Amazon's Kindle Fire Will Push Down Tablet Prices

By Wayne Rash  |  Posted 2011-09-27

Amazon's Kindle Fire Will Push Down Tablet Prices

Amazon's soon-to-be-announced Kindle Fire (assuming that the blogosphere is right about the name) device will do a lot to democratize the tablet market.

The new Amazon model will put great pressure on the prices of Android-based tablets from other makers, meaning that Samsung, Motorola and others will be forced to lower their prices to something at least in striking distance of the Kindle Fire's announced $199 price. The market pressure to lower prices will only increase when Barnes & Noble starts selling the Color Nook 2 at the $250 price point.

By Christmas 2011, you should be able to buy a nice Android tablet from a number of manufacturers for around that price. Overall, this is a good thing. On one hand, it will bring tablets into the hands of a much larger market, and applications for tablet devices will grow accordingly. On the other hand, it may be the coup de grace for the netbook market, finally bringing an end to those dreadful devices.

What it won't do is threaten the iPad. In fact, the new inexpensive tablets might actually help iPad sales a little as tablets become a more legitimate platform. The iPad is popular because it's an iPad, pure and simple. People buy it because of the wealth of applications available for the platform-for the user interface and because it's both easy and comfortable to use.

This isn't to suggest that the Kindle Fire (or the Nook Color 2 for that matter) won't be easy and comfortable to use. Both are intended to be used by people who primarily want e-readers, and their Android innards are disguised by custom software and interfaces. They are, first and foremost, something for people who aren't Android fans, but rather people who want more than the gray e-ink devices that have been offered as e-readers previously.

What customers will be getting from Amazon will be something with the physical appearance of a BlackBerry Playbook (it's virtually the same hardware), but that looks different when you use it. It will have the Kindle e-reader, of course, and it'll have a Web browser. Right now I don't know what else will come with the Kindle Fire, although the word in the blogosphere is that it won't have an email client, but that one will be available for download.

The release of the two Android e-reader/tablets will shake up the Android tablet market. While Motorola and Samsung may be able to get away with charging more for tablets with 10-inch screens, the universe of 7-inch tablets will be changed.

Apple iPad Likely Immune to Tablet Price Pressure

People simply aren't going to pay $500 for a Samsung tablet when they can get a very similar device for $199. As a result, the average price level for good-quality Android tablets will ultimately sink to that level. In fact, the word ultimately may be overstating things. I wouldn't be surprised to see price reductions in the tablet market in anticipation of the Christmas season releases of the Kindle Fire and Nook Color 2.

So by the end of the year, tablets in general will be cheaper, especially for models with 7-inch screens where all the competition is. The price shift may take a little longer for 10-inch tablets. But perhaps this is an area where Apple will lead to a new pricing environment for the larger devices.

Think about a scenario in which Apple releases the iPad 3 sometime early in 2012, but rather than simply closing out the iPad 2 line, it reduces the price and continues to sell them. This is essentially what Apple did with the iPhone 3GS after the iPhone 4 was introduced. The advantage of this to Apple is that it gets to keep its market share intact, while not letting the price of its premier product erode.

If Apple were to follow a strategy for the iPad similar to what it did for the iPhone, then we'd see the iPad 3 on sale for the $500 that you can currently buy an iPad 2, and the latter would then be reduced to something like $300. This pricing strategy would force the 10-inch Android tablets into that price range as well, since it would be hard to convince most customers to pay more for an Android tablet than for an iPad.

Of course, it wouldn't have quite as much of an effect on the 10-inch tablets, especially the Android tablets that exceed the iPad in features. You can already see this in phone sales where many 4G Android phones sell for a higher subsidized price than the iPhone 3GS. A few even sell for more than the iPhone 4. But those all have 4G data capabilities, which the iPhone doesn't.

So the result is that there will still be expensive tablets out there that people will still buy. But the general level of tablet prices will drop, and as a result, more people will buy them, regardless of what Apple does with the iPad. No matter how you look at it, this general broadening of the tablet market is a good thing, and it will make for a nice Christmas. 

Editor's note: This article was updated with the official price that Amazon announced for the Kindle Fire on Sept. 28.

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