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Why Amazon's Tablet Strategy Will Fail

As everyone is "oohing" and "aahing" over Amazon's shiny new tablets and even shiner new prices, I'd like to take this opportunity for a Debbie Downer moment and remind everyone of the following: 

1. Amazon's main competition is Google, not Apple. 

2. Amazon's strategy is unsustainable, and Google will prevail. 

Here's what I'm talking about: 

http://www.computerworld.com/s/article/9225707/Why_Amazon_can_t_win_a_tablet_price_war_against_Google

(Pic props: http://www.fastcompany.com/3001084/amazon-introduces-kindle-paperwhite-kindle-fire-hd-and-more )
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102 comments
 
I wouldn't say everyone is oohing and aahing.
 
what already, hell no mike  want the new hd kindle
 
+Mark Palmberg Then you're not following the press posting from the event, because those guys are gushing about this announcement. 
 
I don't know +Mike Elgan, Amazon's play looks to profit by virtually "giving away" a shopping cart, not beating Google (or Apple) at the tablet game.
 
I'll buy a kindle fire over any android tablet any day. Especially the new one just announced

And except for apps, google play sucks
 
nexus with latest updates can not be beat. Amazons history of updates (or lack there of) makes any hardware announced today already outdated.
 
I don't know about the tablet strategy, but I know what kinda fail's gonna happen if chick sits down like that...
 
nothing happened there that would make me even consider leaving my nexus 7
 
I'm ready for one. As much as I like nexus7,that HD kicked kindal is wow
 
Nexus 7 is the killer small form factor tablet. Google got it right by selling the hardware for next to no profit. With Google Play having the largest collection of ebooks, Amazon doesn't have a chance. 
 
I disagree, Amazon's competitor is mostly Apple (content), and the 8.9" Fire HD is most definitely a content device.
 
Amazon and Apple both have my credit card details; Google does not. That puts Amazon in competition with Apple, as far as I'm concerned - and they're winning.
 
So far I like apple and amazon. Last time I tried to buy music from google it was some convoluted process to download it I just gave up
 
Amazon's devices are no more than portable cash registers - a way for you to purchase content. Amazon knows how to sell stuff. So they will win. The factor that plays against them is how they forked Android (probably prematurely and too deeply) - Kindle UI sucks
 
Do you think this needs to be updated for Microsoft's expected entry? 
 
+Liam Hogan Amazon is also selling devices for next to no profit.  Also Amazon library has more books than Google Play.  
+Mike Elgan Amazon is going to try to beat Apple.  Comparing to the iPad 3's plan. Year 1 cost, $959 for iPad; $549 for Kindle Fire HD. Whether or not they can, that is another story (maybe not, but it will make a dent in Apple's profits).  
 
Interesting article. The way it looks Google can't lose in the long term.
 
The only certainty is that Nexus 7 + Fire 2 market share will obliterate the tiny lead Apple has on the tablet market. Probably before the end of the year. The tablet market is too small, and this price point is perfect for Joe Sixpack. End of a short era of iPad domination.
 
amazon is a lot stronger content-wise than google play. 
 
+Roberto Acevedo III Even given that, I think Google will have the better ecosystem moving forward.  Amazon may have more content at the moment, but that's only because Google's ecosystem is young.  It will grow in time, and likely overtake Amazon when it comes to digital media.
 
+Stefan Ernst Except you have the exact same content on the Nexus 7 if you install Amazon's apps. It's a wash. With the Nexus 7 you get all the content the Fire2 has, plus the full Google Playstore, on a much better tablet. 
 
+Mike Elgan I read that article a while back, great analysis, one of the best I've ever read. Love the N7 and that $25 Play Store Credit means the price difference is only $6 for a better device than the Fire HD.
 
I love Amazon they have been good to me, but I'll rather install Kindle App to my Nexus 7 than buy Kindle device. 
 
+Stefan Ernst Not by that much anymore, the gap is narrowing, and everything from Amazon's ecosystem but Instant Video is available on a Google Android device.
 
The Kindle is too much linked to Amazon. If you have a Kindle your only possible source of content is Amazon. If you have another tablet you can use the content of anyone but Amazon.

