For close to a year, rumors have been quietly circulating about the possibility that Amazon might expand upon its hardware offerings by introducing an Android tablet; on July 14th, these rumors grew much louder, when a Wall Street Journal article claimed that the Amazon tablet will definitely be released in October. According to the WSJ, the tablet would have a 9-inch screen, no camera, and would be entirely designed and manufactured by Amazon-contracted third-parties. Early next year, Amazon is expected to release an additional tablet, designed entirely in-house by Amazon. Questions, of course, abound: Is this a smart move for Amazon? What do they hope to gain from releasing their own tablet? Can they honestly expect to best Apple in the tablet market?
Amazon likely has multiple reasons for deciding to push into the tablet market. With the recent news that sales of the Kindle have been eclipsed by Barnes & Noble’s Nook (an e-reader with a color screen, and a decidedly more “tablet-y” feel than the monochrome Kindle), it may seems as though Amazon’s Android tablet is simply a way for them to one-up the Nook, by offering a color e-reader with a full-fledged tablet operating system. But the WSJ article also noted that Amazon will be releasing two new versions of the Kindle this fall (with one of them featuring a touchscreen), so it’s clear that they’re not eschewing the Kindle’s e-ink technology in favor of LCD color displays. Rather, the Amazon tablet will complement the Kindle, offering an array of multi-media experiences not possible on their dedicated e-reader.
It would appear, then, that Amazon believes the tablet will serve an entirely different market function from that of the Kindle. Since it already has an established Android App Store (with an aggressive, and popular, “free paid app-of-the-day” feature), it makes sense that they would employ Android as the OS on their tablet offering. Amazon has been similarly aggressive in taking on iTunes’ music-download business, by offering loss-leading promotions on new releases, such as their server-busting 99-cent Lady Gaga promotion in May. Their digital content efforts haven’t stopped there, however; they just announced a deal with CBS (a notable Hulu holdout), to add the broadcaster’s offerings to Amazon’s Video-on-Demand service (which means that Amazon Prime members now have access to over 8,000 streaming programs, and positions Amazon as the only sizable competitor to Netflix’s subscription-based streaming service).
Add it all up, and Amazon’s now got some serious digital content offerings; what they lack, however, is a unified means of access for end-users to access this content. Sure, most of the content can be accessed via a desktop computer or mobile device, but neither of these are optimal platforms for watching television programs and movies, although they do work well for music (thanks to Amazon’s Cloud Player, it’s easy for users to access their entire music library from ANY device). The Amazon tablet, then, represents the company’s strategy for creating a single, integrated device through which all these services can be accessed, and in a form factor that works reasonably well for all their disparate offerings (e-books, TV and film programs, and music).
In many ways, this is the reverse of Apple’s strategy over the past ten years; the iTunes store was introduced almost two years after the iPod first hit retailers’ shelves, and has largely served as a mechanism to drive hardware sales. If Amazon really wants to make a splash in the tablet market, they’ll have to considerably undercut the iPad’s price, which will mean Amazon will see fairly low margins on their hardware sales, and must expect to make its profits on digital content, instead. With this in mind, I expect that Amazon will put considerable resources into creating a custom “skin” for their Android tablets, one which blurs the distinctions between local and cloud-based storage, and directs users to Amazon’s omnibus digital offerings.
With all this in mind, Amazon’s tablet is probably just the beginning of a larger push by the company to push its digital offerings into our homes. While the tablet form factor may be better than a smartphone for video entertainment, it’s still a compromised viewing solution for video (a family of four will not gather around the ol’ tablet to watch the latest episode of The Office), e-books (e-ink technology is still best for extended reading), and music (tablet speakers can’t compete with even a $40 boombox). I expect that the Android Tablet will serve as a means for users to have integrated access and local storage of their Amazon content, and be the primary mechanism through which they purchase additional Amazon content.
If Amazon wants to stay ahead of Apple and the rest of the consumer electronics industry, they’ll release low-cost peripherals that will allow wireless streaming of this content to users’ televisions, stereos, and related devices. This has been a sore point for several years now, as the technology is there to implement wireless HD streaming across home networks, though (for a number of reasons) content producers have been reluctant to permit such uses of their content. Recently, however, all of the major studios (except for Disney), and many device manufacturers, have agreed to the new cloud-based “Ultraviolet” digital content platform, though Apple has refused to join the consortium and adopt the new format. If Apple continues to take its go-it-alone approach, and Amazon is able to deliver both the content and the hardware needed to capitalize upon this new platform, Amazon, not Apple, could be the company to deliver the living room of the future. That being said, the Amazon Tablet has the potential to become a powerful gateway to the Amazon retail environment, but it will only succeed at this if it can also provide users with an equally strong system for distributing content to their preferred viewing devices.