it won’t get any serious competition, especially from the Windows 8 camp, until at least Oct of 2012.

    But at the consumer level, the Kindle Fire is clearly going to be a competitor to the iPad in the sense that it is going after a consumer audience. And at $199.00 it gives the consumers a serious option in tablets for use for content consumption.
    I also believe that it could force Apple to bring the price of the iPad down faster than they had planned.

    But there are three key things to consider when comparing the Kindle Fire against the iPad. I see Apple’s iPad as representing the top end of the market for tablets and one that is becoming a cross functioning device. That means it is good for content creation and great for content consumption. And with its 9.6 inch screen and over 140K apps written just for the iPad, even with its pricing today, it is and will continue to be a market leader in tablets. And I believe they will still sell 15+ Million per quarter at least through 2012.

    And while the Kindle Fire is aimed at the same consumer audience, Amazon will need to enhance their eco system consistently if they plan to really compete with the iPad in the future. Also, its 7-inch screen and form factor may be a drawback to some who really do want a larger screen in their tablet. But that said, the Kindle Fire will be a huge hit for Amazon and I would not be surprised to see them sell close to 4 million during the holiday quarter.

    The second thing to consider is that there is a very large audience who are OK with what I call “good enough” tablets. While many consumers may still be lusting after and iPad, its current price remains a drawback for some. And while the Kindle Fire is smaller than the iPad and has less in the way of apps and even services, it will be good enough to many and serve as their first real entry into the world of tablets.

    The third thing to remember is that the tablet market is in its infancy and I believe could eventually be bigger than the PC market. Key reason is the ultimate portability of the tablet and as we get more ubiquitous connections, this will be an ideal form factor for millions of people who want a device with a larger screen then their smartphone with them when they leave the house or hit the road.

    Just as the iPad became the major disruptor in mobile computing, I expect the Kindle Fire to set the tone for low-cost tablet devices and be the leader in this price category for quite a while thanks to the Kindle Fire’s high quality design that is tied directly to an Amazon Eco system of software, apps and services.

    The Kindle Fire and Nook Tablet Will Not Slow the iPad

    Philip Elmer-DeWitt reported on the Fortune blog about data released suggesting the potential impact of the Kindle Fire on iPad sales. The data originated from ChangeWave and points out several key findings from their survey of “early adopter types.”

  • 5% of those surveyed said they had pre-ordered or were very likely to buy Amazon’s new Kindle Fire, exceeding the 4% who said they were very likely to buy the original iPad in 2010.
  • 26% of those 5% said they would delay or put on hold the purchase of a new iPad.

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    I have to question the FUD this data is causing for a number of reasons. First of all the survey was conducted with early adopters (early adopter types actually whatever that is). Early adopters are not the mass market and nor do they represent the mass market. Early adopters shop for technology with a very different mindset than mass market consumers. Because of that it is hard to use data only taken by early adopters.

    Taking the data one step further only 5% surveyed said they pre-ordered or were likely to buy the Kindle Fire. If we do the math, 5% of the 2,600 early adopters types they surveyed means 130 people out of 2,600 said they pre-ordered or were very likely to buy the Kindle Fire. Keep in mind these are early adopters and I’m guessing most if not all of those 2,600 surveyed owned iPads.

    Now 26% of the 130 (5%) said they would delay or put on hold the purchase of a NEW iPad. That means 33.8 people of the 2,600 early adopters surveyed said they would delay or put on hold the purchase of a NEW iPad. When we look at the data under that lens the headlines becomes less ominous for the iPad.

    Now I do expect both the Kindle Fire and the Nook Tablet to do well. However, the fundamental difference is that those two products are competing with each other rather than with the iPad.

    Brooke Crothers at CNET provided research from eDataSource that stated preorders of the Kindle Fire were tracking to exceed one million. I have seen a number of credible reports forecasting Amazon to sell 4 million Fire tablets during the quarter. Most recently the DigiTimes today reported that Amazon has upped their orders to 5 Million due to demand.

    Both those numbers are plausible but the point needs to be made that those customers are either early adopters or customers who were in the market for a Kindle in the first place. I have a hard time believing that mainstream consumers (not early adopters) who were strongly considering an iPad have changed their mind and now going with the Kindle Fire or Nook Tablet.

    IDC’s forecasts for readers in 2011 are 16.2 million, I actually believe that is low, this category is still hot with a lot of consumers. My point, however, is that those consumers in the market for ereaders like the Kindle and the Nook are not in the market for iPad’s, yet at least.
    I’ll end my take on this data with this. Brooke also quoted a separate report today from Rodman & Renshaw’s Ashok Kumar claiming that iPad momentum is slowing. Asok stated:

    “Our checks indicate that production volumes have been scaled back due to moderating sell-through. We estimate that iPad volumes in the current quarter will be 12-13 million units, down from previous estimates of 14-15 million.”

