Posted by Sarah Rotman Epps on September 6, 2012
At its event in Los Angeles today, Amazon announced five new Kindle models: an ultracheap E Ink Kindle; a new "paperwhite" Kindle with a touchscreen and LED light to compete with Barnes & Noble's Nook with Glowlight; an update of its 7-inch Kindle Fire with improved hardware and software; and two "HD" models, with 7-inch and 8.9-inch screen options. Amazon also announced that it would offer its own basic data plan (through AT&T) for its 4G Fire--a very disruptive move that puts pressure on OEMs and carriers to offer their own lower-price plans, and sets the stage for an expected Amazon smartphone launch next year.
With these products, Amazon is:
- Upgrading its devices to match its service. Last year, Bezos emphasized the service over the device, and that was key to Amazon's success--consumers buy tablets for what they can do with them, which helps explain why Amazon is the No. 2 tablet brand in the US. This year, with features like Dolby Digital Plus sound and what it calls a "Retina-class display," Amazon is bringing up the quality of the hardware to match the service, which is good for customer satisfaction and good for perception of Amazon's brand. Adding features like a front-facing camera, gyroscopes, and location APIs make Amazon's devices more appealing to developers, too.
- Creating synergy between Amazon services. Kindle users may be familiar with the "Xray" feature that pulls up an index of words and characters in an eBook. Now, Amazon extends "Xray" to videos, using its IMDB data, so that viewers can bring up character details from any frame of a movie. (We have a feeling Amazon is using Watchwith's time-based metadata to do this, but Amazon did not confirm that.) Amazon is also using "Whispernet" to sync not only books and videos now but also games, and more impressively, synching its Audible audiobooks with Kindle eBooks if users own both types of content.
- Selectively partnering with its competitors, and competing with its partners. Amazon's choices underscore the heated platform battle going on over consumers. In the Fire, Amazon defaults to Google search but offers a maps application from Nokia, not Google (Nokia owns NAVTEQ and considers it a key asset of its future location and commerce strategy). For productivity, Amazon now uses OfficeSuite instead of Quickoffice, since the latter company was recently acquired by Google. Amazon worked with Microsoft to launch the Fire with first tablet version of HD Skype--even though Microsoft will be coming out with its own Windows 8 tablets featuring Skype. The Fire is still built on a heavily customized version of Google's Android operating system, but Amazon's products compete directly with Google's Nexus tablets. Amazon's cafeteria plan for picking partners gives the company greater control over the customer experience and its overall product strategy.
This is an important launch for Amazon, as it continues to evolve its strategy of service syndication: pushing Kindle, Prime, Instant Video, Cloud Drive, and now its data plan to as many touchpoints as possible, making it more convenient and pleasurable for consumers to buy Amazon stuff. Amazon's services are the core of its devices, and the devices enhance Amazon's service: A virtuous cycle where Amazon gains an increasing share of consumers' wallets. Amazon reports that in 2011, consumers that bought a Kindle read 4x the books (print and digital) they did before they bought a Kindle; that's up from 2.8x in 2008. The device-service synergy is working.
And Amazon isn't finished. In a Forrester survey of 4,650 US consumers conducted online in August 2012, 31% reported that they had a credit card on file with Amazon, compared with 18% that have one stored with Apple, and 5% with Google. That payment connection enables Amazon to roll out more subscription services -- which we see as key to Amazon's future success -- and to offer new products like smartphones, which 23% of consumers we surveyed said they'd be interested in purchasing if it were available. What it means: In the post-PC era, services rule, and Amazon is getting quite good at offering services that consumers want. Like Google before it, Amazon is methodically disrupting adjacent industries. If your product strategy hasn't been in its line of fire yet, it may be just a matter of time.