Amazon’s just-announced Kindle Fire HD tablet will face a number of strong competitors in the tablet space over the next few months, including Google’s Nexus 7, Microsoft’s upcoming Surface tablets, and (possibly) a smaller version of the iPad.
The Kindle Fire HD will hit the market in three flavors: 7-inch and 8.9-inch editions, along with an 8.9-inch version with 4G LTE and 32GB storage. The 7-inch version will ship Sept. 14 and cost $199, while the 8.9-inch version will ship Nov. 20 and cost $299. Those who want 4G LTE will pay $499 for that edition of the tablet, plus $49.99 for a full-year data plan (with a cap of 250MB per month).
Other features include a revamped email interface, Whispersync for Games (which, in a manner akin to Amazon’s Whispersync for books, will store individual data about games—including unlocked levels—in the cloud), newly designed apps, a smoother interface, and parental controls.
The online retailer is betting big that a combination of low cost, solid hardware, and tight integration with Amazon products and services (most notably e-books and streaming video, but also apps) will drive customers to the next-generation Kindle Fire. And if sales of the tablet’s pervious version are any indication, the company isn’t necessarily wrong in that assumption.
According to Sterne Agee analyst Shaw Wu, the Kindle Fire HD’s role as an instant portal to Amazon content could pressure the Nexus 7, the 7-inch Android tablet that Google has spent the past few months positioning as the year’s best iPad alternative. “One thing Amazon has proven that it can do better than most is sell digital media content,” he wrote. “So far only Apple and Amazon has been able to demonstrate a strong record in selling music, movies, and TV shows.”
But the Kindle Fire HD’s effect on Microsoft could be much greater. “We believe the pressure for Microsoft to price its Surface tablet aggressively is now greater than ever,” Wu wrote. “Initial press reports indicated a [Surface] price point of $599, a premium to the new iPad, but we now believe it will likely need to price at $299 or lower to give it a fighting chance.”
Amazon’s willingness to kill its margins on tablet sales, betting that consumers will buy enough digital content to make up the difference, is what makes the online retailer so dangerous to other competitors in the mobile arena. Nonetheless, Wu believes that the focus on reselling others’ content “has historically proven to not be a very profitable venture.”
Whether manufacturers’ higher margins help them blunt the competitive effects of Amazon’s business model remains to be seen. But one thing is clear from Bezos’ presentation: Amazon wants some respect on the hardware side of things. “With its latest mobile devices, including the Kindle Fire HD, Amazon is showing that it is serious in becoming a major player in hardware,” Wu wrote.
The ultimate outcome, he added, rests on whether Amazon and Google can deliver the same combination of “quality and seamless integration” that made Apple so popular.