Kindle Phone or Kindle Fire HD? Which is more important for Amazon’s Future

Posted on June 2, 2013 by switch11

Kindle Fire HD is more than just a Tablet for Amazon. It is a means to reach users and sell them things.

Kindle Phone, if it arrives this year, will be extremely important. Not just a Kindle Phone but a connection to Amazon.com and Amazon and all the products and services it sells.

The question becomes – Which is more important? Kindle Phone or Kindle Fire HD?

First, let’s look back at how Amazon used to make money.

Amazon made money from Electronics, Media, and ‘Other Things’

Amazon had three main income streams -

  1. Electronics. This was the fastest growing income stream.
  2. Media. This was mostly CDs (music), DVDs (movies), Games (Physical Game Discs), and Books (physical books). This was under threat due to the rise of things like iTunes.
  3. Other Things. A whole gamut of things here including Zappos, Diapers.com, Websites, Advertisting, and a lot more.

Kindle was a means to tie up the revenue from books before Apple took over with iTunes or Google took over with Google Books.

Kindle Fire HD is a means to grab music and movie revenues before Apple, Google, and Xbox gobble up those income streams.

Amazon was on the losing side (physical media). The huge change in music showed Amazon that it had to be prepared. It faced the propsect of losing out its Media related income streams completely.

That’s REALLY what Kindle and Kindle Fire HD are about. It’s also what Kindle Phone will really be about.

The added bonus is that Amazon can add more services for users and add more things it sells to users. Most Internet and Technology companies are reluctant to get into selling physical goods (apart from electronic devices). They simply don’t want the hassle of selling Diapers and Kitchen Sinks and Raincoats.

So,

  1. Amazon could either die (by ignoring the shift to digital in all physical Media (movies, music, books, games)).
  2. OR Amazon could shift to digital. This would help it realize that ‘supporting digital’ actually makes Amazon stronger in Physical Goods too.

Of course, Amazon has evolved since 2006-2007 (when this decision had to be made). Before we jump into the relative importance of Kindle Phone and Kindle Fire HD, let’s look at all the things Amazon sells currently.

Amazon now makes money from Electronics, Media, Other Things, Digital Content, AWS, Advertising, Kindle & Kindle Fire HD sales

Here are some of the things Amazon sells now -

  1. Electronics.
  2. Physical Media (movies, music, games, books).
  3. Digital Media (movies, music, games & apps, books).
  4. Various things like Kitchen Sinks. Let’s call this ‘Sale of Other Physical Goods’.
  5. AWS – Web Hosting in the Cloud. This is a big, big business now. Perhaps $3 to $4 billion a year in revenues.
  6. Advertising – Supposedly $1 billion a year in revenue. This has the potential to be much bigger.
  7. Kindle Fire HD & Kindle eReader Devices. Perhaps a few billion a year in revenue. If we assume 10 million Kindle Fire HDs and 3 million Kindles a year are being sold, it’s $2.3 billion a year.
  8. Services to Authors – CreateSpace etc.
  9. Content – Book Publishing & Movie Making.
  10. Amazon Prime – 2-day free shipping service, Amazon Instant Video, Kindle Lending Library.
  11. Audiobooks via Audible.com and BrillianceAudio (to make audiobooks).
  12. Shoes & Jeans and more – Zappos.com.
  13. High End Shoes & More – Shopbop.com and others.
  14. Flash Sales – MyHabit.com.
  15. Deals – Woot.com.
  16. Websites - dpreview.com, Endless.com, IMDb, LoveFilm, The Book Depository, Junglee.com, goodreads.com.
  17. Baby Products – Diapers.com. Part of Quidsi.
  18. Pet Products – Wag.com. Part of Quidsi.
  19. Local Deals – AmazonLocal and its investment in Living Social.
  20. Amazon Wireless – The perfect setup for Kindle Phone.

It really is worth it to read a list of everything Amazon has acquired – Amazon Subsidiaries & Acquisitions.

The three big things in there, which are very new and promising, are AWS, Advertising, and Kindle devices.

Kindle devices are not very profitable (perhaps not profitable at all; Note: we are considering only device sales). AWS is unlikely to be wildly profitable. That leaves just Advertising as a very profitable business.

Amazon, fundamentally, has 5 or 6 very high potential long-term businesses -

  1. Electronics.
  2. Content Sales to Kindle Owners.
  3. AWS.
  4. Advertising.
  5. Sale of Other Physical Goods.
  6. Wireless services bundled with Kindle Phone and Kindle Fire HD.

A LOT depends on Amazon selling Kindle Fire HDs and Kindle Phones and setting up stronger connections with its customers and creating new customer relationships. Customers that are willing to spend money – Amazon will sell products and services to. The ones that aren’t, Amazon will package to advertisers as ‘audience’.

Kindle Devices (Kindle, Kindle Fire HD, Kindle Phone) are the new Amazon.com StoreFronts

Basically, to understand which out of Kindle Fire HD and Kindle Phone is more important for Amazon’s future, we need to understand what the future buying patterns of users might be.

