Amazon's Kindle Fire: The tablet's Volkswagen moment
This article is an expansion of Jason Perlow's arguments from our ZDNet Great Debate: Are $200 Tablets a Game Changer?
In 2010, Apple set off the "Big Bang" for the tablet industry, by introducing the iPad. While the consumer electronics giant did not create the tablet, they created the entire model for which all tablets must have today: an App store as well as cloud-based services to back it up.
However, at an entry point of $500, the iPad (and other full size Android tablets that followed) cannot ever be the "People's Tablet".
While cheaper than most desktops and laptops, iPad is still too expensive to stay the market leader. There is still a huge untapped market to fill for people that don't own a tablet at all and would prefer to spend considerably less money on a digital convergence device.
I see a number of parallels between the evolution of the automotive industry and what is happening now in digital convergence.
In the early 1930s, Germany and the rest of the world was in the midst of a global economic depression -- not unlike what the world is going through now. At the time, the automobile industry in that country was largely composed of luxury vehicles, and your average family could never afford such a car.
In 1933, shortly after becoming chancellor of Germany, Adolf Hitler commissioned a state-sponsored program to produce a small automobile that was capable of transporting two adults and two children at 60MPH, and priced at a very affordable 990 Reichmark, about the price of a motorcycle.
At the time, a typical weekly salary in the economically depressed nation was 32 Reichsmark. To finance production, a special savings program was put into place which enabled families to set aside 5RM per week.
Over 330,000 families eventually entered the program. The first cars were produced in 1937-1939, using almost entirely slave labor.
The car, dubbed "Volkswagen", literally meaning "People's Car" in German, did not actually see mass production until after 1945, when the war had ended and the country had to rebuild its industrial infrastructure after Hitler's desire for world domination nearly destroyed his nation and his people.
But for nearly 70 years, up until 2003, the iconic"Beetle" produced by the company and designed by legendary automotive engineer Ferdinand Porsche would become the most mass-produced car model in all of history, with over 21,000,000 coming off assembly lines all over the world, and became a critical component in re-establishing Germany's industrial economy and transforming into the economic power that exists today.
Amazon's Kindle Fire, in my opinion, is destined to become the "Volkswagen" of digital convergence devices.
But why now? There were 7" tablets before, and none of them took to consumers in volume. Not like what we've seen with the iPad.
There are a number of reasons why previous rivals to the iPad failed. The most important of all of these being price and overall value. The first 7" Galaxy Tab and Android Honeycomb Tablets, the BlackBerry PlayBook and the HP TouchPad were all priced way too high after Apple set the bar at $500 for their entry-level model iPad.
Apple had the superior ecosystem for content and Apps as well industry leading design, component integration and build quality that none of these competitors could come even close to matching at the prices they were selling at. When you're coming in as the underdog, pricing your product at $450-$550 doesn't make a lot of sense, and I think that resonated with consumers.
And what of Barnes & Noble's offering, the NOOKTablet?
I concede that NOOKTablet's increased RAM, larger built-in storage and SD expansion may prove to be useful for a small subset of users.
However, ultimately I believe that based on Amazon's superior ability to leverage the supply chain, strong partnerships in retail as well as their ability to monetize the ecosystem for a tablet which is being sold for very close to or less than margin will prove the company to be too difficult an adversary for B&N.
Unlike Amazon, B&N lacks the strong app and ecosystem and content cloud with the exception of a comparable e-book library.
While I think the NOOKTablet will have a reasonably sized following, particularly among hackers and tinkerers that will wish to "root" the device and install alternative ROMs on it, ultimately B&N cannot make a business model out of hackers and tinkerers.
Barnes & Noble needs to monetize its platform with a compelling app ecosystem as well as with paid content delivery in order to make up its margins on the device costs, which have to be razor thin.
The Amazon Kindle Fire, however, will be successful for all the reasons the B&N NOOKTablet will have problems.
One could argue that there's nothing particularly impressive about the Kindle Fire hardware. It's a pretty pedestrian dual-core, 7" tablet with a fairly standard 1024x600 IPS screen with no storage expandability, no Bluetooth, no GPS as well as no cameras or other frills that its 10.1" Android cousins such as the Motorola XOOM or the Samsung Galaxy Tab have.
After all, the B&N NOOKColor even bests it with twice the amount of RAM, double the internal storage and an SD expansion slot.
But let's put this in perspective. The iPad 2 also is a somewhat lacking piece of hardware if you compare it to something like a 10.1" Motorola XOOM or a Samsung Galaxy Tab.
It has no expansion whatsoever, it cannot output to standard HDMI ports without an overpriced accessory or AirPlay on an Apple TV (which works only questionably in my experience when viewing HD content).
iPad 2's cameras are mediocre when compared with competing devices, its Wi-Fi radio is anemic and has about half of the RAM of the competition.
But it still manages to be the most popular tablet around. Why? A fantastic industrial design and excellent marketing, but also largely because of the strength of the App and content ecosystem. And this is why I believe Amazon is going to sell millions upon millions of Kindle Fires in 2012.
[Next: Why Kindle Fire will utterly consume the tablet market]»
Amazon has spent several years developing cloud services to feed the Kindle Fire with in the form of the Amazon Appstore for Android, Amazon Cloud Player (MP3), Amazon Instant Video and of course Kindle eBooks and Magazines. And it will serve as the perfect platform for Amazon to sell you more and more stuff.