Over here most ebooks are epub and Adobe DRM. The Kindle does not handle that very well.
 
I mean I own a nexus 7 and really like it. but the speakers are horrible and this kinda ruins the experience for me
 
+Patrick Schmitz Actually, you can get Amazon content on any android tablet.  You just have to manually install the amazon app store
 
+Stefan Ernst And that's why you'll have to buy the Nexus 7 2.0, or whatever the next model is called :p
 
+Stefan Ernst Really? You think so? I've been pleasantly surprised by them... but I use a Bluetooth headset anyways.
 
So far the iPad is the only serious tablet for content creation (music especially). I'm sure that will change, but haven't seen anything yet. If I were only reading or watching video, I'd consider a device like this, but to do stuff...not so much going on here. Always good to see new competition in any case. As some here have said, based on your needs there are now plenty of choices.
 
+Logan Kraus I can't wait for the Nexus 7 3G/4G. It will become my new phone. No question.
 
What if one of these players were to buy a media company - such as HBO - and make something similar to  HBO Go uniquely available on their devices (I know Amazon already had Prime streaming).

Does the answer change as to who starts winning the tablet race? 
 
+Roy Walter creating content on a tablet is still horrible though. Garage band on my iPad 3 is pure torture compared to using a traditional DAW. It's a nice gimmick, but meh. It's not the same as using a jog wheel and protools with a mackie interface. Fine for playing though, which is what the iPad is good for. It's a toy.
 
+Roy Walter I wouldn't consider ANY tablet to be "serious" when it comes to content creation.  Unless you consider writing, which is equal among all tablets.
 
Anyone limiting their content to a single device is limiting their audience. Especially HBO. They want to sell content, not little shiny breadboards. They may offer premier access, limited viewings, etc. as promotions, but not choose a single device.
 
+Sean Sanders The Nexus 7 is for sale pretty much everywhere. You can get it at walmart and there are commercials on TV. You must not leave the house much.
 
+Wayne Schulz That's an interesting thought, though it would be extremely difficult to compete with Netflix and Hulu in that arena
 
HBO is time Warner. No one is going to buy them
 
+Sean Sanders The N7 has been in a lot of Big Box retailers, actually, and retailers are more inclined to push it than the Kindle Fire. It's been selling like hotcakes. But yes, Amazon has the advantage of promoting it on their site... didn't stop the Kindle Fire's sales collapsing after the holidays. And Google has its search engine page to promote the N7... not bad online real estate... and a much more effective TV advertising strategy. So it's going to be some stiff competition.
 
Amazon should give the Kindle away for free. Then schools would get them for all the kids and distribute school books electronically. 
 
+Logan Kraus To be fair Asus and Samsung own the "writing" aspect of tablet ownership. Asus with their amazing transformer line with the keyboard dock + battery option, and Samsung with their Wacom Android Tablet. Also great for graphic creation with Photoshop Touch. I might have to get a Tab 10.1 just for that feature.
 
+Howard Tanner I've heard Amazon is considering a cheaper tablet that is subsidized using advertisements.  That's probably as close to "free" as they'll get.
 
+Sean Sanders It's a neat gimmick to be sure, but no serious musician is making entire songs on an iPad. It's a toy. You can't even get access to the filesystem directly. Importing things is a pain in the ass. I own the thing. I know. Serious music creation involves multiple DAW's and tools and methods. When I write a song it can start in protools or logic or cubase. It can end up wherever. I have 250G of samples. Can't use any of them on my iPad. It's good for showing people, but that's about it. 
 
Other than using the Kindle app to buy maybe half my ebooks i can not see any reason to leave the Apple system.
 
+Sean Sanders The initial lot of 5 million Nexus 7's sold out almost immediately. That's pretty significant.
 
+Mike Elgan Amazon doesn't make only tablets and there's a market Where they are undisputed leaders: ebook selling and reading. People Will keep using standard Kindle for reading books, because backlighted tablets are not suitable for that. So, Amazon has resources to fight a price battle. They can count on their solid e-commerce, their Aws, and so on...they re Champion in price battles, indeed. And they are Champion in selling, items and themselves, while Google isn't. So, I would not judge them losers before the war.
 