People are switching/shifting from ‘Buying on PCs and in Stores’ to ‘Buying on Phones and Tablets and on PCs and in Stores’. Chris Dixon has a very interesting post on ‘The Shift to Mobile’.

Three paragraphs are key. First:

People tend to lump smartphones and tablets together as “mobile”. This can be misleading. Ask people who run internet companies and they’ll tell you that user behavior on tablets is far more similar to user behavior on desktops/laptops than it is to user behavior on smartphones.

Points in favor of Kindle Fire HD being more important are – People shop more often (as a percentage of time of use) on Tablets, People spend more when shopping on Tablets, Tablets are closer to desktops, Tablets actually allow shopping easily.

Points in favor of Kindle Phone being more important – People have their phone everywhere, more People own phones, People use their phone a lot more, People usually have their phone (and not their tablet) when in a store and deciding whether to buy there or at Amazon.com.

The 2nd and 3rd important paragraphs:

App stores have had a few important effects:

1) They take 30% of revenue, which scares away most big companies (e.g. Microsoft) and also startups/venture capitalists. Not many businesses can survive an immediate 30% haircut.

The best entrepreneurs understand these dynamics and have been exploring “attach” business models, which basically means charging for something outside of the app store, like offline products/services (e.g. Square, Uber), online services (e.g. Spotify, Dropbox), and sometimes even hardware.

Amazon knows it can’t afford to pay 30%. Remember, its overall margins in 2012 were 1.1%. That’s 1.1% total margins. Even Amazon can’t afford a 28.9% loss on sales.

Amazon is left with just two options -

  1. Sell ‘Apps’ for customer acquisition and then route them to buy from the Web (i.e. outside the App Store).
  2. Build its own devices and its own app stores.

It’s choosing both routes. However, the second route is far more promising.

Why?

Apple and Android can do a lot of things to slow down Amazon’s plans in the Apple App Store and the Android Google Play Store -

  1. Levy taxes.
  2. Hide Apps.
  3. Give a boost to competitors.
  4. Make a competing app the default.
  5. Sell services themselves.

If it’s Amazon’s store, not only can it avoid all these things, it can do all these things for its own services. It can even keep out competitors entirely (the ideal situation).

Kindle Fire HD is the Bridge Device

eInk Kindles were a test.

Kindle Fire HD is the Bridge Device.

Kindle Phone and wearable computing devices like Kindle Watch will be the REAL Amazon.com storefront.

Why is Kindle Fire HD just a Bridge Device?

  1. Tablets aren’t with users all the time. This is absolutely key. Most users have Tablets only at home or only at work. Even the ones that carry them everywhere don’t take them out of the purse/bag/briefcase very often.
  2. Tablets are digital content consumption focused. They aren’t good for creation and they aren’t very good for shopping. Remember, users are getting trained to buy $5 books and $10 movies and play free games. More importantly, they are getting trained to spend hours and hours on these $5 books and free games and $10 movies. That’s the exact opposite of what an efficient storefront is.
  3. Tablets are not focused on ‘pure shopping’. They aren’t optimized for it. The software isn’t optimized for it.

Think of Tablets as the ‘Facebook, Twitter, and Tumblr’ of Storefronts. People don’t spend much but they spend a lot of time.

Why will Kindle Phone and Kindle Watch be the REAL Amazon.com storefront?

  1. Users will have them ALL the time.
  2. Users will be trained to do big purchases on them. Note: This will be very subtle. Just like Amazon removed physical keyboards from Kindles to focus users on reading and buying.
  3. Users will be trained to avoid ‘low price, long time’ purchases. This too will be subtle.
  4. Phones are already associated with ‘action’ and ‘business’ and ‘getting things done’. The downside of making Tablets focused on ‘consumption’ is that you don’t have that ‘let’s buy something’ feeling on them. People do shop on Tablets, but not the way they would on devices actually built for shopping.
  5. Kindle Phone and Kindle Watch can be further down the slippery slope of ‘Kindle Storefront’ and not your device. Think of how we’ve gradually gone from Kindle 1 with SD card to Kindle Fire HD with ‘recommendations’ and ‘screensaver ads’ and ‘buy, buy, buy digital content’ focus. The next step is a device that’s even more of a digital storefront – except, this time it’s a digital storefront to buy both digital and physical products from Amazon.

Basically, the combination of Kindle Phone being with the user all the time, Tablets being ‘poisoned’ as cheap/free product consumption devices, and Amazon getting to tailor Kindle Phone more for ‘buying everything and buying expensive things’ means that Kindle Phone will be far more important than Kindle Fire HD.

Biggest Reason Kindle Phone is more important – Number of Kindle Phones Sold

Amazon has sold perhaps 10 to 18 million Kindle Fire HDs and Kindle Fires. That’s a rounding error compared to iPhone and Android Phone sales.

Amazon needs a Kindle Phone that sells 100 million units.

