Amazon's Kindle Revamp & the Future of Digital Media

As predicted, Amazon announced it's first entry into the tablet market on Wednesday, the Kindle Fire. On the technology front, it's not going to directly challenge Apple's iPad.  The Fire has a color touchscreen, but it's only 7 inches (slightly larger than the Kindle reader at 6") compared to the iPad's stunning 10 inch display.  The Fire has no camera or microphone, does not have the capacity to hook up to a 3G network (it does have WiFi), and is limited to 8 GB of internal storage (the iPad comes with up to 64 Gb).  It's stated battery life of 8 hours is several hours less that the iPad 2's expected  time on a charge.  Running on an Android OS, the Fire pulls from the Android app base that still has a way to go to match the range of apps available for the Apple iOS system (approaching half a million).

On the other hand, the Fire isn't being marketed as an iPad-killer high end tablet.  It seems to be envisioned more as an extension of the Kindle branding approach - a device for accessing and using digital media content - only this time accommodating audio and video content (especially content acquired through Amazon).  As the lead feature on the Amazon Kindle Fire product page states, "Movies, apps, games, music, reading and more," with "18 million movies, TV shows, songs, magazines, and books" available through Amazon.  Screen size and battery life is sufficient for regular personal use, and the Fire offers stereo speakers (for stereo on iPads you need to use headphones), and the limited onboard storage is offset by the included free Cloud-based storage for all content acquired through Amazon.  Further, the Fire comes with a one-month trial of its Prime membership, and Prime members get free streaming access to more than 10,000 movies and TV shows.  Amazon's MP3 store regularly offers free songs and samplers, and Kindle bookstore continually offers free promotional titles, access to hundreds of thousands of older public domain titles, and connection with a growing network of public libraries offering eBook loan services.  The Fire is aimed at heavy media consumers rather than Internet and computer users.  But it's not limited to just media.  The Fire includes a customized web browser, and the Android OS means it can run games and other Android apps.  And its priced at $199, while the iPad 2 starts at $499.

John Gruber, blogging at Daring Fireball, gives a good summary of the contrast between Apple and Amazon in the tablet market -

"The iPad takes it on from the high end. It's the best possible device in that price range from the world's best maker of devices. The Kindle Fire takes it on from the low end. The iPad is a credible laptop replacement for many people—and with iCloud and another year or two of hardware improvements that's going to be true for more and more people. The Kindle Fire is a laptop replacement for almost no one. It's a peripheral, not a second computer—and it's priced accordingly."

Analysts expect Amazon to sell 2.5 million Kindle Fires in the first two months (expected to start shipping Nov. 15), and 13-15 million in 2012 (in the U.S. only, for now).  On the other hand, projections are for Apple to sell more than 50 million iPads worldwide in 2012.

While most of the hype has been centered on the Fire as Amazon's first tablet, Wednesday's product launch went well beyond that - introducing a range of new models and price cuts.  Analysts were anticipating a $249 tablet offering, and perhaps the first sub-$100 basic Kindle.  Amazon's biggest surprise was not only pricing the tablet at $199, but three different models breaking the hundred dollar price point, if you're willing to go with the "Special Offers" service, which lets Amazon put ads or offers as the device's screen saver (without is $30-$40 higher).  There's a basic reader at $79, a touchscreen e-Ink version at $99, and a version with Amazon's traditional keypad feature also at $99.  Both the Touch ($149) and Keyboard ($139) models also have 3G models that allow free downloads outside of WiFi areas.  The larger screen DX model remains available as well.

The new price points could well prompt another huge extension of the eBook market this Holiday season - rapidly expanding the ownership base.  A Pew Internet report in June indicated that eBook ownership doubled between November 2010 and May 2011, rising from 6% to 12% of U.S. adults.  A Harris Interactive report released last month suggests ownership and usage will double again in the next six months, and that was prior to Amazon's new models and price points.  With the new prices and models, I anticipate greater adoption and use among younger readers and media consumers, expanding the eBook market.  If Amazon can also follow up with a subscription model for ebooks, this could well push up interest in reading and demand for books. 
In a similar vein, the Fire price point is also likely to significantly expand adoption of tablets and their use for media content.  This should further hasten the shift to digital media and on-demand usage.  It will be interesting to watch the coming transformation.

Sources - Amazon Kindle Fire No True iPad Rival: Munster,  eWeek.com
E-reader ownership doubles in six months, Pew Internet  (full report available at this site)
One in Ten Americans Use an eReader; One in Ten Likely to Get One in Next Six Months, harrisinteractive