Amazon goes after Apple with cheaper Kindle Fire

September 6, 2012

Amazon unveiled a series of new Kindle tablets Thursday as the retailing behemoth set its sights on Apple’s popular iPad as well as a broad array of computer makers, book publishers and entertainment firms.

The new devices were priced aggressively. The company’s first full-fledged tablet with a screen nearly the same size as the newest iPad will cost $200 less. Amazon acknowledged that it is not seeking to make a lot of money off the devices, saying it was more important to get consumers hooked on its vast library of music, e-books and movies.

Offering that marriage of a device and services is what Amazon chief executive Jeff Bezos said will distinguish winners and losers in the all-important mobile industry. He said that companies that only offer hardware, no matter how slick, have failed to take off because there’s no compelling reason to buy them.

“People don’t want gadgets, they want services,” he said at a very Apple-like event in Santa Monica, Calif. “We want to make money when people use our devices, not when they buy our devices.”

Indeed, companies that have tried to enter the tablet market by trying to mimic the iPad’s design while borrowing the software from Google or Microsoft have yet to make a dent in the market.

“Every time Amazon makes an announcement, they make it that much harder for the hardware-only guys to survive,” said Tom Mainelli, an International Data Corp. analyst. “Amazon has basically said, ‘We’ll sell you the device for close to what it costs, but we’ll make money across the long haul.’ ”

Amazon may be the only company that could threaten Apple’s dominance. Its breadth of entertainment options rivals Apple’s. And the rise of the Seattle firm has been on the radar screen of virtually every retailer in the country, as well as firms such as Netflix, Google, and Barnes & Noble.

Bezos’s remarks demonstrate a sea change in consumer electronics. Gone is the era of the 1990s, dominated by Microsoft, where companies that made software and others that focused on hardware could both be successful.

Microsoft made billions by licensing its Windows operating system and Office suite to others while staying away from manufacturing costs. Google used the same model years later with its Android operating system. Now both are trying to offer tablets as well as the software that powers those computers, while hardware-only firms are teetering.

Book publishers have also been in trouble. They tried to band together to stop the rise of Amazon, which had been heavily discounting e-books to capture more consumers. On Thursday, three publishers officially settled with the Justice Department after they were accused of price collusion. Two others as well as Apple vowed to fight the accusations in court.

Apple has long understood the appeal of offering a single package of hardware and content to consumers. Its integrated ecosystem has been a selling point for Macs, iPhones and iPads.

Amazon, it seems, has been paying attention.

Amazon’s announcement comes amid rumors that Apple will release a smaller version of its market-leading tablet just days ahead of the company’s expected launch of the next iPhone. The Cupertino, Calif.-based company has reigned nearly uncontested in tablets since the introduction of the iPad in 2010.

Amazon has been racing with Apple to work with studios to offer new and classic TV shows that can be watched online. Amazon this week struck a deal with Paramount, MGM and Lionsgate’s online streaming venture, EPIX, to expand the content available on its Amazon Instant Video.

Thursday, the online retailer said it would “take on the high end” of the market with three high-definition tablets each called Kindle Fire HD. The cheapest is a $199, 7-inch tablet. Amazon also introduced an 8.9-inch model for $299 that’s nearly the size of Apple’s iPad and an 8.9-inch model for $499 that can browse at the fastest cellular network speeds, known as 4G LTE. An iPad with 4G capability starts at $629.

Amazon also announced a revamped $159 version of its basic tablet, the Kindle Fire, and a $69 version of its Kindle e-reader with a built-in light for the screen.

Hayley Tsukayama covers consumer technology for The Washington Post.
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