Fire in the Cloud?

Well, Amazon finally announced its tablet.  The event itself might have offered some clues because Apple would have done this in the Superdome and Amazon had something that looked more like a high-school auditorium.

Bezos set the tone for the launch with a long praise-fest for the Kindle and the ebook and e-ink concept.  Then he jumped to talking about the Kindle Touch, which is an e-ink product that’s an advance from the current Kindle but much more like Barnes & Noble’s newest Nook model, a cross between a tablet and an e-reader but much more the latter than the former.  This new product has a $99 buck price point (for WiFi; $149 for 3G), which undercuts the new Nook.  The product senses touch via IR rather than capacitance and so I wonder how it will work for those who like (or need to use) a stylus.  With a pre-cached dictionary and Wikipedia capability, I think this device is aimed a lot at the student reader.  For the truly cheap of heart, there’s a $79 version that omits the touch-screen capability.  This, it’s safe to say, is the new mainstream Kindle product, the basic e-reader.

But it’s obvious that Bezos couldn’t stop there.  Ten thousand or more media and PC analysts would have stormed his castle and burned him alive, likely.  After blowing Android Kisses a while, then touting new media and app stores and Amazon Prime and even EC2, he finally got to the point.  The future is media and cloud service offerings!  It’s Kindle Fire.  It’s not a tablet, but a Media Cloud Appliance!

Let’s come back to earth for a moment for the specs.  Fire will have a dual-core processor and a seven-inch screen, making it a less-than-iPad right there, and the announcement is likely to be disappointing to many who had expected them to field an iPad-like product for about the same price as the HP TouchPad sold at in the after-the-market-exit fire sale.  Yes, that would have been wonderful, but as my readers know I’ve never believed for a minute that was Amazon’s intent, and clearly it was not.

Fire is based on a customized (by Amazon) older version of Android, the latest to be available as open-source, and like the Color Nook there’s an overlay GUI on it that harmonizes the look and feel with something a reader-focused buyer would want.  But it’s really a bit more than books, it’s CONTENT, but it’s also a bit less than a real tablet, or the iPad in particular.  A seven-inch form factor is one big difference.  The smaller screen is essential for a reader-focused tablet; people don’t want to really read books on something the size of a cocktail table book.  But it limits the entertainment value of the device and its value as a generalized Internet portal.

The price point for the Fire is within a dollar of the level ($199 versus $200) I blogged this week as the likely floor price for a subsidized tablet/reader.  My model says that you can make money overall at that price because of the ebook sales (and Prime membership sales) you’ll then get as a follow-on.  But at that price the subsidy of follow-on sales is critical, and so that shapes the nature of the Fire.  No matter what others (including Amazon) might say, it’s a “Nook-alike”; more of a B&N competitor than an Apple competitor.

But it does redefine that competition by adding in the video content dimension that Amazon has and B&N lacks.  That makes it a kind of reader-plus or tablet-minus.  You can see that Amazon isn’t trying to say Fire is an iPad, but they’re trying to say that the Fire is a better content device than a generalized tablet, and obviously a much better e-reader.

One innovative feature of their Silk browser is the split architecture; there’s EC2 back-end processing linked to a Fire front-end.  This may be the first example we’ve seen of a cloud service backing up a tablet experience at the GUI level, and it’s also certainly a model of how the cloud hosts what I’ve always said was a “service-layer” function.  Certainly it cements the relationship between the cloud as an IT model and the service layer.  Fire cements the role of Amazon’s EC2 in the web-front-end application model, even expands it a bit.  EC2 is used to enhance the viewing experience by pre-processing stuff that would normally be done on the client, but it seems likely that the role of enhancing the experience could easily be expanded to the functional level under the same model.  Along the way, this pre-processing might reduce communications load.

I think it’s clear that this isn’t a direct challenge to Apple, but it may just be a formidable indirect one.  Fire is a clear partnership between content, appliance, and cloud services.  That’s what I think Apple has been aiming for with iCloud and has not yet achieved.  Why?  Because clouds are fuzzy and hard to market.  Apple had the disadvantage of having a stable of appliances in place before they fielded their cloud approach, and so pretty much had to let the cloud stand on its own.  To make it less complex they’ve kind of dumbed it down.  Amazon can make Fire the face of the cloud, which is what I think they intend to do.  That is a serious challenge to B&N but it’s also a challenge to Apple because the Amazon store retail model is much broader and more successful than Apple’s stores.  Retail is more directly suitable to profit-building than ad subsidies too, so Fire may threaten the Hulu and Netflix models as well.

Fire will disappoint many, as I’ve said, but it may also have a longer-term, and greater, impact on the industry than it would have had it simply gone head-to-head with Apple.

Leave a Reply