If/when that happens, Kindle Phone will instantly have 4 to 5 times more users on it than Kindle Fire HD. That alone would make it far more important.

However, it would also have the advantages we’ve discussed in the previous section. The most important being that it will be set up to not route users to ‘$5 for 5 hours of your time’ consumption, and instead towards ‘buy this crystal vase for $75 and this pair of indigo denim jeans for $175′.

We haven’t yet seen what a device tailor-made for ‘buying from Amazon’ looks like. This is mostly because -

  1. Amazon is still learning how to make devices.
  2. Amazon is still learning user behavior and how to subtly tweak and influence it.
  3. Amazon doesn’t want to reveal its plans. With the Kindle, most people didn’t understand it was an Amazon storefront (though we’ve been saying this for years – What the Kindle was meant to be). Despite all the obvious signs, most people don’t realize Kindle Fire HD is just a natural progression along that same roadmap.

Of course, there’s the risk that at some point Amazon strays too far and loses its ability to actually sell devices – because they aren’t even really devices any more. However, people have an infinite capacity to accept gradual change without thinking about what it means in the long-term.

Kindle Phone and Kindle Watch are literally Amazon’s Future Survival

The shift was supposed to be – Retail to Online Retail. It’s actually turning out to be – Retail to ‘A Weird Mix of Retail + Mobile Retail + Online Retail + Digital’.

This is a big problem for Amazon because Amazon is optimized for ‘Online Retail’. Imagine, if you will, a world where the shift happens from Retail to Mobile Retail.

Guess who’s best positioned there? Google and Apple. Android and iOS would become the ultimate Retail Enablers. Would they really allow Amazon to operate freely?

No.

Google has exactly ONE billion dollar business – Advertising. It needs something to hedge against that. Mobile Retail would do very, very well. Google is already doing a lot of things to set that up – local deals, maps, location services, Google Shopping, etc.

Apple might well decide that it wants to create a ‘Store Front’ like the App Store and like iTunes. Let people sell products and give Apple 10% or 15%. It has the most lucrative 100-200 million customers. Might as well make a cut from their flight purchases and Christmas Gifts and Car Purchases (until iCar arrives with italian leather seats and ‘shut up and let the car drive’ driving rules).

Amazon would have no place at all if Shopping shifts from retail to mobile. Because mobile isn’t very open. It’s Apple’s closed ecosystem and it’s Google’s ‘The Default rules and users just gravitate to the Default’ ecosystem.

Basically, Kindle Phone and Kindle Watch (at least one) have to sell hundreds of million of devices. Amazon is positioned for a shift to Online Retail. The actual shift looks to be happening to Mobile Retail. Kindle Phone and Kindle Watch are Amazon’s means to establish itself in Mobile Retail. If they fail, perhaps so does Amazon.

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Kindle Watch? Kindle Phone? What’s Next for Kindle?

Posted on May 29, 2013 by switch11

Mary Meeker has her annual Internet Trends report up. It instantly made me think of Amazon releasing a Kindle Phone, and perhaps even a Kindle Watch.

Basically, Mary Meeker points out some amazing things -

  1. There are 2.4 billion Global Internet users. US has 78% population penetration. On the other hand, China has just 48% population penetration and India has a measly 11% population penetration. Amazon obviously recognizes this as it’s made Kindle Fire HD and its App Store available in China. It even added support for paid apps in China before Google did.
  2. The population penetration of the Top 14 Markets is just 34%. That suggests a doubling in the number of people who have Internet access isn’t inconceivable. The new growth is likely to come from smart phones and phones and tablets.
  3. Mobile OSes made in the US (Android, iOS, Windows Phone) have 88% market share. Six years ago they had 5% market share.
  4. The Mobile Market is so big that Amazon has to get into it. Kindle Phone isn’t an IF, it’s a WHEN.
  5. The rate at which companies and businesses can grow is unprecedented. What does that mean for Kindle? That a hit Kindle Phone or a hit Kindle Watch could reach tens of millions of users really fast. Perhaps even cross 100 million users in their first 2 years of existence.
  6. Mobile Traffic is 15% of Total Internet Traffic. In China, the percentage of users accessing the Internet via their phone or smart phone is LARGER than the percentage accessing the Internet via their PC.
  7. 45% of Groupon’s Transactions are via Mobile.
  8. There are 1.5 billion smart phone subscribers worldwide. China is the largest market by number of users. US is second.
  9. Smartphone penetration is just 21%. That’s a great opportunity for Amazon. Kindle Phone has 79% of the market that hasn’t even bought a smart phone yet. There are 1.5 billion smart phone users and 5 billion mobile phone users. So, it’s a GIANT market that’s going to grow A LOT (3-4 times).
  10. Apple is growing at 1.4 times (It now has 22% market share). Samsung has grown 7 times in the last 2 years (it has 29% market share). Amazon with Kindle Phone is starting off at zero market share. It could take off and could capture a large part of the market. The smart phone market itself has grown from 55 million units in Q1, 2010 to 219 million units in Q4, 2012 (4 times).
  11. Kindle Watch would be an opportunity to move from smartphones to wearable computing. And that would be a new market. There would be competitors (Google, pretty sure Apple has something for end 2013, Microsoft, Samsung). However, if Kindle Watch comes out by 2014 then it has a shot at being a market leader.
  12. Tablets are growing faster than smartphones. iPad sold at 3 times the rate of iPhone. Note: This is an unfair comparison in some ways. iPad rode on the App Store and the branding and the customer base that iPhone created.
  13. 3 years after introduction, Tablets, in Q4 2012, sold more than desktops and laptops (separately, not combined).
  14. Kindle Fire HD is a hit. Tablet Market Share, according to Mary Meeker, is – iPad at 51%, Samsung at 13%, Amazon at 8%, Asus at 5%.
  15. Mary Meeker thinks the third cycle (after Smartphones and Tablets) will be Wearables (and Drivables and Flyables and Scannables).
  16. Smartphone users check their phones 150 times a day. Wow! That figure seems absurdly high.
  17. A lot about wearable computing. It’s very difficult to take out incumbents. Much easier to create a new market and/or to establish yourself as one of the leaders in an emerging market. That’s why a ‘Kindle Watch’ or ‘Kindle Goggles’ would have a much higher chance of success than a Kindle Phone. The downside is that the wearable computing marketing might never become very big.
  18. Mary Meeker thinks we have a lot to learn from China. She also thinks that China is pointing to what the future of computing will be. Well, everyone’s paying attention. The sheer size of the Chinese market makes it hard to ignore.

