Kindle Fire, Recurring Revenue, & Delaying Profit Gratification

The Kindle Fire gets another stream of content today as Amazon signs a deal with Disney-ABC.

Paid Content (which ironically is free) covers a new, somewhat limited, deal Amazon has struck with Disney-ABC to power Kindle Fire.

 It includes prior seasons of Grey’s Anatomy; all seasons of Lost; … prior seasons of Marvel’s animated shows Spider-ManX-Men EvolutionThor & Loki: Blood Brothers and Iron Man: Extremis; …

This will become part of Amazon’s Prime program – for $79 you get free 2-day shipping on all purchases from Amazon and all this free streaming content.

It illustrates Amazon’s approach i.e. give away lots of free things to create recurring customers.

Why would Amazon pay for Content and then Bundle it for Free with Amazon Prime?

It’s the magic of recurring revenue.

When a customer does certain things that customer’s chances of becoming a recurring Amazon customer increase dramatically.

  1. Buys once from Amazon.
  2. Enters Credit Card information and Shipping Information and saves them.
  3. Buys gifts from Amazon and saves friends’ and relatives’ addresses.
  4. Carries around a Kindle AKA Mini Amazon Store.
  5. Carries around a Kindle Fire AKA 7″ Amazon Store.
  6. Gets a Prime membership program.

On the surface, it seems pretty crazy to PAY Disney-ABC for content and then just bundle it for free. However, it makes perfect sense when we think in terms like ‘lifetime value of the customer’ and ‘recurring revenue from the customer’.

If you’re a company that only makes money from one-time purchases or makes negligible money from recurring purchases, then this approach seems crazy.

However, let’s consider an example.

What is the Monthly Recurring Revenue and Lifetime Revenue from 10 million Kindle Fire owners?

Let’s assume Amazon is selling Kindle Fires at a loss of $25 and sells 10 million on them in the next 9 months.

That’s a massive loss of $250 million. The end of the world. The Press Kings and Queens of Profit are now frowning upon Amazonians and shall drown them in a deluge of Short-thinking drivel. Wall Street is aghast because its yearly bonus shall not benefit from pump-and-dumps of Amazon stock.

However, it’s not that the Kindle Fire owners buy their Tablet, pay the money, and just disappear.

No, they become Kindle owners and Amazon customers and far more likely to buy things from Amazon.

Let’s say the ‘profit’ they will generate per month will be approximately -

  1. $3 a month from books bought (physical and electronic).
  2. $4 a month from Gift purchases.
  3. $1 a month from music and video purchases (physical and electronic).
  4. $3 a month from other purchases (including electronic).

That’s $11 a month in profit. From 10 million Kindle Fire owners that’s $110 million a month.

Amazon keeps focusing on showing the $250 million loss and is happy to let everyone think they are losing money. Because they really, really, really don’t want people to understand that the $250 million loss (aka customer acquisition investment) will create a revenue stream of a massive $110 million a month in profit.

If Amazon can get 25% to subscribe to Prime, the profit figures for that 25% go up to -

  1. $4 a month from books bought (physical and electronic).
  2. $7 a month from Gift purchases.
  3. $2 a month from music and video purchases (physical and electronic).
  4. $5 a month from other purchases (including electronic).

That’s $18 a month.

For that 25% who sign up for Amazon Prime – Amazon is losing $25 per Kindle Fire and $x on shipping and content. But it’s gaining $18 every single month.

If, by magic, Amazon can get all 10 million Kindle Fire owners on Amazon Prime, then it’s added $180 million a month in profits.

Recurring Revenue is RECURRING

If Amazon has 10 million Kindle owners and 5 million Kindle Fire owners by end of 2011. With each generating $11 per month in profits.

That’s $110 million a month from Kindle owners and $55 million a month from Kindle Fire owners.

Amazon has to do nothing extra for these users. No customer acquisition. Minimal maintenance costs.

The biggest bonus is the predictability. Unless there is a massive cataclysm and the world gets reset to 1100 A.D. that $110 million a month and $55 million a month is safe for the next 1 to 4 years. Very few companies have that guarantee.

So, Amazon is 100% Right and Delaying Profit Gratification is Awesome?

Well, there’s a slight problem.

Amazon’s plans assume a few things that aren’t 100% guaranteed.

