Think tablets and the most prominent names that come to mind are the Motorola Xoom (Â 35,000), Blackberry Playbook (Â 27,000), Samsung Galaxy Tab (23,500) and obviously the gold standard iPad 2 (Â 28,095). Now have a look at the indicated prices for the base models of these devices all of which are in excess of $450 and you can quickly gauge the size of the tablet market in India and other third world countries.Â Its not huge even though there is tremendous potential for growth given the presence of an enormous population in the age group of 18-35. All that is needed is a low cost solution, that is attractive and effective and hereâ€™s where Amazon delivered today.
After much speculation and anticipation, Amazon finally unveiled the next avatar of theÂ Kindle. Christened the â€œKindle Fireâ€œ, a slightly ambiguous name for a device synonymous with books, it is now clear what â€˜Fireâ€™ actually means. It means the Fire in the belly of Amazon, the grit and determination that Amazon can truly take on the might of the Apple iPad and the Barnes and Nobles Nook to deliver something truly multi-functional. (Shares of B&N fell by more than 9% after the announcement of Kindle Fire)
As the comparison of the major tablets shown above indicates, the major stumbling block to tablet adoption in growing and developing economies has been the cost of these devices.Â Any company which can produce a tablet in line with the monthly per capita income of developing countries, and gives enough capabilities for a value added experience, including videos, music, browsing and reading can completely disrupt the market.
India for example is ranked 133 in the list of countries on aÂ per capita incometabulation with a monthly mean income of about $ 114. The cost of the Kindle Fire at $ 199 (Â 10,000) is only slightly more than the monthly mean income of an Indian consumer. This makes the device absolutely irresistible and opens up new possibilities on tablet adoption for third world countries.
So whatâ€™s the real game-plan and what is Amazon trying to achieve? If you think about it, it really is a no-brainer. Amazon can greatly subsidize the cost of the Kindle, even take a loss on the hardware, since it hopes to make a lot more on applications, subscriptions, e-book sales and a speculated book lending model, which will thrive on micro-payments. Itâ€™s very similar to the model used by HP, especially in their Printer Business, where they sell their printers at a low price but make money off the Cartridges, which are the real consumable objects.
All in all, Amazon today has all aces up its sleeve and can certainly weave magic with a combination of cloud computing, a cloud drive for music, documents, movie streaming etc. At a size of 7?, it really could be the first of its kind to succeed as a real iPad killer especially for developing markets (well maybe not, but what else can you benchmark it too).
*Views Expressed here are personal. The writer can be reached at http://twitter.com/#!/manishd