The incredible strength of Mobile, the incredible growth of Mobile (which is continuing), and the huge market (billions of users), mean that Amazon has to make a Kindle Phone. It just doesn’t have any other option.

The exceedingly fast rate at which things take off, in our new world, means that Amazon just has to get things right once. If it does, it could displace the existing incumbents in the Phone and/or Tablet markets in just a few years. 7 years ago, neither Android nor iPhone had significant market share. Tablets didn’t really exist 3.25 years ago.

If Amazon can create a new niche, and use that to displace Tablets and/or smartphones, that would be the most elegant path forwared. Unfortunately, it seems like Apple and Google will perhaps release wearable computing devices first.

Kindle Phone – Chances of Amazon releasing a Kindle Phone, When it would arrive, Pros of releasing Kindle Phone

Well, let’s see -

  1. Kindle Phone Probability – 100%.
  2. Arrival – See my Kindle Phone Release Date post.
  3. Pros – Market is absolutely huge. Lots of opportunity to disrupt the existing players. Market that tends to cycle through leaders (remember RIMM, Nokia, Motorola). Trends based Market and therefore easier to capture (comparatively). Amazon already has a huge customer base in the US (the second most important smart phone market). Amazon already has an App Store.
  4. Cons – Well entrenched competitors (but Market shifts a lot). Apple has very strong customer loyalty. Samsung is very dangerous and very flexible. Amazon doesn’t have a good OS (it just skins Android) limiting differentiability. Hardware isn’t exactly Amazon’s strong suit.

Kindle Phone would be the logical successor to eInk Kindles and Kindle Tablets. Perhaps the third time’s the charm. Perhaps Amazon really blows away everyone with the Kindle Phone.

Kindle Watch – Chances of Amazon releasing a Kindle Watch, When it would Arrive, Pros of releasing Kindle Watch

Well, this is more difficult.

  1. Kindle Watch Probability – 100% if iWatch and/or SWatch (Samsung) and/or Google Glass take off. 25% otherwise. Amazon might wait to see how wearable computing does, before jumping in.
  2. Arrival – Perhaps end of 2014. Perhaps end of 2015. On the one hand, Amazon likes to wait and see. So it might wait to get a year’s worth of data on wearable computing sales. On the other hand, Amazon knows that being too late to the market makes things really difficult. Amazon might gamble on wearable computing sooner rather than later. I’d predict Amazon is cautious and Kindle Watch ships in early 2015.
  3. Pros – Brand New Market. No one has released anything yet. If Amazon can release by November 2014, it’ll be just 6 to 12 months late to the party. Amazon is gathering hardware customers and a lot of these will give Kindle Watch a chance.
  4. Cons – No one know if the market for wearable computing will take off. There will be an incredible amount of competition.

Kindle Watch would be more of a gamble. But it’s a gamble worth making. Perhaps even more so than Kindle Phone.

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Kindle Phone 3D? Kindle Phone with Eye Tracking & Gesture Recognition?

Posted on May 9, 2013 by switch11

A new Kindle Phone from Amazon rumor from The Wall Street Journal today.