  1. That there will be no huge event which changes the economy massively.
  2. That companies which are building up huge reserves of money won’t enter the market with their huge reserves. This is actually not a bad bet – Why would companies getting 40% margins on hardware or 70% margins on software get into retail with its 10% margins?
  3. That WalMart won’t hire the people at B&N that turned Nook and Nook Color into successes. People are laughing at the fact that B&N has started selling rugs to its customers. It’s the beginning of a very dangerous move that might end with B&N becoming the Pepsi to Amazon’s Coke.
  4. That a company won’t figure out a way to circumvent the bond Kindle owners have with Amazon. People will, and do, put their own self-interest over their sense of connection with Amazon. WalMart does have an opening if it decides to find it and take it.
  5. That Profit gratification is the best strategy if you have recurring revenue. As opposed to cashing in and ALSO building up recurring revenue.

That last one is the most dangerous. It would be obvious to anyone that there is one thing massively better than recurring revenue - recurring profit. Yet Amazon seems unwilling to consider that possibility.

Amazon’s current approach is maximizing things like recurring revenue and ‘profit in the future’ while minimizing things like ‘profit in the present’. It’s also not building up its cash hoard or its patent arsenal and sooner or later companies with one or both will come knocking.

Amazon’s ’100% focus on the future’ strategy is a very dangerous strategy because it assumes things will either get better or stay the same. In some ways Amazon is doing too much of a good thing.

Can Amazon transition to Recurring Profit?

The problem is that Amazon wants to take over the World’s Retail. So its horizon is 40-50 years. It’ll be pretty happy to keep having short-term and middle-term losses. As long as its vision of huge recurring revenues in the future stay alive.

My feeling is that Amazon doesn’t want recurring profit. That, at some deep level, it feels that profit means it isn’t investing enough in the future. That some other company might beat it, unless it keeps building up more and more Delayed Gratification.

If there is an intervention and someone gives Amazon psychological/subconscious freedom to channel 10% of its earnings into a cash hoard – that would make for a very nice hedge against the possibility that all its delayed profit gets eaten up by a swooping Black Swan.

Amazon is doing the most intelligent thing out of all the big tech companies when it comes to recurring revenue and investing in the future (to be fair, another Seattle company is investing very heavily in its future). Amazon is the doing the least intelligent thing out of all the big tech companies when it comes to profiting in the present and building up its cash and patent reserves.

Kindle Fire, Nook Color 2, and iPad

It’s the first time that I’ve been more excited about the release of a Tablet than of a Kindle. In fact, both Kindle Fire and Nook Color 2 are amazingly exciting.

Why Kindle Touch and Kindle 4 are not that exciting

Part of it has to do with the painful loss of the keyboard in the new Kindles and part of it has to do with not appreciating the two big things the new Kindles provide – Touch and a $79 price.

It would be inappropriate to say that Touch is the equivalent of an extra cup-holder in a car (It’s more like going from no cup-holders to cup-holders). However, it isn’t really about reading.

The $79 price is meaningful because we expand the market of people who have access to ebooks. However, a $79 Kindle 4 isn’t game-changing when you have $99 Kindle 3s and $99 Kindle Touches.

The new Kindles represent the best and worst of Amazon.

  1. An excessive committment to incremental improvement – to the point that Kindle 4 is more like Kindle 2.75 (3 – .25) and Kindle Touch is Kindle 3.25.
  2. A ridiculous committment to getting Kindles into the hands of everyone who has ever even thought about reading a book. Ridiculous in a good sense.

But they aren’t game-changers. The real game changers are Kindle Fire and Nook Color 2. First, let’s see something that most people don’t know about i.e. the rise of Android Tablets.

27% of Tablet Sales in the last Quarter were Android Tablets – Even before Kindle Fire and Nook Color 2 arrived

Fierce Wireless has an eye-opening article about the growth of Android Tablets.

Strategy Analytics report -

  1. iPad had 66.6% of the Tablet Market in the third quarter of 2011.
  2. Android Tablets captured 26.9% of the market. Up from 2.3%.
  3. Apple had 11.1 million iPad shipments. Android Tablets numbered 4.5 million shipments.

Let’s think about that – Android Tablets went from 2.3% of the Tablet Market to 26.9%.

B&N’s Nook Color is probably single-handedly making up 10% of the Tablet Market at this point. Once Kindle Fire and Nook Color 2 come out – they might well account for 25% to 50% of the Tablet Market themselves.

Heresy. It’s absolutely wrong to even suggest that such inferior Tablets might eat up so much of the market.

Yet, it’s the truth.

Let’s see why.

