Online retailer Amazon.com recently debuted new versions of its Kindle Fire tablet. Called the Kindle Fire HD, they include an improved version of last year's 7-inch tablet, as well as Wi-Fi and 4G models of an 8.9-inch Kindle tablet.
While last year's Kindle Fire broke new ground with its $199 price tag -- the Nook Color was formerly the cheapest name-brand 7-inch tablet, at $249 -- the new 8.9-inch Kindle Fire HD similarly breaks the price barrier set up by Apple's iPad. At $499, the original Wi-Fi only iPad was priced very aggressively. But while the Kindle Fire HD has a slightly smaller screen, it features a high-res display nearly as sharp as the new iPad's Retina Display, plus more onboard memory and a 4G wireless connection.
How did Amazon manage to make the new Kindle Fire HD so inexpensive?
Intrusive advertising
Online and even in-app advertisements are nothing new these days. But Amazon's entire lineup of new Kindle Fire models is sponsored by "special offers" on the tablets themselves, which appear in the corner of the home screen and take up the whole lock screen. These ads might promise a discount of some kind, or they can simply promote a given brand or product every time you turn on your Kindle.
Amazon has since announced that people who buy the new Kindle Fire tablets can pay $15 to turn off the ads. As All Things D's Tricia Duryee found out from interviewing Amazon CEO Jeff Bezos, however, very few Amazon customers chose to pay extra to buy black-and-white Kindles without ads, after sponsored Kindle e-readers were introduced. "Everyone buys the special-offers version", Bezos explained. And those ads drive the prices down, because advertisers are willing to bet that you'll spend more money buying their products than you saved from buying an ad-sponsored Kindle.
Fierce undercutting
An iSuppli teardown revealed last year that the Kindle Fire costs slightly more to manufacture than Amazon makes on each sale. Bezos said in the interview that "We do not like the razor and razor blade model" (where you lose money on the product up front), but he didn't disavow using it. And since the Kindle Fire HD is in many ways Amazon's equivalent of the Sears catalog -- a retail storefront in every Kindle owner's home -- it has lots of "razor blades" on offer.
Apple, in contrast, makes the bulk of its money from hardware sales, and operates iTunes and the App Store at more or less break-even.
Inferior quality
"Quality" is in some ways subjective, but reviewers (and even usability expert Jakob Nielsen) took last year's Kindle Fire apart for its slow, unintuitive interface. Meanwhile, a Droid-Life reviewer noted "quite a bit of lag" on this year's 7-inch Kindle Fire HD, a problem not shared by the iPad.
Jared Spurbeck is an open-source software enthusiast, who uses an Android phone and an Ubuntu laptop PC. He has been writing about technology and electronics since 2008.