  1. Key: A high-end Kindle Phone 3D that allows for 3D images without glasses.
  2. Key: A total of two smartphones and an audio-only streaming device.
  3. Interesting: Retina-tracking technology would be used to make images float above the screen like a hologram. That’s some very science fiction type stuff. Amazon? Really? Have the WSJ guys seen what the Kindle Fire 1 looked like? The company that made that boxy thing is going to make a Kindle Phone 3D that projects hologram and makes you feel like Tom Cruise in Minority Report?
  4. Navigation via your eyes. Another hard to believe feature. Please Note: Amazon does have a patent for Gesture Recognition and visual input. This was approved around June 6th, 2010. So, hard to believe as it might be, Amazon might really have a Kindle Phone 3D with retina-tracking technology and gesture recognition.
  5. Overall Strategy: WSJ says that Amazon will release a set-top box (Kindle TV), a smartphone (Kindle Phone), a Kindle Phone 3D, an audio-streaming device (Kindle Audio? Kindle Stream? Air Kindle?). These are known as the Alphabet Projects – Project A, B, C, and D.
  6. WSJ says some or all of the devices could be shelved because of performance, financial or other concerns. Way to give yourself an out WSJ.
  7. WSJ also thinks the overall aim is to expand Amazon’s reach into content distribution.

That’s a lot to digest.

Will Amazon release a Kindle Phone?

We’ve discussed Kindle Phone and Kindle Phone Release Date before. This seems quite likely.

Will Amazon release a Kindle TV?

Again, we’ve covered Kindle TV and Kindle TV Release Date and chances of it arriving before. This seems possible. It might not arrive until 2014.

Will Amazon release a Kindle Phone 3D? With Retina-Tracking and Holographic 3D images and Gesture Recognition?

I find this really, really hard to believe. Amazon has the patent for Gesture Recognition and Eye Tracking. It’s had it since June, 2010. However, does Amazon have the ability to introduce game-changing hardware? Kindle Fire and eInk Kindle have both been follow-ups to existing products from competitors. All the components and the screen technology were well established (it wasn’t brand new). I don’t see any 3D holographic screen devices Amazon can iterate on. Same for gesture tracking. Kinect exists. However, I doubt Amazon has access to Microsoft’s Kinect technology.

How on Earth is Amazon going to introduce a market-changing (perhaps even market-transforming) Kindle Phone 3D with not just one but 3 almost completely new technologies?

Retina-Tracking. Almost completely new. Since Kinect technology isn’t licensable.

Holographic 3D images. Completely new.

Gesture Tracking. Completely new.

If Amazon ships a Kindle Phone 3D then it deserves a ton of credit. Much as it pains me to say this, this seems like something Apple would do, not Amazon. Wouldn’t that be funny – if Apple introduces a boring iWatch while Amazon launches a genre-transforming Kindle Phone 3D.

Filed under: Kindle Phone | Tagged: , , , | 6 Comments »

Kindle Phone Release Date Estimates, Kindle Phone Predictions

Posted on April 25, 2013 by switch11

Kindle Phone is the second big Kindle family device rumored to be arriving this Fall (Fall 2013). The first is Kindle TV.

Let’s ponder over a few things -

  1. What do we know about Kindle Phone?
  2. What will the Kindle Phone Release Date be?
  3. Why Amazon needs a Kindle Phone.
  4. How will Kindle Phone do?
  5. What impact will Kindle Phone have on other companies?
  6. Kindle Phone Predictions.

Let’s start with what people are speculating about Kindle Phone.

Kindle Phone – What we know

Firstly, just to be clear, these are all rumors. None of this is guaranteed, regardless of how likely and logical some of it might seem.

Rumors and Speculation from earlier years -

  1. Way back in October 2011, David Carnoy at CNet was speculating about a Kindle Phone. He thought Amazon’s Lab126 would make a Kindle Phone and it would be premium quality, but be offered free with a 2-year subscription. He also thinks, and this makes sense, that it would be based on Android. That Amazon’s Android App Store is primarily meant to feed Kindle Phone (when it arrives).
  2. Even before that, in 2010, New York Times talked about a Kindle Phone. NY Times had brought up the notion of Lab126 building a Kindle Phone to compete with Google and Apple.
  3. In November 2011, Harry McCracken at PC World talked about Amazon making a Kindle Phone that was the iPhone of the Android world. He even suggested that Amazon might buy wireless service in bulk from Sprint or Verizon and resell it in a hassle free form. I think it’s a splendid idea (except for the fact that Sprint and Verizon might be in no rush to play along).

Newer rumors and speculation -

  1. At Fool.com (a strange name for an investment site), Adam Levy talks about the high probability of success of a Kindle Phone. He cites Xiaomi (a Chinese cell phone company that sold 7.5 million phones last year) as an example of the success possible by selling high-end phones at cost. Xiaomi plans on making money by selling services to these Xiaomi phone users. Adam Levy thinks this model fits perfectly with Amazon’s (it does).
  2. A few of the other suggestions in the Fool.com article seem strange. The claim that Kindle Fire has captured 22% of the US Market seems sketchy. Perhaps the sales results for the Holiday Quarter (when Amazon is supposed to have captured 22% of sales for the quarter) are being confused with total market share. The suggestion that Amazon might capture 22% of the US phone market is also a bit speculative.

There are lots of other articles we could look at. However, they circle around the same points.