Kindle Fire and Nook Color 2 are competing against each other, and against the iPad

It’s quite easy to see why Kindle Fire and Nook Color 2 are in competition. Kindle Fire is basically Amazon realizing that Tablets are a market and a channel. It has seen B&N prove that Tablets not produced by Apple can do well. And it’s acting – better late than never.

Why Kindle Fire and Nook Color 2 are competing against iPad becomes clearer when you think about what an iPad is.

An iPad is -

  1. A device lots of iDevice owners are buying. Let’s not discount the importance of this.
  2. Possibly the beginning of a post-PC world where everyone prioritizes consumption over creation.
  3. An expensive toy.
  4. Mobile computing done right.
  5. A killer device which is just missing the particular use that will make it indispensable. Note: There are arguments that watching movies, checking email, accessing Facebook, surfing the Internet, etc. are all the killer uses of the iPad. Which, if true, makes the case for the rise of Kindle Fire and Nook Color 2 stronger.
  6. A status symbol that you can use as a status symbol without being overly nouveau-riche.
  7. A very well marketed product.
  8. Shiny new technology.
  9. A way to sell all sorts of content.
  10. Revolutionary – though it isn’t quite clear what the revolution is. Or whether it is the iPad that will complete the revolution.
  11. Directionless now that there is no master salesman to tell us just why it is revolutionary.
  12. An actual ‘Personal’ computer. The first time ever that a computer was really personal and understood your thoughts and feelings and gave you emotions like that first movie you watched holding your sweetheart’s hand. Oh, iPad – you really do understand me.

If you look at that list, Kindle Fire and Nook Color 2 (and, for that matter, Nook Color) can do all the meaningful and possibly meaningful things on that list. Except being a status symbol (which, in a world of 7 billion people, should not be discounted).

The things that people use iPads for i.e. movies, surfing, email, etc. – are all quite possible on Kindle Fire and Nook Color. In fact, the 7″ size is actually better suited (for most people) for some things such as Email and Surfing the web.

A Tablet at $500 can reach tens of millions of people. It can be the best possible status symbol that these tens of millions of people are the chosen few – The 0.5% of the world’s population that can afford a $500 device.

A Tablet at $200 can reach hundreds of millions of people. Provided the Tablet really is ushering in a revolution, the $200 Tablet becomes far more important than the $500 Tablet. $200 Tablets can take those 6.95 billion people who are left out of the ‘Elite Revolution of the Tablet’ and give at least half a billion of them a chance to participate in the magic and revolution of Tablets. To be able to watch movies on a 7″ or 10″ screen while they sit on the couch in front of their 30″ TV screens. To send email via a device that has a larger screen than their cellphones and that is not as far away as their PC.

That’s the thing that everyone seems to be missing. Revolutionary devices aren’t limited to Marie Antoinette and the nobles - cake is.

If Tablets really are revolutionary, then Kindle Fire and Nook Color 2 will end up being the actual revolutionaries

Consider the scenarios -

  1. Tablets are revolutionary but only for people who can afford a $500 device. That certainly limits market size and makes it hard to argue it’s anything other than a ‘revolution for the Elite’. It also guarantees iPad will never lose – unless someone makes a $750 tablet with purple headphones. You have to admit - it would be a pretty hollow revolution if it only affected people able to afford $500 devices with no known killer use case scenario.
  2. Tablets are revolutionary for everyone. In which case a $200 Tablet that sacrifices status symbol capabilities and aesthetic flourish, but keeps 90% of the ‘actual usage value’ of Tablets, will become the real revolution.
  3. Tablets are just toys. In this case all Tablets will do well until people move on to the next shiny toy.

At $200 and $250 (probably), Kindle Fire and Nook Color 2 can reach 10 to 20 times more people than a $500 iPad. Apple knows this and knows that it must release a $300 mini iPad soon. However, and this is key, the success of the Nook Color and the supposed/probable/imminent success of the Kindle Fire is going to motivate every single technology company to get back into Tablets. Achilles has a heel and Nook Color and Kindle Fire are pinpointing it for everyone to see.

It’s all very simple.

If Tablets really are a revolution – then $200 Tablets that can reach a billion people are the ones that will carry the load.

Kindle Fire and Nook Color 2 actually beat the iPad in some core functions

Nook Color has a better quality screen than the iPad (iPad, not iPad 2 as don’t own one and don’t know what revolutionary and magical technologies it has in its screen). It’s heresy to mention such things but the $249 Nook Color has an IPS LCD screen with 169 dpi. It’s an absolutely amazing screen. Nook Color 2 will definitely be better than iPad 2 in at least some areas (SD card slot, for example).

