For the last two years, Amazon.com (AMZN) has scraped and clawed its way to a relatively minor position in the exploding tablet market. Its Kindle Fire tablets, which run a heavily customized version of Google’s (GOOG) Android operating system and plug directly into Amazon’s own media and e-commerce services, have set a low threshold for tablet pricing and helped spark a wave of small, 7-inch imitators such as Apple’s (AAPL) iPad Mini.
While Amazon has helped to change some of the rules of the tablet game, it’s hardly winning. Data tracking firm IDC puts the company’s share of the U.S. tablet market in the second quarter at 4.6 percent, compared with the iPad’s 50.7 percent (Samsung (005930:KS) has 18.5 percent). IDC says Amazon’s global market share is negligible.
Now, Amazon Chief Executive Officer Jeff Bezos is making his boldest tablet bid yet, with a triumvirate of new Kindle Fire models that boast a few nifty new features, some extra computing muscle, and the disruptively low prices for which the company is known.
The basics: Amazon will offer a lower-end 7-inch Kindle Fire HD for $139, a new 7-inch Kindle Fire HDX starting at $229, and a larger 8.9-inch Kindle Fire HDX starting at $379. The HDX models come with both front- and rear-facing cameras and enhanced screens that show vivid colors in light and dark settings; they feature additional options for 4G wireless connectivity on the AT&T (T) and Verizon Wireless networks. They are lighter and faster than the previous generation—running Qualcomm’s (QCOM) Snapdragon 800 processor—and have about 11 hours of battery life.
The HDX devices also offer a unique customer service feature called Mayday, which owners can use to summon live video feeds with Amazon customer service representatives onto their screens at any time of day to help them navigate their devices and fix problems.
“When beta users discover and use this feature, their jaws hit the table,” says Bezos, who spent two days this week briefing small groups of journalists on Amazon’s new hardware lineup in lieu of a single large media event. “They are not expecting to have a tech support person appear on their screen, and once that happens they are not expecting the tech support person to actually draw on their screen.”
Customers can order the new Kindle Fires today on Amazon’s website. Some models will start shipping in mid-October. Bezos says Amazon’s mission “is to develop premium products at non-premium prices.” He spoke with Bloomberg Businessweek about the new tablets, his August acquisition of the Washington Post, and the meeting he couldn’t sit through.
What were the biggest lessons from the successes and the failures of the first two generations of Kindle Fires?
The big surprise from the first generation was how frequently families and kids used it. So we doubled down on that with things like Kindle FreeTime [a feature that lets parents control how their kids access their tablets]. And then I would say the biggest surprise from the second generation was how much it was purchased by and used by corporations and enterprises. So we have really doubled down on all the productivity elements, such as interfacing with Microsoft (MSFT) Exchange services, doing a VPN [virtual private network] really well so you can get on the corporate intranet, and encryption of data. People don’t want both an entertainment and a corporate work tablet. They want one tablet. So we have doubled down on that.
Retailers like Wal-Mart (WMT) and Target (TGT) have stopped selling the Kindle Fire due to competitive concerns. Does that hurt this product’s prospects?
We still have over 20,000 retail outlets, in addition to Amazon.com. I think our percentage of units sold through retail has actually gone up, year-over-year. And that is global, by the way. All over the world, we have thousands of retail outlets.
I imagine some Kindle Fire owners would love to access Gmail, Google Maps, or Chrome from Google—or, for that matter, iTunes from Apple. [Those companies currently do not make many of their apps available in Amazon’s Appstore.] What are the prospects of getting those and turning the Kindle Fire into a more open platform than it is today?
We are open to that, but I don’t want to speculate on the future.
Do you envision the assets and content of the Washington Post [which Bezos personally acquired in August] adding something unique to the Kindle Fire, and vice-versa?
I would say it a little differently. I think tablets are a great opportunity for newspapers. As you know, I’m a congenital optimist, so take that with a grain of salt, if you like. But I really believe it. I think tablets are going to be very important for the future of newspapers. But the Washington Post really is a personal investment, and on the Amazon side I take my duty to our public shareholders extraordinarily seriously. There will be undoubtedly be opportunities and the Washington Post is already on Kindle. There will be opportunities for the two companies to help each other. But that would be done at an arm’s-length way, just as it would be done with any other tablet manufacturer or newspaper, to mutual advantage.
You are spending lots of your own personal time on the Kindle business; you even spent part of the summer in the Bay Area with Amazon’s Lab126 unit. Why is it so critical for Amazon and demanding so much of your attention?
I spend my time on the things where I hope I can contribute the most. The rate of invention here is very high. And it’s a place where I can contribute. I once found myself in a meeting with a room full of international tax experts talking about a dispute between Japanese taxing authorities and American taxing authorities. I was invited to the meeting because it was a large amount of money and in the worst-case scenario, we would have had to pay both. This was many years ago and I can’t even remember how it was resolved. But 30 minutes into the meeting I said, “Look, guys, I know this is an important issue, but it’s not one I can contribute to, so I will bow out.”
By the way, I don’t spend all of my time focused exclusively on this business. I do spend a lot of time on digital and the device business and Amazon Prime, basically in areas where the rate of change is high and where I can bring various parts of the company together. That’s one of the things I can do well because of the length of time I have been here. Anything that requires cross-coordination—and certainly this business does—it brings together Amazon Prime, all of our digital assets, the music store, videos, the Kindle bookstore, everything. That kind of cross-coordination is something I can help with. But the short answer is: When I’m disciplined, I try to spend my time on things where I can contribute.
Can Mayday help sell more Kindle Fires? And does it fit for other areas of Amazon, like customer service on the website?
The classic thing people do today when they have a problem with their tablet is that they wait until their spouse or parent or children get home to help them. We think this will be a game-changer. It’s a whole new way to do tech support. Nothing like this has ever been attempted before. It is the kind of thing that Amazon is uniquely well-suited to do. It marries high-tech and heavy lifting, which, if you look at our history for even five minutes, you would know is one of the things we have uniquely done in this industry.
Is controlling connectivity itself—perhaps owning or leasing wireless spectrum—part of your ultimate vision for hardware? [Bloomberg recently reported Amazon was testing wireless spectrum from satellite provider Globalstar (GSAT).]
I wouldn’t want to speculate on the future.