A lot of the peripheral commentary on the debut of the new Kindle Fire lineup, especially the ultra-cheap Kindle Fire 7, is revolving around whether Amazon can make any money off it. After all, $49.99, right? But is that question simply a no-brainer?
The Motley Fool has just run an article, “Amazon’s New $50 Fire Tablet Is More Profitable Than You Might Think,” in which Jamal Carnette tries hard to find a serious compromise that Amazon made to hit that price point, and comes up with the Kindle Fire 7’s relatively low 8GB memory – expandable through the microSD card slot, of course. “Essentially, the Fire tablet can best be thought of as a content and consumption device, with Amazon exclusively providing these products and services,” he concludes unsurprisingly. “And that’s what makes Amazon’s tablet so profitable – not the actual sale itself, but the consumers it brings into Amazon’s ecosystem.”
This doesn’t exactly break new ground in parsing Amazon’s Kindle business model. What does make a difference is the situation that Chris ably summarizes in his roundup of cheap alternatives to the $50 Kindle Fire 7. He finds plenty. And those no-brand bargain-basement devices are available in such profusion and variety that someone somewhere (probably in China) is clearly able to make money out of them.
So … with one of the most admired brands in the world, with a distribution and fulfillment chain second to none, with a sponsored lockscreen promotional plan that adds $15 to the $49.99 price if you don’t sign up to it, never mind the whole Amazon content delivery cornucopia lined up behind it: how can Amazon not make money on the Kindle Fire 7? It may not even be a loss leader: after all, those no-brand Chinese tablets aren’t, and yet they come in at the same price point.
The question maybe we should be asking is not whether Amazon can make any money with the Kindle Fire 7, but whether anyone else will be able to make any money after it. Analysts have been reporting on the decline of the tablet market for years, as the format buckles under pressure from phablets and super smartphones. “Beyond the decline, we’re seeing a profound shift in the vendor landscape as the top two vendors, Apple and Samsung, lose share in the overall market,” said Jean Philippe Bouchard, IDC Research Director for Tablets, in IDC’s June Worldwide Quarterly Tablet Tracker. The same report speaks of “little hardware innovation and limited vendor portfolio updates.” With the Kindle Fire 7, Amazon might have done enough to break that deadlock, and leave everyone else in the dust.