Amazon fights iPad with Fire
By STU WOO And JEFFREY A. TRACHTENBERG

Amazon.com Inc. jumped into the tablet computer fray, escalating its rivalry with Apple Inc. as each aims to provide both the devices and digital stores where people buy books, songs and movies.

Standing on stage in front of a large New York audience, Amazon Chief Executive Jeff Bezos Wednesday unveiled a music- and video-playing tablet dubbed the Kindle Fire. The color touch-screen gadget takes direct aim at Apple's market-dominating iPad—particularly with its price of $199, far below the iPad's starting price of $499.
 
Amazon debuted four new Kindles in New York on Wednesday with features including free wireless 3G, new e-ink, touch interface and streaming content. Stu Woo reports on digits.

The online retailer is gambling it can succeed with its tablet where several other giants, including Hewlett-Packard Co. and BlackBerry maker Research In Motion Ltd., have so far failed. Unlike those companies, Amazon already has a vast library of digital content to sell and tens of millions of credit-card numbers.

The move highlights how the battle lines are blurring in retail, media and technology. Apple, once known as a computer company, is now the world's biggest music retailer and a leading phone maker. Amazon has morphed from a discount retailer of physical books to a digital department store that streams movies and sells its own gadgets.
 
Amazon's new Kindle Fire, which will offer magazine content and streaming videos, takes aim at Apple's tablet dominance. How does the Kindle Fire stack up against the iPad 2? Should Apple be worried? Stu Woo and Dan Gallagher join digits.

While Amazon has had some success in new markets—it claims its Kindle e-book reader outsells other goods it offers on its website, for instance—the Kindle Fire puts the company into a fast-growing but competitive field.
The competition is likely to heat up further, with Barnes & Noble Inc. expected to introduce its own tablet next month. The bookseller already has a tablet-like device in the Nook Color. The new tablet is expected to provide faster access to the Web, a broader array of apps, and better video-playing. A spokeswoman for Barnes & Noble declined to comment.

Overall, Apple has sold 29 million iPads since releasing it in early 2010. Apple had 68% of the tablet market in this year's second quarter, according to data tracker IDC.
Allen Weiner, an analyst with industry-tracker Gartner Inc., said Apple could do something from either a technological or pricing standpoint to lure consumers and content providers who might be tempted by the Kindle Fire. "They still have a better device for magazines and newspapers, in a bigger format," Mr. Weiner said, referring to the iPad.
The Kindle Fire is only Amazon's second foray into the hardware business, after selling the Kindle reader for four years. And though Mr. Bezos said in an interview that Amazon engineers drove the design of the gadget, people familiar with the device said the company outsourced some of the design and manufacturing to an Asian manufacturer.
Mr. Bezos said his tablet strategy was about more than selling gadgets. "Well, you can call it a tablet if you want. I call it a service," he said. A piece of that service is this hardware, and "the service is that deep integration with that content and that media," he said.

Amazon didn't let reporters test or touch the Kindle Fire at Wednesday's event, having company handlers show them off instead. The Kindle Fire has a smaller screen and less storage capacity than the iPad and runs Google Inc.'s Android operating system.
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Amazon is now taking orders for the device, which ships on Nov. 15.
Amazon has had some success tangling with Apple. Both companies have competed to sell digital products such as MP3 downloads. Earlier this year, Amazon made a splash undercutting Apple's leading iTunes music store by selling the new album from Lady Gaga for just 99 cents.

The Kindle Fire also has a notable advantage over other tablets that have tried to narrow the iPad's lead: Amazon's library of digital content, which its tablet users can access. Customers can pay $79 a year for a service known as Amazon Prime, which gives them access to 11,000 movies and TV shows, as well as unlimited two-day shipping for physical goods purchased on Amazon.com. Amazon also sells single movies, TV shows and music songs, with a catalog that competes with that of Apple's iTunes store.

Some speculate that Amazon won't be making much, if any, money from the Fire. But UBM TechInsights, which calculates the cost to build devices, said a preliminary estimate of the components in the Fire likely totaled about $150, netting Amazon a profit of about $50 a tablet.

Some analysts also said the tablet could boost Amazon's revenue because the device makes it easy to buy both physical goods and digital goods, such as books, music and videos, on Amazon.com.

Amazon's shares rose $5.50, or 2.5%, to $229.71 Wednesday.

"Consumers want email, Web access, games, video and music, and that's exactly what Amazon is delivering for a very reasonable price," said Sarah Rotman Epps, an analyst with Forrester Research. "The Kindle Fire is all the tablet that most consumers will need."

At the Wednesday event, Mr. Bezos also introduced two new versions of the black-and-white Kindles. The entry level one costs $79, while one with a touch screen costs $99. Both come with advertising on the home screen and on the screensaver; the ad-free version of the Kindles cost at least $30 more.

Book publishers said they expected the new black-and-white Kindles and the Kindle Fire to boost e-book sales, particularly after the holidays. Before the original Kindle launched, the fledgling e-book business had lost traction and had largely been written off by the publishing community.

Today some major publishers say e-books are 15% to 20% of revenue, and as much as 50% or more of sales on certain commercial fiction titles.
"What we saw today is really going to drive the adoption curve in the U.S.," said Maja Thomas, senior vice president of Hachette Digital, a unit of Lagardere SCA's Hachette Book Group.

Added Jane Friedman, CEO of Open Road Integrated Media Inc., a digital publisher, "Some will continue to want a pure e-reader. But the Kindle Fire is... much more than I expected, and it's going to be great for my company."
Amazon still faces the delicate task of promoting its tablet at the same time as its Kindle e-readers.

Some analysts said that the tablet—on which people can read e-books—might cannibalize sales of the dedicated e-readers. Amazon executives, however, played down those concerns.
"People are going to choose different devices for different content," said Russ Grandinetti, Amazon's Kindle vice president. They would choose the tablet for children's books, comic books and graphic novels, while opting for the black-and-white reader for bigger novels and biographies, he said.

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