As Apple Steals the Show, 4 Things to Remember About Amazon’s Kindle

9/12/12Follow @curtwoodward

The technology industry is in full rapture mode today as it awaits Apple’s latest product unveiling. And if you think too much is made of the company’s announcements, just recall how furiously all of the other technology giants worked to get their news out ahead of the big bomb from Cupertino.

For the Seattle area, this flurry of new product and service roll-outs has special significance—it has highlighted the fact that Microsoft and Amazon, the region’s two leading tech companies, are now the biggest challengers in smartphones and tablets (respectively) to the current Apple-Google duopoly in mobile computing.

I think Amazon’s vision was a more compelling, current one for the new era of digital service ecosystems, versus Microsoft and Nokia’s very gadget-centric pitch. (Also, you have to note that the all-out marketing push that will probably make or break Microsoft and Nokia’s partnership was marred at its launch by the amazingly dumb use of a faked demo video.)

Part of what makes Amazon such an odd and compelling story these days is the scope of its ambition. The company started out as just an online retailer, although that was a crazy enough idea at the time. But it’s now got fingers in an unbelievable number of pies, from critical Internet infrastructure to mobile devices to digital media and even entertainment production.

That also means you can’t possibly get your arms around all of the angles from the company’s news announcements in one go-round. So I’ve rounded up four of the freshest or most important pieces of journalism and commentary that I’ve seen since the Amazon press conference last week. As Apple gets ready to steal the stage for the next several days, keep these bookmarked when it’s time to consider if Amazon is a worthy competitor—or whether it’s even playing the same game.

—Digital Sales Become Physical Sales: Jeff Bezos dedicated a part of his really long on-stage announcement to this idea, but it’s definitely worth repeating, and Tricia Duryee from AllThingsD has a great, to-the-point recap. Basically, Amazon is working with video game companies to sell players toys and other little trinkets that will get shipped to their homes when they buy certain digital upgrades within a game app.

This could be a lot bigger deal than it seems. In-app purchases are the primary way that mobile games make money, with a huge chunk of them relying on free downloads to corral a large audience that can be enticed to buy things later. Those purchases are usually enhancements like a different-looking character or special powers to help the game go faster.

By linking actual trinkets to those purchases, Amazon is bringing together its two worlds of selling digital and physical goods. And it could give game developers or other app makers an entirely new way to make money—what if you could be inside a content app and get the latest edition print of a photo you just saw delivered to your door with one click? Watch this closely.

—Amazon’s Digital Modem Could Work for Phones: Brier Dudley of The Seattle Times points this one out, and it’s a great observation. There were a lot of rumors leading up to the Amazon press conference that the company would introduce a smartphone. That turned out not to be the case, but Amazon did roll out a new Kindle Fire tablet that comes with wireless data coverage from AT&T.

Dudley dug into the specifications of the modem that’s powering that service, and highlights the fact that it’s small enough to fit inside a smartphone and works with bands of the 4G LTE cell-phone network that are used by other providers outside of AT&T.

“Would Amazon invest in a modem like that and then use it in a single device with a single carrier? I don’t think so, either,” he writes. Bezos was typically non-revealing when asked about smartphone plans later, and I know many people in the industry think it’s just a matter of time until Amazon goes down that path. So consider this another strong clue.

—New Kindle Fires are Still Just OK: Throwing aside all of the subjectivity of reviews in general, and the cult of the celebrity tech reviewer in particular, I really thought this column by The New York Times’ David Pogue was on the mark. Not because I agree with his assessment of the new Kindle Fire—like most mortals, I haven’t seen it—but because he took plenty of shine off the new tablet while still getting the point of how it’ll probably do in the market.

In this era of tightly stage-managed corporate roll-outs, complete with meaningless statistics like assertions that the Kindle Fire is the “best” tablet, it’s really refreshing to read a thorough review that digs into the product’s shortcomings. Pogue does a good job of running those shortcomings down, from the really specific features that only tech geeks would miss to the more workaday head-scratchers like hard-to-use buttons and missing charging cables.

Here’s the other thread woven into that review: It’s a good-enough product, provided Amazon gets some software kinks worked out. And that’s the important one, because Amazon’s target for this product line isn’t the high-end consumer who buys the latest iPad on release day. It’s the much broader, more price-conscious, vast middle of the American consumer market, who will take “just fine” at a great price from a brand they know.

Or, as Pogue puts it, “the Kindle Fire HD models are attractive, confident viewers of movies, TV shows, Web pages and books. They tap into Amazon’s increasingly appealing online world of entertainment and information stores. And above all, they make the Kindle Fire’s industry-leading features-per-dollar ratio even more top-heavy.” That’s Amazon’s bet. We’ll have to wait to see if it’s the right one.

—Amazon’s Tablets are a Different Beast: Industry analyst Horace Dediu of Asymco has a short post that digs into the key takeaway from Bezos’ presentation: That Amazon wants to make money when its customers use tablets, not when they buy them.

That’s the flip side of Apple’s model, which gets its profits on high prices for premium products. And it draws our attention back to the fundamental difference between the companies—Apple and Amazon aren’t competing tablet-makers so much as they are wildly different companies who both sell tablets.

Amazon’s money, when it actually takes a profit, is made on a lifetime of consumer purchases, not a bunch of constantly refreshing product releases. You have to assume that’s the main reason Amazon keeps adding so many free side benefits to the Prime loyalty program without raising the price—it just wants you to buy everything from Amazon, forever, unless you have no other option.

It’s also why, as Bezos said, Amazon is trying to compete on price in tablets. It’s not going to knock the iPad off its throne, and isn’t really trying. Amazon’s tablet strategy is to be the best Android-based tablet before Google/Motorola or Samsung or anyone else can grab too much of that territory. As we said from the beginning, Amazon’s tablet isn’t a computer—it’s a store.

“Using this frame of mind, assessing its ‘threat to another business which charges for the product itself is like assessing whether free t-shirts from trade shows affect the sales of clothing or apparel in general,” Dediu writes. “They do, but mostly the sale of cheap t-shirts. I doubt that people stop buying more functional clothing because they have hundreds of free t-shirts.”

And now, after some of those serious thoughts, here’s a hilarious video that someone cut together of all of the dramatic pauses Bezos made during his presentation last week. It’s almost eight minutes. Of just pauses.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • ex-con

    Give it a rest, Curt. The Kindle is overpriced junk that no one wants. iPhone, Samsung Galaxy, iPad, Nook, all beat the Kindle.