+Sean Sanders I know the same way I know the Fire sold well... because I see them in the wild, I see all the people in my Circles who've bought them, I see average folks talking about it, I see it selling out at retailers, selling for way above its MSRP in markets where availability is limited, etc...
 
I like the analysis, +Mike Elgan , but as the cost of manufacturing tablets continues to drop, wouldn't it be just as affordable for Amazon to make them as it is for Google's partners? I'm not sure why Amazon would have to take a loss while Google partners are making a profit.
 
+Sean Sanders The N7 is a fantastic piece of technology for a very low price.  I would be beyond shocked if it wasn't doing well.  The only reason I don't own one is because I bought a Transformer Prime a few months back
 
+Enrico Giammarco I love my standard kindle for reading. Nothing like epaper and months of battery. It's a whole lot of not having to care. Very easy on the eyes. They should stick to products that innovative and leave the copying to Apple. 
 
+Scott Wilson But there are many steps in songwriting and arranging that precede studio production. I used to lug a DAW around for far more than was needed. During recording, having AC-7 to remotely control Logic from the drums or a vocal booth is rather nice. In photography having tools for shot selection in the field is tremendously valuable. I shouldn't have used "serious" content creation, so forgive me, but it is a serious tool in the content creation value chain. 
 
+Roy Walter I think that's a good way to think of tablets.  They are very useful tools in the content creation process.  But tablets themselves are severely lacking in features if one were trying to exclusively use them to create content.
 
I love my Kindle Fire (gen 1 obviously). However, that's only because I use a Cyanogenmod-based ROM. I liked the hardware Amazon announced today, but unless I can do the same, I'm not buying.

I like being able to piece together the best (for me) software and hardware, that's the allure of the Android world for me. In fact, I won't buy an Android-powered device without first seeing what the modding/custom ROM scene is for that device. If there isn't one, or the ROMs are not fully functional, or it's too hard to replace, then I look elsewhere.
 
So at some point, Amazon and B&N are going to have to find hardware partners, if that can be done?
 
+Roy Walter Well, do whatever you like. I do very strange things with cabinets and mic placement when I do guitars. If you like using the iPad for stuff, that's great. Any tool is a good one if it works. I know a guy that uses a casio PT1. 
 
+Logan Kraus Of course. No one who does this stuff is looking for anything to "replace" anything. They are looking for ways to accomplish various things that are a challenge. Having the portability, instant-on and high resolution capabilities of a tablet at hand addresses many of these challenges for professionals who actually create content. To say it can do what a loaded DAW can is silly. 
 
Amazon will not fail in the tablet space. I don't expect them to ever be number one in this area but their offerings have a place and plenty of people will buy them
 
+Sean Sanders I too had problems finding N7 in stores, but not because nobody stocked them.  Instead what I found was signs indicating that "we are completely sold out, leave us your name and number."  It happened repeatedly at local stores like Best Buy, Staples, or anywhere else that kept a stock of tablets.  Even Google themselves were temporarily out when I first went to purchase one, and I ended up waiting about a week or two before they came available again.  

Also, as others have mentioned, I actually see them in the wild.  I speak to people and they have heard of it.  It has name recognition, which is something that other Android tablets tended to lack. Numbers or no, it's hard to ignore what I've seen face-to-face in the past month.
 
+Scott Wilson My point is I write songs on the subway. In the park. On camping trips. On airplanes. I have a digital interface to an iPad, a guitar, a good mic. I'm not producing an album yet, so the fun studio stuff will have to wait. I used to use a Morantz portable digital field recorder. This is a huge step up. It will change again within 5 years. It's great how these things progress so fast now. It also encourages amateur and cross-over artists to grow.
 
+Mike Elgan I do wonder just how low Google can drive the price of an Android tablet.  Isn't there going to be a floor at which partners like Asus beg for mercy?  I've easily been the most impressed with Asus's Android tablets out of any other manufacturer, but can they really keep up with the race to the bottom?  As you say, group 3 - tablet manufacturers - are in a dangerous, low-marging game.  How can they afford to keep up when Google is cutting their legs out from under them?
 
+Tony Patino Asus and Google offer different products though.  I have an Asus Transformer Prime tablet, and it's a lot more high end than the Nexus 7.  It has a price to match, but the added features are nice, and I'm sure people will continue to pay for them.
 
