News Analysis: Amazon's plan isn't to become a mobile hardware giant by marketing the Kindle Fire Tablet. It just wants another way to sell more books, movies and lots of other stuff.
clear now that the flurry of the Kindle announcement is behind us that Amazon
has learned a thing or two from another of the great success stories in
American marketing. That other great success is Gillette, and the lesson its
success teaches is that Gillette didn't get rich selling razors. It got rich
the Kindle Fire will make money for Amazon is clear, despite the fact that
Kindle Fire is
being sold at a price
that's probably at or slightly below cost for the
hardware. While Amazon was able to take advantage of an existing platform-the
BlackBerry PlayBook-and have it run a version of Android instead, the fact is
that the hardware is high-quality. So apparently is the software, which
replaces the standard Android user interface and application suite with
software designed by Amazon.
if you assume that Amazon's programmers worked for free, the hardware costs are
still likely to be higher
than the $199 that the Kindle Fire sells
for. So if Amazon is going to lose
money on every Kindle Fire sold, where's the profit?
short, the profit is in content. Every time you order a Kindle book or you buy
a movie or an app from Amazon, the company makes money. Considering that it's
very unlikely, especially at first, that you'll be able to find content for the
Kindle Fire that doesn't come from Amazon, the company will make up for its
losses when you buy products or content. In other words, Amazon isn't really
selling a tablet. What Amazon is selling is a vehicle for sales of books,
music, movies, games, apps and, of course, stuff.
to be a vehicle that sells successfully, it needs to be a very good vehicle.
This is why Amazon had to come up with a tablet that has very high-quality
hardware and that runs software that will be attractive to customers. Unless
those customers are willing to use their Kindle Fire tablets a lot, Amazon won't
get the return it needs.
despite the fact that the Amazon Kindle Fire is at least subsidized by Amazon
in hope of future profits, what consumers will see is the price, which is less
than $200. Consumers will expect to see 7-inch tablets from other vendors sell
around that same price, subsidized or not
. In addition, they'll expect to
see the same kind of high-quality hardware that Amazon is selling with the
Kindle Fire. Considering that Android tablets currently cost a lot more than
market is in for a big shift
you look at the Gillette model, you'll see how that shift will happen. When
Gillette brought out the first of its line of safety razors with disposable
blades at the beginning of the 20th century, the razors themselves were sold at
a low cost.