Amazon is going head to head with Apple: Ovum

BANGALORE, INDIA: Amazon unveiled a new range of Kindle devices including its much anticipated move into the tablet market with the announcement of the Kindle Fire.

"Amazon is going head to head with Apple and the iPad with a consumer-centric media consumption device and is hoping to attract consumers with a device that has direct access to its huge content library of books, music, films and TV shows," said Adam Leach, Practice Leader at Ovum.

The company has priced the Kindle Fire at $199. The pricing is critical to gain traction in the tablet market where the iPad has effectively become the defacto standard.

Leach added that rival manufacturers have failed to attract consumers as they have matched the iPad’s price point without matching its content offering, whereas the Kindle Fire has access to Amazon’s content store and is half the price of the cheapest iPad model.

Amazon's retail-based business model allows the company to subsidize the device on the premise that consumers will buy more from Amazon, be that physical goods or its digital content. This model is the direct inverse of Apple’s model; Amazon is selling a device in order to sell more content where as Apple sells content in order to sell more devices says Leach.

"However, the device is still an integral part of Amazon's proposition; it still needs to be attractive in its own right to consumers. Amazon has opted for a 7" display, the same size as the Blackberry Playbook," said Leach.

This screen size has undoubtedly helped them achieve a lower price point for the device but so far this form factor has not been popular with consumers, we shall see if this is related to other aspects of those devices other than its screen size, added Leach.

Amazon Android App Store

"The Amazon Fire is based on Google's Android operating system; however, it appears that Amazon is positioning its own services above those of Google’s by using the Amazon Android app store and its own mobile browser based on its own dynamic split browsing technology, essentially creating its own variant of Android."

This will have significant implications for developers wishing to deploy Android applications to the device if the two platforms do not remain compatible. It will also force consumers to choose if Amazon’s set of services are more valuable to them than Google’s when buying a tablet, said Leach.    

From a standing start in 2010, Ovum expects shipments of tablets and other mobile Internet devices based on "lite" operating systems (OSs) to reach 41m by year-end 2011, rising to 219m units in calendar year 2016. This equates to a compound annual growth rate (CAGR) of 45 per cent across the period 2010—16.

Ovum does not see shipments of tablets and other mobile Internet devices significantly eroding the growing demand for smartphones, especially those that are fundamentally similar in their hardware and software technology. The utility of smartphones is simply greater than that of tablets and similar devices for a majority of users, added Leach.