A $299 Amazon Kindle Fire- What It Could Be

Last week the industry was engrossed in the Amazon Kindle Fire launch. There was lots of excitement, speculation and  many questions on it. The $199 price point was one of the biggest points of excitement, particularly in that it was less than half the price of the Apple iPad 2. What could a $299 Fire look like? What features and use cases could it support over the $199 version? Design Strategy Every company needs a focused strategy, particularly in the risky tablet market,  and Amazon surely has one.  Amazon must balance inexpensive tablet “must haves” with ways to monetize their store.  That’s why consumers can buy an inexpensive tablet and Amazon doesn’t need to make 40% gross margins.  Their bet is that Fire consumers will buy their books, movies, TV shows, music, magazines, and maybe even durables.  So everything needs to lead to an Amazon purchase or be a required element. Operating System Amazon will stick with Android 2.X as their base as it’s the only OS that Google has opened up.  Google has yet to open up Honeycomb, even as Ice Cream Sandwich (ICS) is around the corner.  If Google opens up ICS, they would want to move there for many reasons.  First, they get access to larger screens, 10″ all the way to the TV.  Secondly, they would need to ask less of the developers to modify their apps to work decent on a 10″ display. Display The display would most likely be a 10.1″, 1,280×800, IPS display.  This is where the current cost break-point is right now.  The other possibility is 1,024×600 display, given these are shipped en-masse on netbooks and mini-notebooks.  Amazon could claim “HD” with both, but with x800 it would be “more HD accurate” given it could support real 1,280×720 (720P) movies.  Also at x800 they can claim that the resolution is better than the iPad 2 at 1,024×768.  That is, until the rumored iPad 3 comes out with Retina Display. Web Sites versus Apps One challenge Amazon will have with a 10.1” display and Android 2.X is the app’s appearance. It’s a stretch for Android 2.X apps to even look good on a 7” display. Many of them are blocky, because they were designed for a maximum of 5” displays. At a minimum, Amazon would need to write custom apps for mail, calendar, and address books. I can see Amazon encouraging users to use web sites via Silk versus apps as well and they would need to beef up Silk’s browser to do this. Today’s tablet browsers have limitations, limitations Amazon’s Silk could remove. One simple issue is tablet browser’s ability to access the file system. The iPad’s browser, for example, is unable to upload photos to Picasa. This is why you need an app for that. Silk could conceivably remove the barrier. Processor, Storage and RAM While it doesn’t necessarily need more of this for a better experience, the competitive optics demand a bump, particularly on storage. There’s no reason to move beyond the OMAP 4, particularly if the $199 Fire has the TI 4430, which can easily do 1080P HD video.  RAM could very well stay at 512MB, but for the optics, would most likely move to 1GB.  Storage would definitely bump beyond 8GB to at least 16GB.  Apple has made storage the break point for iPad, and Amazon knows they cannot be at a disadvantage, even with Amazon Cloud Storage as the backup. Living Room Entertainment with Remote Control Here’s where it gets interesting.  The $199 Fire is designed for individual video content.  The step-up $299 could be positioned as the living room alternative to the “over the top” set top box.  By providing a simple HDMI 1.4 port out and a remote control, consumers could watch all the 1080P TV and movies from Amazon Prime and Amazon VOD.  Consumers are always looking for a way to justify that extra $100 and this alone could be the reason.  To accomplish the same this on the iPad, the consumer needs to buy the expensive HDMI connector and have an iPhone, load the “Remote App”, and setup AirPlay.   The other Apple alternative is to buy an Apple TV, and extra $99.  Amazon could have a cost and simplicity message over Apple in the living room. Optional Living Room Dock Taking the living room video usage to the next level, Amazon could offer an optional $29.99 dock which makes living room video even easier.  Place the $299 Fire into the dock and it gets power, HDMI out to the HDTV, speaker out, and Ethernet.  This would be an easy way to connect the Fire to the TV.  It also provides another justification to buy this over an “expensive” $499 tablet that doesn’t provide this option. Camera and Mic Enable “Entertainment Assistant” App If the $299 Fire has a front facing camera and microphone, Amazon could “listen” or “watch” the content you are consuming in your living room. This would be user-driven as not to be “creepy”. Think of it as Pandora for all types of content, including TV shows and movies. The user could point the Fire to the TV, press a button and a few seconds, an in-context search result would result. In addition to the news and social media results, it would also show relevant results from the Amazon store. All it would take is for Amazon to index what they already have. They have access to 18M pieces of content; TV shows, movies, songs, books, and magazines. With Silk, they will also know every web site you access, where you shop, what you buy and how long you stay there. Even without any access to the rich Amazon data, simple Evernote was able to extract “Dallas” from this photo. Google Goggles is able to extract “Fox Sports” too. Now imagine this capability with Amazon’s access to basically all content and wherever you have ever browsed. Camera to Improve Shopping At $299, consumers will expect a camera, maybe even two.  What’s its primary role?  Shopping, of course.  What?  Yes.  Like I said before, everything needs to lead to the Amazon store.  The camera could serve as an augmented reality try-before-you-buy feature.  Amazon is great at selling physical books, DVDs, electronics, and toys, but what about items that are better sold in a retail store?
  • Clothing: In conjunction with the TV and remote, see what different clothes look like on you and get the perfect fit, too.  The camera is taking videos of you and overlays the clothes on you.  What to change the color or size?  Just use the remote.
  • Jewelry: Watches are interesting.  Will the face be too big on the wrist?  Is it too masculine or feminine?  Use the Fire to see what it looks on you before you buy it.
  • Shoes: Afraid of getting the wrong size or that on you it looks ugly? Print the Amazon Sizing Grid.  Take the picture with the Fire of your feet on the grid.  See how it looks on you; get the right size shoe, including the correct width.  Now that it has this much info, why not now introduce custom show sizes?
  • Home: How will those towels look in your bathroom?  That patio furniture on your patio? That lamp on your end table?
  • You get the idea; use the camera with augmented reality to make the shopping experience more fun and with less risk.
Camera for Universal Videoconferencing What if your parents use Skype and you use Apple Facetime? One of you needs to change programs or you don’t get to communicate with each other. Amazon, with its data center prowess, could become the “universal adapter” for video services, and make money doing it. Skype, FaceTime, Google Video, Yahoo Messenger, it doesn’t matter. If you use Amazon’s service, you can connect to all of them. A stretch? Maybe, but remember, via Silk they know every site you go to and have a login as well. What’s to stop from the “embracing and extending” if they can further lock in customers? A Note on Living Room Gaming Amazon could relatively easily use the dock above, the included remote to enter living room gaming.  But they have a big issue.  Android 2.X looks horrible on the big screen.  Even Angry Birds.  I have tried racing games, too.  So Amazon would need to further break, or fork, from stock Android to make this happen.  Developers would need to do this, too.  When or if Google opens up Ice Cream Sandwich could be the time this happens.  I cannot imagine Amazon going after living room gaming without ICS, although tempting. Conclusion I have no inside information whatsoever on any future Amazon Kindle Fire.  BUT, it only makes sense for Amazon to introduce a higher-priced, higher-feature tablet to intercept the 10″ competitors.  Also, given Amazon’s business model, these features must drive Amazon.com store revenue, too.  This $299 Fire as I have laid out does all of these things.
Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.