Market Insight

Amazon releases new tablets and eReader

September 22, 2014  | Subscribers Only

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Online retail giant Amazon has released four new tablets and two eReaders. The new devices include:

  • An updated  version of the Fire HDX tablet, starting at $379
    • The tablet has an 8.9-inch screen with 2560x1600 display. It has 2.5GHz quad-core processor for improved graphic performance. The tablet features audio enhancements from Dolby Audio for a virtual surround sound listening experience through headphones. Available in 16GB, 32 GB, and 64GB.   
  • New Fire HD tablets, starting at $99 for 6-inch model
    • Available in 6 and 7-inch screen size. The models feature 8 GB or 16 GB of storage. The 6-inch starts at $99 and the 7-inch at $139. Both models have 1280x800 resolution, front and rear cameras, and a 1.5 GHz processor.
  • A Fire HD tablet for kids, starting at $149
    • The kids tablet comes in either 6 or 7 inches. It includes a year of Amazon FreeTime Unlimited with access to over 5,000 child safe books, movies, apps, and games.
    • The tablet also comes with a 2-year replacement warranty as well as a bumper case
  • A cheaper Kindle for $79
    • The entry level Kindle now has a touchscreen display and faster processor.  
  • The Kindle Voyage, starting at $199
    • The new premium eReader features a 300 pixels per inch (PPI) display and is offered in both WiFi and 3G. It features a new light adjustment feature that adapts the screen to the user’s lighting as well as PagePress which turns pages forward and back by pressing down on sensors on the bezel.

While not updating the Fire HDX 7-inch tablet, Amazon did lower the price from $229 to $199 for the 16GB model. All new models automatically include Kindle Unlimited, the subscription book service with the new tablets and eReaders free for 30 days. All products are currently available for preorder in the US. Actual ship dates vary by product from October 2nd to October 21st.

Amazon also released its new operating system, Fire OS 4.0 “Sangria.” The Fire OS, a customized version of Android 4.4 includes several updates:

  • Profile- individual family members can have their own profile
  • Family Library- links Amazon accounts, allowing family members to easily cross access content
  • Firefly- a feature first introduced on the Fire phone which lets users quickly identify printed web and email addresses, phone numbers, QR and bar codes, and movies, TV episodes, songs, and products
  • Free cloud storage for photos
  • Advanced Streaming and Prediction- originally on Fire TV, this feature s move and TV recommendations and preps  them for instant playback
  • WPS Office integration- allows users to create, edit, view, and print Word, Excel, and PowerPoint files
  • Smart Suspend- develops a device-specific profile for the tablet’s usage; will turn on and off Wi-Fi depending on times of usage

Our analysis

In a sharp contrast to general industry trends, Amazon is expanding into smaller tablets as its competitors move to larger screen product. The 6-inch move makes sense when considered with the introduction of a child friendly version of the Fire. Amazon had been slowly ramping up its focus on families with promotional offers like Amazon Mom (US) and Amazon Family (UK) and a smaller, lighter version could play well with that segment, where competitors such as Fuhu offer products as small as 5-inches.

The smaller size also allows Amazon to dip below $100 on the entry level pricing for its regular customers. This is a return to the value-focus of the first Kindle Fire which launched with a price of $159, well below that of the major competitors in late 2012.  In recent years competitors such as Walmart, with its assorted Android tablets, Tesco with its member coupon pricing on the Hudl, and Flipkart with its Digiflip Pro products have all undercut Amazon’s pricing on 7-inch products.  Amazon’s 2013 launch focus on technological leadership garnered positive product reviews but its higher average pricing limited demand for the products.

While playing to the value customer, Amazon has been careful not to neglect its premium tablet product, the 8.9-inch Fire HDX, adding new audio and processing enhancements. The 8.9-inch unit represents less than 20% of Amazon’s 2014 tablet business but is their flagship model, and plays a key role in demonstrating technological expertise. Nevertheless the challenge that Amazon faces with its value-driven shipments is attracting the ‘right kind of customer’, which is to say consumers who spend a lot with Amazon, rather than people looking for a cheap tablet but who are otherwise not Amazon customers.  In this context the child-friendly tablet is particularly interesting as it brings with it the potential for appreciable incremental parental spending, particularly in markets like the US and UK where there are already broader initiatives from the company aimed at parents.

In addition to price and hardware, Amazon is looking to differentiate its products with software built into Fire OS (key features are outlined above). However, this level of customized software can be a double edged sword and as the increased customization, control and potential benefits of tight software and hardware integration come at the price of increased development costs and reduced compatibility – Fire OS limits access to the Google Play store in favor of Amazon’s own app store, a barrier for many potential customers. In Amazon’s case, we believe that the company’s OS is not yet a significant driver of Kindle Fire sales (compared to: price, the promise of access to Amazon’s ebook and video libraries, and potentially the new child friendly form factor). But the OS continues to be a way of making sure that the Kindle Fire ties into Amazon’s broader corporate strategy both now and in the future and this cannot be guaranteed with the light touch customization that comes with a product like the Hudl.

North America USA
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