Kindle Fire Is A Service

[wizwor]

Originally Posted by Jeff Bezos

Kindle Fire is a service. What does it mean for a hardware device to be a service? It greets you by name. It has the lowest prices on content, it keeps your place for you, it keeps all of your content in the Amazon cloud, backed up, worry-free. Hardware is a critical part of the service, absolutely essential...We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach...We want to make money when our customers use our devices, not when they buy our devices...We don’t need you to be on the upgrade treadmill. We’re happy that people are still using Kindle 1’s that are five years old.

A lot of people are trying to decide if the Fire is an iPad killer or a Nexus killer. Many are speculating as to how long Amazon will impress as a platform. None of that matters. Amazon makes money when you buy a Nexus or an iPad or a Transformer -- as long as you buy it on Amazon.com.

People are wondering if Amazon video will be offered on other tablets and phones. It will. Amazon makes money when people subscribe to Prime because they buy more stuff.

The only ones who will keep Amazon services off a platform are the platform's owners. They won't. Not offering Amazon services will put their product at a disadvantage.

So, what about all those Amazon Kindles? They create purchase opportunities. I expect that my new Fire's front facing camera and inexpensive 4G will work together to let me know when the item I'm thinking about buying is less expensive through Amazon. That I'll get it in two days with free shipping if I am a Prime subscriber and that I can subscribe to Prime immediately by pressing a button. Oh, and that there are some really good movies on Prime. If you have an EV, you'll be glad to know that Amazon can ship that 80" Sanyo to your home for free! When Amazon opens a Retail Store in your area, the new TV may be waiting by the time you get home from Best Buy.

Originally Posted by Jeff Bezos

We will certainly — not any time soon — but next year. We have some more things that we hope people will enjoy. It’s premature

I think Amazon will put their services on a lot more devices. Would you pay $50 per year if your GPS could tell you where to get the item you are shopping for at the best price? Offer a coupon? Send it to your phone? Where to get the cheapest gas? What restaurants serve what you like? Pull up a menu? Read it to you? Make reservations for you? Order takeout? Stream audio books? Read text books? Tune in the football game you are a little late for?

How about a little Amazon TV? See something you like in a commercial and press the 'buy' button on your remote for prices and offers? Finish the audio book you almost finished on your commute? Watch the movie? Offer to resume a movie you were watching when you turn on a tv in another room?

I think this kind of 'service' is the next rung in the evolution of information systems and that Amazon is working hard to bring it to us. I can't wait!

[Lemurion]

Yep, every time Amazon sells a Kindle or Fire they're putting a storefront in someone's hands. That's where they make money: by using their devices as sales tools for additional purchases.

[tubemonkey]

Originally Posted by Lemurion

Yep, every time Amazon sells a Kindle or Fire they're putting a storefront in someone's hands. That's where they make money: by using their devices as sales tools for additional purchases.

Then they need a Pocket Fire - a 4" PMP with free 3G access to their website.

[cromag]

Sorry. I'm definitely a device person, not a service person. I don't like buying something and then being tied to an ongoing service. I'd like to buy the most suitable device and then buy content at the best sites for that content -- preferably with multiple sites competing for my business.

[Barbara1955]

Originally Posted by cromag

Sorry. I'm definitely a device person, not a service person. I don't like buying something and then being tied to an ongoing service. I'd like to buy the most suitable device and then buy content at the best sites for that content -- preferably with multiple sites competing for my business.

I Agree!

[Scarpad]

If thats the Case give me the device for free or relatively low cost. or charge me 3 bucks a month for it like a cable box.

[fjtorres]

Originally Posted by Scarpad

If thats the Case give me the device for free or relatively low cost. or charge me 3 bucks a month for it like a cable box.

That would be fitting if the device would be useless without the service, like cable boxes. Or if somebody else owns it and leases it to you.

But when the device has at least some value without the service the most the vendor can properly do is discount it. They have no way to actually *force* you to use the linked services after all. Think of the TiVo's: you buy the hardware, pay for the TiVo service to be able to use the box, and you pay again wth your eyeballs watching commercials. But if you don't actually watch TV they don't get the ad revenues. (Apparently, the ad revenue is where their profit comes from.) Microsoft ran into that problem with the original XBOX: they were looking to make money off the games but once hackers figured out how to turn them into media centers with XBMC a far amount of XBOXes were sold that never generated game revenue. Vendors don't like when people do that to their business plans.

There's a whole lot of different subsidized-hardware business models for different products depending on the exact situation. Razors and razor blades is one extreme--the razors are cheap enough to manufacture in volume that even if they go unused the cost of giving them away doesn't impact profitability but other products don't have that luxury. So the subsidy tends to be just enough to make the product entice but not enough the company goes out of business.

[Andrew H.]

Originally Posted by cromag

Sorry. I'm definitely a device person, not a service person. I don't like buying something and then being tied to an ongoing service. I'd like to buy the most suitable device and then buy content at the best sites for that content -- preferably with multiple sites competing for my business.

That is ideal from a consumer point of view. But it's not always an option, unfortunately.

I think the point Amazon is really making is that consumers want both a device *and* some way of easily getting content on the device. Selling the device and not worrying about the content means few people will buy the device because there's not much they can do with it.

The Kindle is a good example. The Sony reader was introduced more than a year before the Kindle came on the market (the Librie several years earlier, but only in Japan). However, the Kindle quickly overtook the Sony and within a couple of years had 90% of the US market. The reason for this is simple: with the Kindle you could buy books from Amazon, wirelessly. Sony didn't have a store at all at that time.

Device+Service 90; Device alone 10.

It's notable that when B&N came on the scene with their device+service, they didn't take long to get to 25% of the market; again, because they offered device+service.

The key, though, is that you have to actually be offering a *real* service. Something that people actually want. Something that adds actual value to a device.

And of course in some markets, you can just offer the device because the content for the device is readily available.

I think time will tell whether the Fire is in the first or second market.

[cromag]

In all honesty, I think the biggest reasons for the success of Amazon and B&N are size and name recognition. As with MP3s, Amazon let someone else develop a market and then entered.

But, I freely admit that I don't really follow the business side of ereaders.

[wizwor]

I disagree, Cromag. Amazon is for the lazy. Set Amazon.com as your home page and you can get tv, a movie, a song, a dress, or a tv. You can read reviews and get everything shipped to your door. You can subscribe to products you use a lot. Amazon is easy -- it's the ultimate convenience store. And you pay NO premium for the convenience. Along the way, they have put their logo on some pretty slick products.