If you’re an Apple (Nasdaq: AAPL) investor, it’d be no surprise if you were looking past the week ahead. After all, this week is really the calm before the storm; Apple is expected to unveil its newest iPhone, and possibly an iPad Mini, during the following week on Sept. 12. Yet there are plenty of story lines not to be ignored this week. Here’s a checkup on one storyline not to be ignored — the introduction of a new Kindle Fire. Sept. 6: The newest Amazon tablet hits This Thursday, Amazon.com (Nasdaq: AMZN) is holding an event in Santa Monica, Calif., and is widely anticipated to…
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If you’re an Apple (Nasdaq: AAPL) investor, it’d be no surprise if you were looking past the week ahead. After all, this week is really the calm before the storm; Apple is expected to unveil its newest iPhone, and possibly an iPad Mini, during the following week on Sept. 12.
Yet there are plenty of story lines not to be ignored this week. Here’s a checkup on one storyline not to be ignored — the introduction of a new Kindle Fire.
Sept. 6: The newest Amazon tablet hits
This Thursday, Amazon.com (Nasdaq: AMZN) is holding an event in Santa Monica, Calif., and is widely anticipated to unveil a new lineup of not only Kindle e-readers but also a new Kindle Fire. That move comes just a month and a half after Microsoft (Nasdaq: MSFT) used nearby Los Angeles to reveal its Surface tablet.
What’s at stake this Thursday? As fellow Fool Evan Niu notes, Amazon claims its Kindle Fire has grabbed 22% of the domestic tablet market in the past nine months. While Amazon doesn’t cite where it’s getting that market-share figure and hasn’t released specific sales numbers, researcher IDC estimated that 6.6 million Kindle Fires shipped during its first nine months on the market.
The appeal of the Kindle Fire is pretty simple: It’s cheap. The tablet hit a US$199 entry price last year, when many rival tablets were still selling at prices near the iPad, a losing proposition with the popularity of the iPad compared with other tablets. However, since the Kindle Fire hit, other rivals have pushed into the low-priced tablet space. Google‘s (Nasdaq: GOOG) Nexus tablet hit the US$199 price point and has received some of the better reviews for an Android-based tablet.
How cheap can it get?
To combat these moves, Amazon, according to The Wall Street Journal, is looking to use an ad-supported model tested on its Kindle e-reader lineup on the Kindle Fire. That is, it’ll sell a version of the Kindle Fire that places ads when “the user ‘wakes’ the gadget.” That could allow Amazon to sell its tablet well below its existing US$200 price point. Judging by price breaks for ad-supported Kindle e-readers, the Kindle Fire could start at US$150 or less. That price point adds a crucial price difference between the Kindle Fire and any lower-priced iPad Mini that Apple is expected to launch, which would be likely to fall in the US$250-$300 price range.
Do people … love the Kindle Fire?
In the end, the biggest question for the Kindle Fire is whether users are embracing the platform. The first Kindle Fire benefited from being the first credible competitor to the iPad in a long-time. With that novelty worn off, have users been satisfied enough in the Kindle Fire to keep buying it over an iPad Mini or the Google Nexus?
The data on whether Kindle Fire owners have been satisfied with their devices is mixed. A June survey by researcher Changewave showed that just 41% of Kindle Fire owners were “very satisfied” with the device, which significantly lagged the 81% of iPad owners who said they were “very satisfied.” Then again, a more recent survey from comScore, another researcher, found Kindle Fire users rating their Kindle Fires an 8.7 on overall satisfaction (out of 10), a number just slightly behind the iPad’s 8.8.
Can the iPad hold on to its market share?
Apple shareholders have to know no one will just cede the tablet space to them. The iPad is commanding iPod-like market share, but in a market that is already much larger than MP3 players ever were. Likewise, with MP3 players, companies challenged Apple with cheaper challengers (think SanDisk (Nasdaq: SNDK) and its Sansa MP3 players) and also with approaches that tried counter-programming the iPod (as in Microsoft’s ill-fated Zune adventure). We’re seeing the same approaches today, with companies trying to out-price Apple in tablets, and Microsoft trying to redefine the category with Windows 8.
The battle for tablets is likely to be more hard-fought for a few reasons. One, as I mentioned, it’s a bigger market. In the past four quarters, Apple has collected almost US$32 billion in iPad sales. Second, the tablet battle is slated to last longer. While MP3 players became obsolete with the rise of smartphones, tablets are still in the process of pushing past PCs as the dominant device of the next decade. Finally, the third factor is that competitors in the tablet space have learned from past mistakes and have far more resources than Apple’s MP3 player competitors do.
While the iPad is still far ahead of the competition, the present crop of challengers is its strongest yet. The Google Nexus is the best blend of value and functionality form an Android tablet to date, the next Kindle Fire is resuming the downward march in pricing, and Microsoft has finally introduced a competent competitor with Windows 8.
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The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
A version of this article, written by Eric Bleeker, originally appeared on fool.com