Tag: Amazon

Will the Kindle Fire Burn the iPad?

Amazon became a serious player in the tablet wars yesterday with the unveiling of the Kindle Fire, a $199 device that many expect to be the first to seriously take on Apple’s iPad, which still leads the sector.

The Kindle Fire features a touch screen, Wi-Fi capability and access to Amazon’s content library of e-books, movies, TV shows and music. It will become the anchor of Amazon’s hardware offerings, which are expanding to include a $149 Kindle with touch screen and 3G capabilities, a $99 Wi-Fi-only touch screen version and a $79 classic Kindle.

While introducing the Kindle Fire, Amazon CEO Jeff Bezos called the device an “unbelievable value” — it is $300 cheaper than the least expensive version of the iPad, which is $499. But will the Fire’s combination of price and performance be enough to succeed where others have failed?  Hewlett-Packard recently unloaded its remaining TouchPad tablets at fire sale prices after deciding to discontinue the device. Meanwhile, Research in Motion’s shipments of the BlackBerry PlayBook tablet during the most recent quarter was half of what Wall Street expected.

“The Kindle Fire will definitely be the most serious competitor thus far to the iPad,” says Wharton operations and information management professor Kartik Hosanagar. “Given Amazon’s experience with the Kindle, and its experience with content and overall execution, I fully expect the Fire to be a terrific device.”

Price is a “very important” part of that equation, according to Hosanagar. “Amazon did not just come out with a device that is $40 or $50 cheaper than the iPad…. At its current price, the Fire will put significant price pressure on the iPad. I expect Apple to revise its pricing for the iPad soon.”

Wharton operations and information management professor Eric Clemons takes a slightly different view. Clemons notes that the Fire is targeted toward entertainment, such as games or streaming movies. Rather than challenging Apple’s device, he predicts it will force the iPad to include things that “should have been … supported long ago,” such as word processing or spreadsheet programs. “This will just force the iPad to be more like a netbook sooner.”

Creating a lower-priced suite of Kindles represents a change in Amazon’s strategy, according to Clemons. “I did not buy a Kindle years ago because I thought either the Kindle should be free and the content priced like paperbacks or the Kindle should be priced like an entertainment device and the content should be priced at Amazon’s marginal cost (the author’s royalties plus some payment to the publisher).  I think this is a move toward pricing the Kindle at marginal cost and pricing the content like books.”

The stripped-down Kindle is not meant to take on the tablet sector, he says. “This creates a market for Kindles for people who just want to read content. But it will not compete directly with the iPad any more than a Schwinn competes with a Harley or a Honda.”

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Dos and Don’ts for Amazon’s Redesign

Online retailer Amazon.com announced on Friday that it is now in the testing phase of a major redesign that streamlines the site’s older — some might say “cluttered” — interface. According to an article in the Wall Street Journal, the new design is apparently geared more toward tablet users — with “fewer buttons, more white space and a bigger search box.” The Journal also notes that the new version emphasizes the sale of digital products over physical ones. So far, the test site has been distributed to a limited number of users, and the company has declined to say how soon the new design will go live.

The redesign has led to speculation that Amazon is gearing up for the launch of its own tablet. Indeed, the Journal story says, sources inside the company have indicated that the new device will arrive in the coming weeks.

Amazon is the world’s largest online retailer, earning $34 billion in revenue in 2010, according to the Journal. Even with that lead, it’s no surprise that the company is undertaking a redesign, notes Wharton marketing professor Eric Bradlow. “Amazon, like others, realizes the direction of the wind,” he says. “Mobility — and full access while mobile — is becoming expected. Hence, the ability of firms to tailor their content to web users will become critical going forward.”

Still, Amazon needs to be aware of some potential pitfalls, even as it works to remain relevant in the age of mobility. Wharton management professor Stephen Kobrin, publisher and executive director of Wharton Digital Press, says that although it’s hard to determine what kind of specific changes are in store for the redesign without seeing the test version, one potential pitfall would be if “navigation on a [regular] computer will be compromised to make it easier on their tablet.” According to research firm comScore, 282 million consumers visited Amazon in June — whether to shop, research products or read and write product reviews. One thing many of them have in common is a familiarity with Amazon’s current setup.

Bradlow agrees that there is a risk inherent in undertaking a redesign of such a popular site. “One of the greatest drivers of consumer loyalty/lock-in is the cost of learning a new interface from a new site,” he notes. “If a firm changes its own look or feel, there is the potential to erode the loyalty that was there to being with.”

Bradlow adds that for any site design to be successful, the user must come first. “Make search and commerce easy and quick, and don’t think about maximizing site time,” he says. “Think about maximizing consumer needs. Too many [companies] treat site time as engagement; it is not. People may just be confused, or the site may be hard to navigate.”

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For Apple’s iCloud, the Sky’s the Limit

Apple’s iCloud begins a new era of cloud wars, in which companies like Amazon and Google vie for what may be a one-time, land-rush opportunity to attract new customers and cement their loyalty. Once a consumer stores their music, photos and other files with a service, it can create a high level of “stickiness.”

More directly, Apple’s move offers a compelling new level of convenience for gadget users. For those using strictly Apple products, at least, there will be no more relentless synchronizing of gadgets – smartphones, tablets, laptops – to keep music, photos, files and applications up to date on each. Since everything will simply sync wirelessly to a central server warehouse, updating one device becomes an instant update of every other device upon connection.

“It’s about time,” says Wharton marketing professor Peter Fader. Imagine if when you went to pick up your car at the repair shop the mechanic handed you a wrench and asked if you wouldn’t mind cranking on those last few bolts yourself. It’s almost as if we’ve been “brainwashed” into doing the tedious upkeep in synchronizing our electronic devices ourselves. Or, as Apple’s Steve Jobs put it in making the iCloud announcement: “Keeping these devices in sync is driving us crazy.”

For Fader, “This signals a whole new ballgame for everyone with a vested interest in music, ranging from Apple’s direct competitors — most notably Google and Amazon — to up-and-comers such as Pandora and Spotify.”

Apple’s announcement Monday came a few weeks after Amazon announced its new Cloud Drive and Cloud Player, which allow customers to store music and other content remotely on Amazon’s servers. In early May, Google launched its own cloud music-management service called Music Beta. Like Amazon and Apple, Google wants to manage music libraries and deliver them through the cloud. Many observers expect Facebook to jump into the market, too.

There is one big difference with Apple’s service, however: Consumers can “match” their entire music collection via the Internet with Apple’s catalogue of more than 18 million songs. iTunes Match will scan every song in users’ libraries and match them with an Apple duplicate copy already stored on Apple’s servers (in the cloud). That eliminates the need to tediously upload a whole music collection, often song by song. Apple alone can do this because of existing agreements with four major record labels. Apple will charge users $24.99 per year for the service, and the record companies earn 70% of that fee.

Some analysts point out that by distributing those revenues to recording companies, Apple in effect will allow them to recoup some fees for songs that had been copied or shared illegally among users.

“It will be fascinating to see how all of these firms will start changing their strategies and tactics to compete in the cloud, but the clear winner is the consumer – who will have a far better music consumption experience than ever before,” Fader says.

The move by Apple comes at a time when increasing attention is being devoted to the cloud by corporations that also want to simplify the process of endlessly updating applications that reside on computers and other devices. One of the biggest challenges in that effort involves security.

For more information on the future of remote music storage and players, including insight into the Amazon and Google strategies, see this Knowledge@Wharton story: With Its New Music Storage and Player, Can Amazon Deliver in the Cloud?

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