Amazon ignites a content war with the Kindle Fire

Amazon boss Jeff Bezos duly launched the Kindle Fire at a press conference in New York yesterday, and that part was almost entirely as expected, apart from the low-ball price. The Fire will be sold at $199 in the US, undercutting its main rival, the $249 Nook Color from Barnes & Noble.

Amazon boss Jeff Bezos duly launched the Kindle Fire at a press conference in New York yesterday, and that part was almost entirely as expected, apart from the low-ball price. The Fire will be sold at $199 in the US, undercutting its main rival, the $249 Nook Color from Barnes & Noble. But Bezos still had some surprises, the main one being the introduction of a cloud-based browsing service along with a new web browser, Amazon Silk. In a strategic context, this is a beautiful ploy, though it is not really a new idea, and already has bloggers complaining about the privacy implications.

The Kindle Fire lived up to its billing here on Tuesday in Due tomorrow: a PlayBook-style Amazon Kindle Fire?. The hardware really does look like a RIM BlackBerry PlayBook -- which is a good thing -- and even the software looks more like a QNX-based PlayBook than a typical Android smartphone or tablet.

From what Amazon showed in its demos, the Kindle Fire has been designed mainly for the consumption of movies and TV programmes, though it also provides for reading Kindle ebooks, playing Android games, and browsing the web. In this respect, it is part of a range of models that include the Kindle Keyboard and Kindle Touch, which are cheap e-readers with monochrome E Ink screens. There are enough differences that some customers will buy both the Touch and Fire versions.

Hardware

There has been some speculation that Amazon is making no profit on the Kindle Fire hardware, and could be losing up to $50 per unit. If so, this will be made up from increased sales of movies and music files etc, and increased Amazon Prime subscriptions. Amazon has already tested this approach by selling Kindle e-readers at lower prices if people are willing to receive "special offers", and this is now part of the standard $79 Kindle offering. Kindle Fire users will get an introductory taste of Amazon Prime and since this allows free access to 11,000 movies, I expect a large proportion will subscribe.

Based on my experience with the RIM BlackBerry, I think the movie experience will be as good as or better than an Apple iPad 2. The 7-inch screen is smaller, obviously, but the resolution is not much different, and the Fire's 16:9 widescreen is a better fit for movies. There is no "right" screen for watching a movie, and you can do it on anything from a tiny MP3 player through a 48-inch plasma TV set to an enormous IMAX screen. I expect the Fire to work extremely well for one-person viewing. For 2 to 2,000 people, there are better options, including widescreen laptops with built-in Blu-ray drives. The Fire's one real drawback is the lack of an HDMI port that would let you plug it into a TV set to share the viewing experience.

Cloud connected

Amazon is very well established as a cloud computing supplier and with the Kindle Fire, it keeps all purchased content online. This means Fire owners can delete anything they don't need immediately (there's only 8GB of internal storage) and redownload it whenever they like. It's also economical for Amazon: if it sells a movie to 10 million Fire users, it still only needs to store one copy.

So far so expected, but Amazon has taken things further by connecting web browsing into its cloud. When a Fire user requests a web page, this comes from Amazon's cloud, where pages are cached, not directly from the site itself. This is what AOL used to do when its subscribers accessed the internet via AOL's dial-up servers rather than directly, and meant AOL could recode heavy graphics pages to make them lighter. DataWind's PocketSurfer, RIM's smartphones and the Opera Mini web browser also access the web using similar techniques.

The benefit to Amazon is that it will know its customers' browsing habits better than Google and Facebook, who can both track users across the web. In fact, if Amazon offered a proxy web-browsing service that cut out Google adverts and Facebook Like buttons, some users might prefer it. Amazon may look less of a privacy-threatening Big Brother than Apple, Facebook, Google, Microsoft, your mobile network carrier or your ISP.

Either way, the historical precedents suggest that consumers will find Amazon's approach acceptable, even if it upsets privacy wonks. At least Amazon Silk allows you to opt out of using the EC2 cloud connection, and if you do use it. Amazon will "generally" hold the data for only 30 days.

Selling content

Amazon has forked Google's Android software, so users don't have to get tied into Google, and will be directed to Amazon's Android App Store not Google's Marketplace. This is not the best news for Android supporters, since the versions may diverge and the two stores could end up competing for content. Of course, Kindle Fire owners will still be able to access Gmail, YouTube and other Google websites -- and any equivalent Microsoft sites -- when they want to.

But Google is only incidental to the real battle, which is not between the Kindle Fire, Nook and iPad hardware. It's between Amazon, Barnes & Noble, Apple's iTunes store and other online sources of paid content. The Kindle Fire is aimed at getting more people to sample, rent and buy more books, music, TV programmes, movies and games from Amazon. If it can do that, it will be a success, and at the moment, that looks very likely.

If Amazon can tempt newspaper, magazine and book publishers into signing deals that bypass or exclude the iTunes store, that would be be even better.

There may, of course, be some innocent victims. The pundits already have RIM's PlayBook as first in line for the chop, because it offers similar hardware at a much higher price but without the same content libraries. PlayBook price-cuts certainly look inevitable, though they already looked inevitable due to slowing sales. Still, RIM plans to use QNX in its BlackBerry smartphones, so it's unlikely to abandon the PlayBook, which is pioneering the market. Also, RIM has ambitions in the business market, which the Kindle Fire clearly does not share.

Burning the iPad

While the Kindle Fire is not competing directly against Apple's iPad, the price difference may make some iPad buyers think twice. Why pay $499 or more when you can easily consume all the content you want on a smart device that costs $199? It would be interesting to see Amazon pitch the Kindle Fire with, say, $350 worth of "free" content as an iPad alternative.

The argument for the iPad is that it has practical uses too, but it would be easy to offer a two-for-one deal where you get a Kindle Fire plus a netbook or laptop for the same price as an iPad. This is an idea that will no doubt underlie some of the marketing of Asus Transformer-style devices running Microsoft Windows 8….

@jackschofield

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