When it comes to the relationship between the devices and content they offer Amazon and Apple are two very different companies. Apple’s App Store was created to act as a differentiating feature that is available only to its end users…to compel consumers to purchase Apple devices rather than those of their rivals. While for Amazon it is the reverse – its devices exist to encourage the growth of the market for the sale of the digital content that is available on its online store.
Yet in this vital difference there is also a strong commonality of purpose – to reinforce both companies’ core business models. For Apple the content store exists to reinforce its core business model of selling hardware, while for Amazon, the device portfolio serves to reinforce a core business model of retailing content.
As a consequence Apple’s mobile ecosystem is characterized by general-purpose, premium-priced devices, for which (more often than not) users purchase free or low-price software from the App Store. Amazon’s mobile ecosystem has, thus-far, been characterized by more application-specific, lower-priced devices, for which users purchase premium rate content.
It is important to point out that Amazon’s hardware is certainly not deficient in functionality or build quality in any way. It’s simply that the company’s business model is not based upon the margins they obtain from the sale of those devices alone. Amazon could charge more for them, but this might impede hardware sales and by association reduce the potential for its long-term goal – the sale of digital content for those devices.
Yesterday Amazon formally announced the addition of four new products to its device portfolio: the Kindle (basic), the Kindle Touch, the Kindle Touch 3G and the Kindle Fire. They are all e-readers, with the exception of the Fire which is a tablet. The original Kindle e-readers have since been renamed the Kindle Keyboard and Kindle Keyboard 3G to avoid confusion. The lesser-spotted Kindle DX is still available too.
As tablet computers are media consumption devices rather than productivity tools Amazon is, by the nature of its core business, well placed to compete. It can offer high-quality hardware at a minimal price point, based upon its expectations for the future sale of content. And this is exactly what it has done. The new Kindle Fire is priced at just $199 (€146)… - a stark comparison to $499 for…entry-level versions of the Apple iPad 2 and BlackBerry Playbook.
The Kindle Fire is being marketed as for “Web, games, apps, movies, reading and more,” with Amazon’s promotional material boasting the availability of “100,000 movies and TV shows”, “millions of books”, “17 million songs” [and] apps and games from the Amazon App Store for Android (as the Kindle Fire uses an Android-based operating system). Amazon’s new tablet also features server-assisted web browsing and cloud storage.
So now that Amazon has entered the arena, who will win-out in the ‘battle of the tablets’ – the hardware-centric companies or the content-centric companies? It’s actually a very tedious question (although it’s bound to be asked all over the blogosphere – yawn), as many people who buy an iPad probably don’t purchase it because they want a tablet computer – but because they want an iPad.
Similarly, it is likely that many people do not buy a Kindle just because they want an e-reader – but because they specifically want a Kindle. The unique qualities of both products have given them a powerful individual identity in the eyes if the consumer and a market segment all of their own, above and beyond their technical classification as devices of a given ‘type’.
So, what is far more interesting in all this is that a powerful second player with an already mature direct-to-consumer billing relationship has entered the tablet market. Apple has iTunes and Amazon has amazon.com (and its regional subsidiaries). The consequence…is that it could finally help to boost the tablet computing market into something more than just a market for the iPad.
Apple’s iPad and Amazon’s Kindle Fire are technically competitors yes, but I see the launch of the Fire as a new avenue for the expansion of the tablet market overall. So let us celebrate the potential for growth in general through choice and innovation, instead of worrying about market share for a while.
Jamie Moss is senior analyst for content and applications at Informa Telecoms and Media. For more information visit www.informatandm.com/