Analyst Says That Amazon’s Tablet Will be the iPad’s Biggest Threat Yet

Discussion in 'Apple iPad News' started by Maura, Aug 29, 2011.

  1. Maura
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    Maura iPadForums News Team

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    Tech Fortune’s Apple 2.0 blog reports today that Forrester analyst Sarah Rotman Epps has said that Amazon’s forthcoming Android tablet will be a worthy competitor for the iPad in terms of “price, content, and commerce.†She predicts that the Amazon tablet, if launched at a suitable price, could sell between three to five million units in Q4, enough to disrupt the product strategy of not just Apple, but other tablet manufacturers. She also says that the fact that Amazon is able to sell its hardware at a loss, which it did with the Kindle, makes it a “nasty competitor.†According to Epps, the fact that most of Apple’s revenue still comes from hardware also gives Amazon an advantage, because it does n't have to make a profit from hardware sales. Finally, Epps makes the bold prediction that in a year’s time, “‘Amazon’ will be synonymous with ‘Android’ on tablets, a strong second to Apple’s iPad.â€

    Source: Forrester: Amazon's tablet will bury the iPad - Apple 2.0 - Fortune Tech
    http://blogs.forrester.com/sarah_ro...ill_be_tablet_product_strategists_new_frenemy
  2. thewitt
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    thewitt iPad Ninja

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    Amazon could certainly sell their tablet at a loss in order to try to gain market share, but seriously, is that a viable strategy with a tablet?

    With a Kindle you have a captive book purchasing consumer who will be forced to purchase books from you at a 90% profit margin so you can afford to sell the hardware at a loss as you will make it up on book sales.

    Unless they lock down the tablet and force everyone to buy apps through amazon, AND figure out a way to get several hundred thousand apps in their app store to compete with Apple, what's the draw that will guarantee you a profit in the hardware+software purchase combo?

    Even Amazon cannot afford to lose money on 5 million tablets and not have a plan to recover that...

    -t
  3. Sigil
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    Sigil iPF Noob

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    Perhaps Amazon can give developers free or substantially discounted "Cloud Space"? That would be a significant benefit to developers. For "Cable Cutters", Amazon's TV season pass is cheaper than iTunes and the pricing structure is much more affordable. If they can connect their Instant Video to their tablet, it would be successful. For the most part, all of their media is cheaper. They have the pieces they just have to put it together.

    If the price fixing lawsuit is successful, this could help their tablet efforts. Obviously, that is a BIG "IF"!
  4. thewitt
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    thewitt iPad Ninja

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    But you can't lose money on every tablet sold and make it up in volume...

    If they lose $100 on every device sold - enough to make price a viable attraction - and their App Store uses a 30% margin model like Apple's does, then in apps alone they would need to sell $300 worth to EVERY customer just to break even, not to mention make a profit...

    Seems like a tough way to enter the market.

    How do you fund development and upgrades?

    -t
  5. jsh1120
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    jsh1120 iPad Addict

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    You're assuming that "Amazon Tablet" owners won't buy books. In fact, the same model that works with the Kindle will apply to Amazon tablet sales.
  6. thewitt
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    thewitt iPad Ninja

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    No, that model does not work.

    With the kindle, the customer is captive and the device is worthless without constantly purchasing new content - that is books.

    If you stop buying new books your kindle is dead full of already read content.

    The same is not true of a tablet.

    - t
  7. info
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    info iPad Junkie

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    You make a strong point, but I doubt that at the prices being discussed this will be an ordinary Android tablet. Albeit subtley, it will almost undoubtedly be locked, in more ways than one, to Amazon's retail operation. Judging from what we have seen in the past, it's bound to contain *something* really special that is going to please a lot of us.
  8. GoPackGo
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    GoPackGo iPad Junkie

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    Hmm. We'll see. Lots of competitors say they're going to kill the iPad, and they haven't yet!

    My brother drug us into the Best Buy Mobile store in the mall tonight and, yep, still happy I picked the iPad!
  9. thewitt
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    thewitt iPad Ninja

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    If your success model is to lose money on the hardware and try to make it up on software and content - AND you are going up againt the most successful hardware and software model in the last 25 years, that's a very tall order.

    Apple has amassed a huge pile of cash because they make a great product, and make money on the hardware, software AND content...

    -t
  10. info
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    info iPad Junkie

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    Definitely. I don't think for a moment that it will hold a candle to the iPad, rather it will more likely enhance the experience of using Amazon.
  11. GoPackGo
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    GoPackGo iPad Junkie

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    It's personal preference. Android and iOS are different, and each have their pros and cons. The things my brother criticizes I don't mind or I actually prefer. And again, the more I see Honeycomb tablets, the more I don't like their interface. I'm happy with my purchase!