Additionally, one needs to consider the value add that Prime membership serves as part of the Kindle Fire "Secret Sauce". Today, it provides a complimentary reading library as well as selected free Instant Video content. Amazon can continue to bolster Prime with additional benefits such as more videos, more free premium books and perhaps free music content.
Right now Amazon's app ecosystem is less robust than even Google's which has about 200,000 Android apps total (of which only a small percentage are actually tablet optimized) and has fewer native tablet apps than the iPad which is around 155,000.
The exact number of Amazon Appstore certified apps for Kindle Fire as of launch is unknown, but I expect it at this to be anywhere to be 10 to 15 percent of the size of Google's Android Market.
However, that being said, the gap should close very quickly based on the simple fact that once volume sales of the Kindle Fire pick up, the developer interest and submissions to the Appstore will increase dramatically.
Amazon will "curate" for their device, but I expect Amazon's ecosystem in terms of apps to be very similar in scope to Android Market by mid-2012.
In terms of other content, Amazon is a very strong competitor to Apple in terms of e-books (essentially unrivaled in this area), Magazines, Music and streaming video.
It should be noted that Apple currently takes a side-loading approach to music and video content with iTunes and iCloud as opposed to Amazon which is completely dependent on streaming from Instant Video and uses a hybrid approach on Cloud Player, but I expect more streaming from Apple on tablets as well in 2012.
Who's going to jump on Kindle Fire? Well consumers, obviously. Lots and lots of consumers.
I beleive that because of the price factor we are looking at potentially a much larger customer base than even the iPad. Recent surveys have also indicated that iPads tend to be "family-owned" devices and are shared.
At less than half the price, I expect there to be potential for multiple Kindle Fires per household and also for it to potentially threaten the traditional handheld game (Nintendo) market as well.
I also expect the device to be extremely popular with elementary, junior high, high school and college students as a reader and content consumption platform for movies and music. Because of the smaller size the Kindle Fire is much more likely to be used outside the home, to be more of a "go-to" device and thus used more in general.
But what about professional users?
I believe this depends on the actual professional use cases for the device, which may not be completely apparent or fleshed out at this time.
While most of Kindle Fire's market will almost certainly be in consumer, the smaller form factor may prove popular with professionals that want a more portable device (such as female executives that only have so much space in a pocketbook or prefer a device with a lighter weight) so it would not surprise me to see it being used in the same sort of dual work/play role that the iPad currently serves.
To fill this dual role, more productivity apps will have to make their way onto the Amazon Appstore and I would expect better built-in messaging and calendar integration as well.
After all, the Kindle Fire was modeled after the BlackBerry PlayBook's reference design, which was supposed to be targeted towards professional users.
The PlayBook has so far been a huge flop, but this is not to say that the 7" form factor which Kindle Fire uses doesn't have merit, or end-users will in any way become dissatisfied with their purchase.
It has been brought to my attention that as a result of the findings of a recent survey, as many as 25 percent of all iPad buyers regret purchasing their device.
While every product has their share of buyer's remorse, I expect that figure to be considerably smaller for the Kindle Fire than for the iPad or for other larger format tablets due to the fact that the cost is lower, the product is more of an impulse buy and also considered to be a risk-averse purchase, as ZDNet EIC Larry Dignan stated in a recent column.
This isn't to say that the Kindle Fire is perfect, or even an "iPad Killer." In my opinion the device is neither of those two things. Rather, what I think it has done is establish an entirely new category of digital convergence device.
Certainly I beleive the lack of Google integration is something of a negative. The Kindle Fire and NOOKTablet both cannot currently use native GMail, Google Calendar, Google Maps, Google Plus or other native Google Apps that ship with other Android devices.
While I would not rule out the possibility that Amazon might negotiate the use of some of those apps and services from Google, it's unlikely to happen for a while if at all. 3rd-party software packages will have to take the place of those instead, but this is not necessarily a bad thing.
In the case of email, there's already a decent selection of GMail-compatible applications on the Amazon Appstore.
The lack of cameras, GPS and Bluetooth on both the Kindle Fire and the NOOKTablet also limit their appeal since they cannot be used as video conferencing devices or use GPS-aware apps.
Kindle Fire's lack of memory expansion and paltry 8GB built-in of storage make it an extremely cloud-dependent device which is inadequate for content side-loading, particularly video.
For those who want the ability to side-load movies for viewing on aircraft and in bandwidth-constrained areas, the NOOKTablet (with its integrated SD card), the mid-range and upper-end iPad 2 and full-size Android tablets are currently much better choices.
But even with these limitations the effect on the industry will still be profound.
In the same way that iPad set the $500 or less bar for 10" devices, The Kindle Fire (and to a much lesser extent, the NOOKTablet) have set the bar for $200 for 7" devices. Other 7" Android tablets will find difficulty breaking into the market unless they come with significant value add for about the same price as Amazon and B&N's offerings.
We can expect this new price alignment to affect the Android tablet market as a whole, including full sized devices, as it is almost certain that within one year, Amazon is likely to release a 10" Kindle Fire for around $300-$350.
Indeed, $200 is the magic price point that will enable tens of millions of people to buy tablets and eventually propel us into the golden age of the Post-PC era that Steve Jobs will establish as his true legacy.
And like the epic Volkswagen Beetle that propelled affordable cars into the modern automotive age, the Amazon Kindle Fire will be known as the device that ushered in the tablet that was made and priced for everyone.