Re: Bloomberg Article:
Overall this is a pretty good article, but I thought I might make a couple of criticisms.
- …Sebastian said. “The iPad’s more powerful, and when you restrict it to Amazon’s Android app market, you’re missing a lot.”
The reference here is confusing. I think you should have it read something like “…restrict it [The Fire] to Amazon’s…”
Otherwise it says that the iPad is restricted to…
- …The number of people who really want the front-facing camera are going to be small relative to the people who want to pay $199 for this thing.”
Of course this is also a quote, but you should note that the Fire has NO camera at all, not missing only a front facing one, which is what the isolated statement implies. BTW, I believe that FaceTime – and other video chat systems such as Skype – actually is a very big selling point for the iPad.
- That compares with a $350 cost of production for Apple’s tablet, giving the Cupertino, California-based company a profit of $149 per unit.
A financial magazine should be the last to confuse gross margin with profit!!! Apple’s profit on the base iPad is much much smaller. They do make significantly higher margins/profits on the upgraded models.
On my personal analysis…
- I think the 2 quotes really point out what will happen. The Kindle Fire will be regarded as a “poor man’s iPad” with its many limitations. The quote on which you end “You’re not going to beat Apple at its own game, but Amazon can create its own [game].” is the most relevant. Most of the customers will be ones who are either just looking for an e-reader, or really cannot afford the iPad, neither of which are Apple customers. I think in a perverse way, while it will of course take some customers from iPad, it may also bolster iPad amongst others. I think some people will jump into the Fire only to realize the reduced experience, and later go back to the iPad.
- I think that Amazon may run into some trouble here on price. It appears to be losing $50 on each device sold, and this does not include marketing, and other costs related to the device. With the original Kindles they could count on making up that amount in e-books. After all, this was the only thing it did (pretty much) and only from Amazon. With the Fire, however, this is more problematic. General tablet buyers are not necessarily big book buyers. Nor are Android users big on paying for apps. (Google loves this fact since they can then tap into the advertising revenue.) Amazon Prime is just another loss leader to garner overall customers. Somehow, the need to makeup $150 per device in order to make the thing worth while. I believe this will be difficult for them to do.