+Logan Kraus Prime owner here too, and I love it to pieces.  My point is more about whether the presence of tablets that are both high quality and low priced like the Nexus 7 leaves room for high quality and high priced models like the Transformer series, particularly when Asus's sales numbers for its Transformer line lag so far behind the likes of Samsung.

If the N7 sells well yet makes no profit, and the TF sells poorly and makes no profit, where does that leave them?
 
+Tony Patino Google owns Motorola, so they can go pretty much as low as they want to go.
 
+Tony Patino I think the market will adjust to compensate.  High end tablets will get better and aim for a different consumer than the N7, similarly to how laptops are sold.  At the moment it's easy to cry doomsday because the tablet market is young and the casual consumer doesn't know a lot about the differences in technology yet, but I think as tablets mature this will subside.  For example, the N7 is a great all-around tablet, but the more powerful, larger screened, Prime is much better for entertainment.
 
I know about that app +Logan Kraus but that still means you need Amazon specific software for Amazon content. I already have an ebook app that I like and use for all other content. I don't want to use that Kindle app.
 
3) Tablet owners will bring Amazon to it's knees by carrying the device in their back pocket.
 
+Tony Patino Here's another point... some OEM's had the same thought when PC's were racing to the bottom.  Sony actually dropped out of the race for a while... but they came back.  Get people on their first tablet, and hope they'll stick with you when they want a more expensive upgrade.
 
This was a strange article the first time around (in March). Google has since released the Nexus 7. So what category does it fall into? Every company with content or a mobile operating system will be able to provide a better experience if they control both. Every company is trying to get into the  first category. Google, Amazon, Microsoft are all selling hardware to further their goal of competing with Apple. With Android app infrastructure + physical and digital content (books, music, video streaming), Amazon is the only real competitor.
 
+Kerstin B I don't quite follow the logic that Amazon is a serious Apple competitor... you can get all of Amazon's content on an iPad.  You can't get Apple's or Google's or MS's stuff on a KF.  The Prime Membership does sweeten the pot a bit, but you don't need a KF to get that, either.
Greg R
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That article seems to be yet another Apple fan type thing, "Apple has insurmountable advantages", "Amazon will fail".  Amazon and google are going to fight....wrong. These cheap tablets will get more people to buy tablets, while amazon might not stay in the hardware portion forever all they have to do is get people mildly invested in their little "cloud" and then, when say, I go buy a nexus 7 I'm still going to buy content from Amazon.  Amazon and Google both stand to win regardless of what I buy after my first kindle. (or even if I never bought a kindle)
The Fires are a great move by Amazon, they did what Barnes and Noble couldn't do and now with Google on the bandwagon of cheap "real" tablets Apple may need to freshen some things up because while iFans may love how all of apple's stuff works together (and I'll even grant it is pretty seamless)....there is less and less reason for anyone just starting out to chose a proprietary method.  We own a Fire, a cheapy kindle, a MOTO and HTC phone, now I can get a Nexus 7 tablet and heck even an ipad and STILL buy all my content from Amazon if I so desire....and sorry if I have 600 bucks burning a hole in my pocket, 3 fires with $120 left over for content seems like a much better purchase than 1 iPad
 
don't agree, Amazon and Apple are in direct competition after today's announcement. Your march analysis might be true because Amazon only has a 7" cheap tablet, but not anymore.
 
+Greg R I'd actually guess that's Amazon's long-term goal... they'll probably drop out of the tablet race eventually.  They just want their ecosystem to remain relevant on mobile... they want people on other devices clamoring for Instant Video.
 
If any of these companies don't consider all the others serious competition, they're mistaken. They have all reinvented themselves enough to know that things do change. It's not just hardware, or content, or cloud services, or your credit card info. It's everything and then some we don't see yet.
 
It blows my mind that apple is making a small tablet but not making it pocketable. 7" is perfect for a front pocket. 8" is not, especially if they keep using the nonstandard 4:3 screen.
 
The nexus 7 isn't even for sale on Amazon UK! They are so scared of the kindle losing out! But I bet this kindle never comes to the uk either that is where google is reaping it in as there was a hole in the market in uk for a great tablet but under £200. Kobo is trying to get a piece of the action now too. 
 