Basically, all of Amazon’s moves are now being scrutinized as ‘possible signs’ that Amazon is getting ready to release a Kindle Phone.

Let’s move on to exploring when Kindle Phone might arrive, why Amazon needs a Kindle Phone (Note: Needs, not Wants), and how Kindle Phone will do.

Kindle Phone Release Date Estimates

Amazon has been running Amazon Wireless for quite a while now. One huge benefit is that Amazon can collect data about what subscribers want and what would make them buy a Kindle Phone.

Kindle Phone Release Date Estimates are tricky because -

  1. Past Amazon Device Release Dates suggest we’ll see – An October Kindle Phone Announcement and a November Kindle Phone release date.
  2. However, we don’t know what information Amazon has gathered from Amazon Wireless. Perhaps Amazon has figured out that the best time to launch would be in the summer lull – when the next iPhone is still far, far away. Perhaps it’s figured out that the Holiday Season is indeed the best time to launch.
  3. After considering all the factors, my bet would be that we’ll see a September Kindle Phone announcement and an October Kindle Phone release. That Amazon would try to release as close to Holiday Season as possible, but also try to come out a month or two ahead of Apple’s new iPhone. That has the dual benefits of reaching a large amount of people waiting to update their phone AND making sure Amazon can release as close to the Holiday Season as possible.

Now that Steve Jobs isn’t around, the Apple risk isn’t quite as high. However, releasing before Apple’s announcement would still be a good idea.

Why Amazon needs a Kindle Phone

Two main reasons. Profit. Profit.

  1. Firstly, consider the amount of Profit Apple and Samsung are making from smartphones. It’s almost absurd. We’re talking about $2 to $3 billion a month in profits. So, both #1 and #2 in the Smartphone market are making out like bandits.
  2. Secondly, consider the amount of Profit AT&T and Verizon are making from data plans. AT&T made $3.4 billion last quarter. That’s $3.318 billion more than Amazon. Amazon already has the Cloud. It already has the customer accounts. It already has the OS. It already has the App Store. All it needs are phones and wireless bandwidth.

We’re talking about an absolutely incredible amount of profit in both smartphones and in smartphone data plans.

Perhaps Amazon sees another market (twin market?) where it can destroy profits to gain customers. However, my bet would be on Amazon seeing an opportunity to go from a profit averse company to a profit loving company. Sooner or later Amazon will go after the data plans. By end of 2013, Amazon will go after Apple and Samsung.

Amazon Needs Kindle Phone.

There are very few other super high profit businesses that are right in front of Amazon. Advertising is one, and Amazon is already setting up things to take a giant share of that. Phones and Data Plans are two beautiful cash cows and Kindle Phone might be Amazon’s best opportunity to either keep them for itself, or destroy them and weaken two of its biggest rivals significantly.

How will Kindle Phone do?

Well, there are two possibilities -

  1. Amazon goes with a profit destroying approach. It sells phones at cost, sells data plans at close to cost, and focuses on adding Amazon customers and/or Prime subscribers to profit from in 2159.
  2. Amazon goes with a profit focused approach. It sells one out of phones and data plans at close to cost, and gathers profits from the second. In effect, it tries to profit from phones and plans now.
  3. If Amazon goes with the former approach, it’ll add a lot of customers. It will, however, lose the opportunity to add one huge cash cow. Perhaps even two huge cash cows.
  4. If Amazon goes with the latter, it’ll be a lower number of sales and a slower ramp-up in total Kindle Phone sales. It will, however, add huge Cash Cows. Cash Cows which might keep Amazon alive when the next big crisis and/or economic depression hits.

Quite frankly, I don’t see any scenario where the Kindle Phone doesn’t do well. That’s highly unlikely. Lots of people are willing to try out a Kindle Phone. Lots and lots of people.

Amazon has already demonstrated it can make decent hardware (not spectacular, but decent). Amazon has already gathered huge amounts of data on phone and phone plan purchases. Most importantly, Amazon already has a HUGE customer base that trusts Amazon. Now it just has to deliver a decent phone and a decent plan and it’ll be set.

Prediction: 10 to 20 million Kindle Phones sold in 2013.

Note: This is assuming Amazon goes with either a Phone that is close to cost OR it goes with both Phone and Phone Plan that are close to cost. In the extremely unlikely event that Amazon tries to pull off an Apple, Kindle Phone sales will be poor.

What Impact will Kindle Phone have on Other Companies?

This is the very interesting part.

Profit focused companies like Apple and Microsoft must wonder about the motives of companies like Amazon.

Kindle Phone is going to destroy profits and/or steal them.

If Amazon goes with a cheap Kindle Phone with cheap data plans then a LOT of companies will see profits go down – Apple, Samsung, AT&T, Verizon, and more.

If Amazon goes for profits, it’ll still lead to some customers leaving Apple and Samsung. Those two companies will definitely feel the pain.

