On Wednesday Amazon announced its entry into the tablet market, the Kindle Fire, a 7-inch full-colour touchscreen device that's about as far removed from the original Kindle as you can imagine.

Amazon's slogan sums up what customers can expect from their new toy: “All the content. Ultra-fast web browsing.” We’ll see how fast their new cloud-boosted 'Silk' browser turns out to be, but the content part is Amazon's USP. If you buy a Kindle Fire, you’ll have no trouble finding and buying books, movies, and apps. The Fire runs a custom build of Android, but it's not being marketed as an Android device, it’s all about the content. 
 

And that’s the difference that Motorola, Samsung, RIM and the other Android tablet makers have missed — they've been chasing the iPad on hardware features, trying to match the $500 starting price. But they have no clear answer to the question “Why should somebody buy this instead of an iPad?” With the Kindle Fire Amazon is the first one with a compelling answer: it’s much, much cheaper, and it offers an integrated digital content ecosystem that rivals Apple’s. What Amazon has built is an alternative to the iPad, not a direct competitor. 
 

The iPad is consistent with Apple's core business strategy, which is selling high-quality devices for a healthy profit, and backing that up with a side business selling digital content for those devices. For many people the iPad is a credible laptop replacement. Amazon’s primary business is retail, and one of the things it sells is digital content. They back that up with a side business of low-cost devices that are optimized for on-the-fly purchasing of anything and everything Amazon sells; the Kindle Fire is a laptop replacement for almost no-one. It’s a peripheral, not a second computer. There's no 3G option, no camera, no microphone, just 8GB of internal storage and the 7-inch screen is too cramped for even semi-serious work.
 

And it's priced accordingly: at an aggressive $199, the Fire costs less than half of Apple’s entry-level iPad. An appealing price point, but one that analysts estimate will cost Amazon about $50 per unit. But that doesn't matter if they make it back on content. 

With the launch of the Fire, Amazon has a good chance at splitting the tablet market in two and dominating the low end. People who want a $500 tablet will still look to the iPad. But if that price is too dear, $200 for the Fire is a compelling proposition. 
 

Sarah Rotman Epps of Forrester Research says “Amazon will sell millions of tablets, and the rapidfire adoption of the Kindle Fire will give app developers a reason — finally — to develop Android tablet apps. Apple’s place as market leader is secure, but Amazon will be a strong number two, and we expect no other serious tablet competitors until Windows 8 tablets launch.” 
 

That’s bad news for other tablet makers. With me-too hardware, weak ecosystems and mediocre content offerings, what will companies like RIM, Samsung and Motorola do now? This Christmas there will be two tablets on the market — one at the high end, the other low — and they won’t be able to compete with either of them.

Image with thanks to Dekuwa