I hesitate referring to the Kindle Fire as an Android tablet because it is marketed and supported totally outside the Android ecosystem. Most buyers see it as a purely Amazon creation and know nothing about Android. However the Kindle Fire is perceived, it is time to start wondering what is next for Amazon with the product line?
See also: Kindle Fire: Blurring the tablet and ereader markets
Rumors have been floating around that a 10-inch Kindle Fire is on the way to compete with larger tablets from Apple and Android tablet makers. If Amazon chooses to produce a second model in its tablet line it won't be without a fair amount of risk.
Amazon is selling the small Kindle Fire at a loss in order to sell more content from its store. A larger tablet would be more expensive to produce, and Amazon may have to take more of a loss on each unit to sell it.
I believe the Kindle Fire has been so successful due to the $199 price point. This puts it just under the impulse price point where folks who find the tablet interesting are willing to give it a try. Amazon is savvy about retail and no doubt why the Kindle Fire is priced the way it is.
See also: Forget the iPad: Android tablet makers better fear the Kindle Fire
I don't see how a larger tablet could be sold as cheaply without damaging the existing tablet's market. Priced higher than $200 and a larger tablet would not fall in that impulse buy category. That may find prospective buyers unwilling to give the new device a try without a lot more thought. Amazon may have to give some additional incentives to get them over that hump.
If those incentives push buyers to the larger tablet, that could harm sales of the Kindle Fire. Amazon certainly doesn't want to compete with itself, but it may end up doing so with a larger model. Plus, the Kindle Fire is being sold as a Kindle with benefits. Amazon doesn't have to market it as competition for other products. It would be hard to sell a larger tablet that way, it would likely be viewed by prospective buyers as competition with the iPad and other tablets.
Amazon may have something up its sleeve with a larger tablet, aimed at selling video content. That could work if it uses its video on demand service as an incentive to keep the selling price down as low as possible without intruding on the Kindle Fire market. Position the Kindle Fire as the ereader that does other stuff, and the larger tablet as a video device that does also does Kindle books. Maybe offer the larger tablet with an exclusive video deal that can't be found anywhere else, like Game of Thrones.
It might be better business to stick with the Kindle Fire, but add capability with a product refresh while keeping the existing price. It could add a camera and better components, and stay with a single product in the tablet line. Amazon is entering an important phase this year with the Kindle Fire, and it doesn't want to upset the good thing it has going.
What do you think? Should Amazon introduce a second, larger tablet or improve the Kindle Fire in the next go-round? Share your thoughts in the comments.