It’s a lose-lose situation for Apple and other smartphone companies. It might be worst for companies like HTC and Nokia which don’t have a very strong US brand. It’s tough enough to compete against Apple (almost impossible in the US) and Samsung (so strong worldwide, somewhat strong in the US). Now you have Amazon which is incredibly strong brand-wise in both US and UK. 2 of the 5 most important markets gone.

A Kindle Phone would mean that the top 3 phone brands in the US would be – Apple, Samsung, Amazon/Kindle.

Makes things incredibly difficult for Nokia and HTC and Android Phone makers in general. Problems for Blackberry too as Amazon will steal some market share from Blackberry too.

Definitely a lot of bloodshed if Kindle Phone comes in at a low price.

Kindle Phone Predictions

Here are our Kindle Phone Predictions -

  1. Kindle Phone is announced in September 2013 and ships in October 2013.
  2. Two Kindle Phones. A mid-range model that is free on a 2-year plan and a premium model that will be $99 to $149 on a 2-year plan.
  3. Special Data Plans that come with Kindle Phones. First Year at a ridiculously low price with the 2nd and subsequent years at a normal data plan type rate.
  4. Kindle Phone will do very well. If Amazon offers just a low-price high-end phone it’ll sell 5 to 10 million units. If Amazon offers it for $0 with a 2 year plan, it might sell 10 million or more units. If Amazon offers both a low priced phone ($0 to $50 with a 2-year plan) and a reasonable plan, then we might see 12 to 20 million sales. Note: This is for the Holiday Quarter, and it assumes there is pent up demand for a well made yet cheap Android phone which comes with a decent data plan.
  5. Kindle Phone will have a material impact on Apple and Samsung profits. Kindle Phone will have a very large impact on all other phone makers.
  6. Kindle Phone plans will have a small but not insignificant impact on AT&T and Verizon IF they are low-priced and/or offered without long contracts.
  7. Kindle Phones will also be sold without contract but with a Prime Membership for $199 to $249 for the mid-range Kindle Phone and $299 to $349 for the premium Kindle Phone.

Kindle Phone is going to have much more of an impact than Kindle Fire. Kindle Phone gives Amazon an opportunity to flex its infrastructure muscle and also show off its ability to sacrifice today’s profits for tomorrow’s promise. Prediction: Amazon will go all-out and deliver a pair of low-price, high-quality Kindle Phones with very compelling data plan options. We’ll see 10 to 20 million Kindle Phones sold by end fo 2013.

Filed under: Kindle Phone | Tagged: , | 12 Comments »

Kindle TV or Kindle Phone – Which will arrive first?

Posted on December 12, 2012 by switch11

Firstly, let’s be clear that there’s zero proof whatsoever that Amazon is going to release either a Kindle TV or a Kindle Phone in 2013 or 2014 or later.

Secondly, let’s go through exactly why both a Kindle TV and a Kindle Phone are inevitable and why Amazon is almost certainly working on both.

Why a Kindle TV is inevitable

The living room is a big focus area for nearly all major technology companies -

  1. Microsoft has a bit of an early lead with all the Xboxes it has sold which double up as Netflix and Movie providing set top boxes. It has also made other efforts like Windows Media Center.
  2. Apple is rumored to be working on an Apple TV. It also has the little Apple TV thingie that can stream movies to your TV. You could even argue that the next logical step in the iPod to iPhone to iPad evolution is an iTV.
  3. Google already has partnerships with Samsung to ship Smart TVs. It is also trying lots of different things including providing Internet and TV services to one lucky city.
  4. Facebook wants to replace TV. Or so people claim. That would mean its planning on replacing the Internet, Google, the Casual Games Industry, and TV. If you want to think, you might as well think Big.
  5. Sony is using Playstation much in the way Microsoft is using Xbox. Sony went so far as to include a Blu-Ray player in the Playstation itself. That’s just a ridiculous amount of commitment to becoming the living room ‘one device to rule them all’. Sony literally risked losing the console wars to try and win the living room wars.

Those are just a few examples. There are lots of other companies that want to take over people’s living rooms and the associated revenue streams i.e. Movies, Games, TV, Internet, Phone, etc.

Amazon makes most of its revenues from sales of electronics and sales of media. Within media the big income streams are books, movies, and music CDs. Let’s consider how Amazon sees the transition to digital in each -

  1. Books – Here we have the transition to Kindle eBooks and we have Kindle and Kindle Fire as delivery channels.
  2. Music – Here Amazon hasn’t been as successful. However, you can see with the focus on Dolby Sound and High Quality Speakers in Kindle Fire that it does want to control the delivery channel here too.
  3. Movies – Here we see Kindle Fire becoming Amazon’s delivery device of choice.
  4. Electronics – Amazon here is gradually adding its own products. Kindle, Kindle Fire, branded cables and such.

Whether you look at preservation/strengthening of the Movies revenue stream, or you look at preservation/strengthening of the Electronics revenue stream, owning the Movie delivery device makes perfect sense. That’s why Kindle Fire HD comes with HDMI streaming. That’s why a Kindle TV is very, very, very likely. Hopefully they don’t name it the Kindle Volcano with Plasma Screen and Ash Black Contrast.