    While Amazon had the first well known ereader (it was the first one I had heard of), I think nooks are cooler.
  12. info
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    info iPad Junkie

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    Yes, it certainly is a tall order. But they have no alternative other than to compete with innovation and excellence. If not, Apple will not only eat them alive, but all the others as well. :)
  13. Kaykaykay
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    Kaykaykay iPad Wizard

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    Given my experience with Amazon, I'd be willing to shell out for an Amazon Android tablet. I can't say the same of any other Android hardware maker at this point. Amazon seems to get that it's not just about hardware, and I figure that if I have a problem, Amazon will take care of me.
  14. jsh1120
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    jsh1120 iPad Addict

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    Precisely. The "threat" noted in the Forrester commentary is typical of such hyping found in their (and others) market analysis. The notion that the Amazon Tablet (aka Kindle 4) will "kill" the iPad is simply silly.

    Nevertheless, Amazon has an opportunity to make a serious play in the tablet market by broadening the concept. Barnes and Noble has already taken a step in that direction with the Nook Color ("The Tablet for Readers".)

    Amazon is a very, very strong brand. Not as broad or deep as Apple but they'll ship 20-25 million Kindles in 2011 and that ain't hay. If they introduce a relatively low cost tablet ($250-$300. The Nook Color is $249.) with strong appeal to their customer base (who are already accustomed to paying premium prices for content) and additional functionality (web browsing, video, audio, email support, messaging, etc.) in a 7" form factor, they can make a killing.

    I seriously doubt that they'll be dumb enough either to replace the low price Kindle or step up to be a direct competitor to the iPad. What they will do, I suspect, is to try to bury the Nook Color and provide a high quality reading experience in a form factor more suited to what their customers already like plus some of the most popular features of the iPad.

    It will of course impact some of their Kindle sales, just as the iPad has sent iPod Touch sales into the toilet (down 20% since a year ago.) But those customers can be expected to buy books whether on a Kindle or the "Amazon Tablet." Furthermore, at a $300 price point, they'll eat into some of Apple's low end iPad sales.

    In short, the error is thinking that purchasers of the Amazon product will look for the same features/functionality as iPad buyers. Those aren't the customers Amazon is looking for. Rather, they're after a market segment analogous to the folks who purchase iPads rather than laptops because they don't need or want all the functionality of the latter. In this case, Amazon is looking for those who don't need all the functionality of an iPad but do want the best possible media consumption (especially printed media) experience.

    I wouldn't bet against them if that's their plan.
  15. jsh1120
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    jsh1120 iPad Addict

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    You and my wife...And millions of other happy Kindle owners and Amazon customers.
  16. Kaykaykay
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    Kaykaykay iPad Wizard

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    Amazon won me over with a great Kindle experience (including hardware, content, support in cases of problems with purchases, and good service). Before Kindle, I rarely bought anything from Amazon. It's since made plenty of money off me, beyond Kindle and content sales.
  17. thewitt
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    thewitt iPad Ninja

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    I must be the only person on the planet who hates my kindle. I gave it to my daughter after two hardware exchanges due to catastrophic failure, and ultimately too short a battery life to read all the way to Malaysia from the US East coast.

    Amazon customer service though polite was not ever helpful.

    My daughter has now shelved it for an iPad as well.

    -t
  18. jsh1120
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    jsh1120 iPad Addict

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    You make another interesting point there. Amazon has a much broader play here, broader in some ways than even Apple. The Amazon "brand" reaches across literally hundreds of product categories. To the extent that they can drive traffic to the Amazon website they can profit from purchases in those areas, as well.

    It may be odd to think of it but Kindle sales drive purchases of lawn equipment, audio equipment, etc. etc. etc. All of that factors into the subsidy Amazon can afford for a product like the Amazon Tablet.
  19. Kaykaykay
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    Kaykaykay iPad Wizard

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    Amazon has even made money off my owning iPads, because I buy accessories on Amazon, for instance.

    No one has Amazon's reach when it comes to competing with Apple. It has the resources, smarts and commitment to build a product category from nothing. Amazon also has a much more varied demographic when it comes to buyers.

    I wouldn't mind helping if it chooses to bet on a tablet, even if it fails. I think Amazon will make a good show, though.
  20. thewitt
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    thewitt iPad Ninja

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    This will not keep a product in production that loses money on every sale. It doesn't work that way in the real world.

    If they cannot DIRECTLY trace revenue and profit to a tablet, they will drop the product.

    "Gray" sales will never keep alive.

    -t
    Last edited by a moderator: Aug 30, 2011

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