    I think he is wrong but even if he isn’t that would still be more iPads in a quarter than Apple has sold before still putting them over 30 million iPad’s sold in calendar, not fiscal, 2011. That’s still a lot of iPads.

    [VIA Fortune, CNET]

    7″ Media Tablets Like Kindle Fire…”Dead On Arrival”?

    UPDATED with Amazon Kindle “Fire” references.

    A few weeks ago, TechCrunch reported that Amazon’s 7″ Kindle tablet was “very real” and would ship for the 2011 holidays.  (UPDATED: Now rumored to be called “Kindle Fire“.  ) Almost a year before that, Wired’s Brian Chen reported that on an earnings call, Jobs said, “the current crop of 7-inch tablets are going to be DOA — dead on arrival.” So the stage is set for an interesting war of beliefs and concepts this holiday shopping season.  In one corner, the world’s most trafficked internet retail stores and Kindle inventor, Amazon, and in the other, Apple, the most valuable company on the planet and inventor of the iPad.  Will the Amazon Kindle Fire tablet be treated in the marketplace with very little respect or will it shock everyone like the original Kindle?  It really comes down to the basics of the consumer value proposition.

    Many Variables at Play

    With a considered technology purchase, consumers actually do a bit of research before they buy.  It can be as simple as asking a geek friend for advice, doing a Google search for reviews, or as complex as side-by-side feature analysis, but in the end, it’s still research.  Consumers looking at buying a 7″ or 10″ tablet will look at variables like perceived price, value, content, brand, size, display, and weight.  More meaningful, though, is how they apply those variables to what they believe they want to do with their tablet and the location they will do it.

    For the sake of this analysis, I will use the iPad 2 as representative of the 10″ tablet and the combination of a Nook Color and the rumored Amazon Kindle “Fire” tablet as the 7” designate.  I will also assume that each tablet has access to the same books, magazines, movies, videos, music and games.  The only “iffy” one may be games given the iPad’s tremendous lead today.

    IMAGE_1000003527

    Potential Advantages with a 7″ $249 Tablet (Amazon Kindle “Fire” Tablet)

    • 20-30% lighter and even smaller means easier to carry and hold for almost every usage model.  Anecdotally, I have heard that women prefer the 7″ tablet because they are easier to carry.
    • Half the $499 price of the cheapest iPad 2. Not only is the tablet less expensive, but I will guess that every accessory will be less expensive, too.
    • Free subscription to Amazon Prime, which means free access to Amazon Instant Video Service.  Again, this is rumor, not confirmed.
    • Most of the same books, magazines, videos, movies, web content as the 10″, $499 tablet.
    • Simpler, as in fewer choices for apps and content providers, yet plays the same content. There is one button only.
    • Standard micro USB power and data cable.  These are everywhere in the house, your cars, and at the local convenience store.  You can also charge from your PC, unlike an iPad 2.
    • More durable, given plastic and rubber design.  I don’t care when someone drops my Nook on the carpet.  I shriek when someone drops my iPad 2.

    Potential Advantages with a 10″ $499 (iPad 2)

    • Twice the viewable image area of everything you see, like pictures, videos, books, newspapers, and web pages.
    • Battery life, although tough to predict.  Apple claims up to 10 hours for web, video, and music while Barnes & Noble claims 8 hours for reading.
    • Use more complex applications and basic activities are more responsive, given dual core processor and better graphics subsystem.  Think better looking games, richer video and photos, and more complex web pages.
    • Watch videos and listen to music from the tablet to an HDTV, PC, Mac or other AirPlay compliant device.  Maybe the Kindle will have some sort of DLNA capabilities, but from what I’ve seen on Android tablets today, it won’t hold a candle to the iPad AirPlay.
    • Take pictures and home movies.  While I scoffed at this at first with the iPad 2’s low res camera, I find myself taking pictures and videos with it.  It’s just so convenient to take it and show it to someone immediately.  Maybe I will stop doing this when iCloud immediately uploads my pictures and videos, but we will see.

    Conclusion

    As you can see, there are potential benefits in a less expensive, smaller and lighter 7” media tablet like the Kindle “Fire” as there are in a fuller-featured, twice as expensive, 10” media tablet. I believe that if the Amazon Fire tablet ships this as rumored above and with Amazon Video on Demand, it will sell extremely well. That is, given competition stays still, which it rarely does. So does this mean Steve Jobs was wrong? No, because when he made that statement a year ago, 7” tablets were priced right on top of the iPad 2 with a lot less content and a much degraded experience. A lot has changed since then and a lot will change in the future. And I am sure of that.