If Amazon can own the store, if it can own the device through which movies are streamed, and if it can own the device on which movies are played – then why not?

The Main Reason a Kindle TV is inevitable

Eventually, the device on which the service is used/utilized controls the revenue stream. Sooner or later we are going to have Smart TVs become commonplace and the ‘DEFAULT’ movie services on these Smart TVs will rule.

Amazon must understand this. It has an incredible amount of insight into what devices people buy, what movies people buy, and patterns in electronics and movie rentals. It makes perfect sense for it to leverage that to make a TV that is ideally suited for TV Shows and Movies.

More importantly, if it doesn’t make its own TV, then sooner or later Apple with iOS powered Apple TV, or Google+Samsung with Google Android powered Smart TVs, will take over the living room.

Of course, we also have the threat of Xbox and Sony Playstation.

Amazon has to move now or it might get left behind.

My Thought: Amazon has been working on Kindle TV since 2010 or 2011.

My Prediction: Kindle TV by 2014 at the latest.

Why a Kindle Phone is inevitable

First, consider what Amazon Wireless is – It’s a giant store selling wireless phones and plans.

Amazon is gathering up an incredible amount of information on what sells phones and what sells plans and user habits and trends.

This might not seem relevant to our topic i.e. Why a Kindle Phone is inevitable. However, it’s very relevant because Amazon is learning all the secrets of the industry. It’s realizing a lot of things that make a Kindle Phone seem more and more important and necessary to Amazon’s future.

Second, let’s look at why a Kindle Phone is inevitable from a ‘it’s just absolutely necessary standpoint’.

Phones and Smart Phones have taken over the world. They are reaching customers that computers never did. They are always on the person. They are the perfect device for a company that aims to sell everything to everyone.

However, each phone platform comes with its own ecosystems. Some ecosystems are completely closed off. Some ecosystems ask for a 30% tax. Some ecosystems have defaults from rivals.

That means that Amazon is at other people’s mercy. That’s not a very good position to be in because those people tend to suck out all the profits.

Amazon’s only choice is to make its own ecosystem. That is why Kindle Fire isn’t ‘open’ and doesn’t use ‘open and free Android’.

That (the need for an ecosystem it can control) is why a Kindle Phone is inevitable and imminent. We’re creating a world where phones are ever present in our lives and everything is shifting to mobile. Amazon’s survival as an ecommerce giant depends on adjusting and adapting to this world. Its own phone is absolutely critical. It can’t keep giving its profits to the phone ecosystem owners.

My Thought: Amazon has been planning out and working on a Kindle Phone since the day iPhone came out i.e. 2007.

My Prediction: Kindle Phone out by 2013.

Why Kindle TV in 2014 is not a Fantasy

  1. If Android powered Samsung TVs or the next Xbox or the next Playstation or Apple’s iTV take over living rooms then Amazon will be unable to sell digital content to those users. With digital media all the infrastructure advantages Amazon has (warehouses, logistics, distribution) just disappear. Everyone has their own Cloud.
  2. The success of the Kindle must have gotten Amazon started on other products. There are only so many directions – Tablets, Phones, TVs, Computers. Tablets we’ve already seen in the form of Kindle Fire. Phones we might see soon in the form of Kindle Phone. TVs make a LOT of sense.
  3. Kindle TV becomes the delivery channel for everything – shopping services, movies, TV shows, games, surfing the Internet. It slots in perfectly with Kindle and Kindle Fire and Kindle Phone.

Why Kindle Phone in 2013 is not a Fantasy

  1. Amazon is probably tired of being one app out of a million in other ecosystems. Of seeing B&N and Apple and Google sell books and movies that Amazon could be selling. With its Kindle Phone and with its own ecosystem Amazon could take 100% of book sales and movie sales and music sales on its devices.
  2. Amazon Wireless is a great experiment – to collect all the data Amazon could need to sell its own phones. Perhaps even to sell its own data services.
  3. Kindle Phone allows Amazon to get more people into its ecosystem. It leads to more Kindle Fire and Kindle sales. It leads to more Amazon sales.
  4. A Kindle Phone is a 24-7 shopping device in users’ hands.
  5. Amazon can control the entire experience with Kindle Phone and get an incredible amount of information – what stores users go into before buying from Amazon, what stores users buy from after browsing at Amazon, buying patterns, data usage patterns, browsing information. It can use a Kindle Phone to even mount assaults on Google’s Search and Apple’s iTunes. If you control the device and the ecosystem you can subtly shift ALL the profit to yourself.

Fundamentally, Kindle Phone and Kindle TV are Amazon’s future. Without them Amazon is at the mercy of Apple and Google – neither of which are dying to see Amazon thrive. With Kindle Phone and Kindle TV Amazon gets two big huge pieces to add to Kindle Fire and Kindle and it becomes much, much stronger.

Filed under: Kindle Phone, Kindle TV | Tagged: , | 2 Comments »

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