+Arabella Parker Amazon seems reluctant to bring the Fire to a market where they can't give you all their content... obviously, because otherwise they're just losing money.  Google doesn't give a shit... they can bring the ecosystem later... and their partners can just sell it as a gadget, so they don't give a shit either.
 
But it's not about Amazon selling its tablet as a stand alone device, it's selling amazon products on amazon tablets and all the other bells and whistles like sync-ing content in the devices across the web and so on. Which is where I think Amazon is a winner. Even with a basic kindle, it is not difficult to see why amazon is useful. Don't think Amazon will lose out to Google, ever.
 
the tablet wars -- if someone looses what happens to the cloud content? 
 
iOS has more than content and decent hardware, it has ALL the software I want to use. No other system has that.

If I would want to consume only, Amazon might be the right choice.
 
+Paul Kennedy It's not even really a war yet. Barely 5 percent of the world uses tablets, if that. Android has the greatest share of the world market thanks to the 2,000 sub 99 dollar android tablets in developing countries, but the US is the real market and even here tablet penetration hasn't reached 15 percent yet. It's more like the "mild tablet phenomenon" until at least a third of us own one. It's looking like Google and Amazon are going to snap up all those people that have been waiting, or they'd already own iPads. 
 
Amazon still hasn't put a GPS into the 7" Fire HD or access to the Google Play store or Google Apps (such as Google Maps, Voice, etc.). Until they do this remains a buyer beware. (I have an original Fire - bought it knowing the limitations, then bought a Nexus 7 when they came out to escape said limitations). The Nexus 7 still beats the Fire HD because of this.
 
+Jerry Ham Any new tablet device that doesn't have Jelly Bean automatically loses to the Nexus 7. Any device. It's the difference between a bad tablet and the best tablet experience money can buy.
 
+Eli Fennell Maybe you're right. If Amazon makes money on content and its content is available everywhere, they don't care what device you consume it on. Amazon does have some exclusive for Kindle owners like the Lending Library. They may introduce similar exclusives to entice more to buy a KF. So their plan must be to get more tablets into more consumers hands to increase content purchases. We'll see if the iPad mini enters the fray in a few weeks.
 
People, remember that Amazon Kindle devices are only worth it in the
USA. The rest of the world is going for ipads or real Android tablets.
 
I don't think Amazon is heading the same way Google and Apple do. I think there's something else in the horizon, between them and a major retailer who promotes books and music... more on this soon :)
 
While I don't see myself buying an Amazon tablet, I think they likely will be successful with them.
Greg R
 
+Stefan R. Manzow slow clap good for you finding the perfect product for you... The rest of us are still looking.
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+Mike Elgan
I agree with you in pretty much everything in this article after reading it all. Good information
 
Pretty interesting read, personally I don't know why you would buy a fire when you could get the Nexus 7. Nexus = updates from the big G till the end of time, plus a bunch of other features like not being locked into Amazons ecosystem.
 
What has kindle /amazon got that's so unique? Content!
But you can access this content, and very importantly so, from almost any device. This makes the kindle, in my eyes not very hot.
If amazon would want to make the kindle unique they would have to limit the content access over their own devices. This would be a terrible mistake.
 
What has kindle /amazon got that's so unique? Content!
But you can access this content, and very importantly so, from almost any device. This makes the kindle, in my eyes not very hot.
If amazon would want to make the kindle unique they would have to limit the content access over their own devices. This would be a terrible mistake.
 
I would like to point out the fact that the article cited here is from MARCH. In the tech world articles from almost 6 months ago have less impact on than more recent market assessments.
 
I think you make a number of valid points in your article, Mike. For me, none of that matters, though. While I like electronics, I don't have an unlimited budget for gadgets. Therefore, I don't have a need for e-readers - as a class of hardware. I have a Galaxy Note phone, which I can comfortably read on (at 60+) when I wish. When I want to do more, yet not sit in front of my computer, I use my (original) iPad. When that dies, I will replace it with either a new iPad or a different tablet, quite possibly from Samsung. To me e-readers are a single-use device.
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