Kindle Fire has the Silk Browser which will presumably (hopefully?) be lightning fast. Amazon may even do the unthinkable and make an OS that’s faster and easier to use than iPad 2.

We aren’t just talking about things that ‘are needed for the aesthetic purity of the device’ i.e. no USB slots and no SD card slots. We are talking about core things – Surfing the Net, Screen Quality. We are getting into dangerous territory here. Apple people might have to start explaining how Safari is still a better browser because the slower speed lets you better appreciate the smoothness of touch of the screen. What is life if not an opportunity to take things slow and appreciate the finer things in life. Buy an iPad – get time to stand and stare.

What happens when the $200 Kindle Fire Tablet is easier to hold, better for browsing, and much better value for money than the $500 Tablet?

We don’t know. However, it would be safe to assume that a considerable number of people would buy it. In fact, all signs indicate that tons of people already are.

Of course, analysts and Apple people will say that not a single person out of the 5 million or so people who are likely to buy a Kindle Fire in 2011 would have bought an iPad.

A $200 Tablet couldn’t possibly affect a $500 Tablet. Who would sacrifice white headphones for a measly $300?

What happens if the $250 Nook Color 2 (perhaps even $200) has better features than the $500 Tablet?

Again, we don’t know. However, it’s quite likely that Nook Color 2 will sell very well if it beats iPad 2 in some areas. Because then the price difference becomes a huge factor.

If Nook Color is selling well enough to help propel Android Tablets to 27.9% market share – then it would be safe to assume that an improved Nook Color 2 would sell even more and take away even more market share from the iPad.

Notice the trend – Kindle Fire funnels away some iPad sales, Nook Color 2 funnels away some more iPad sales, Android Tablets keep increasing market share.

It’s very, very interesting.

The Magical and Revolutionary Barrier is Gone

That’s the truth.

The magical and revolutionary and insanely great halo that was protecting iPad and keeping Android Tablets at 2.3% market share is gone. Forever.

B&N figured out that it couldn’t compete with iPad at $500 and it went with $250. Asus figured out that it couldn’t compete with iPad by copying the design and it went with the Transformer. Perhaps most importantly, Amazon realized it’s a market it must enter and one it must enter with a low-priced Tablet and it is releasing a $200 Kindle Fire Tablet.

You can’t compete with a $500 Status Symbol and Tablet using a $500 Tablet. But you can compete with it very effectively using a $250 Tablet. That’s B&N’s lesson and it’s the lesson that Apple’s competitors can use to beat it in any market. Seriously, each and every Apple product has that huge weakness - Unfortunately, its competitors keep playing up to its strengths instead of attacking its weaknesses.

It’s a relief that there are at least two companies that are attacking Achilles’ Heel instead of testing the strength of his Shield with their arrows.

It shouldn’t be so difficult – History is a great teacher.

Apple stole the Graphical User Interface idea from Xerox and figured out how to make a beautiful, expensive computer out of it. Microsoft stole the Graphical User Interface Idea from Xerox and figured out how to make PCs cheap and put a PC on every desk.

Microsoft tried and failed to make Tablet Computers. Apple succeeded in showing everyone there is a tablet market. But it is repeating its mistakes. Amazon and B&N and Asus and other companies are going to put a Tablet in every person’s hands – even if those hands can’t afford a $500 Tablet.

History is such a beautiful thing – if you learn the lessons it teaches you.

The Vatican of Consumerism is now directionless and defenceless and the armies of value for money and thrift are fast approaching. Apple’s cash hoard and its patent arsenal are going to come in very handy but they aren’t going to be enough. It’s the beginning of the end of consumerism and conspicuous consumption in tech devices. Even if we don’t know it yet.

Kindle Fire 2 in 1st half 2012, Kindle Fire might sell 4-5 million units in 2011

Kindle Fire seems to be doing so well that Amazon has kicked off production of Kindle Fire 2.

DigiTimes claims that Foxconn (maker of iPhones and iPads and Kindles; torturer of its own workers) has landed orders for assembling Kindle Fire 2. Kindle Fire 2 release date will supposedly be in the first half of 2012.

Foxconn Electronics (Hon Hai Precision Industry) reportedly has secured orders from Amazon for assembling second-generation Kindle Fire tablet PCs, with shipments to begin in the first half of 2012, according to Taiwan-based makers. In response, Foxconn declined to comment.

The sources pointed out that the first-generation Kindle Fire is handled by Quanta Computer, but Foxconn has already successfully gained orders for the second-generation model.

Kindle Fire was produced/assembled by Quanta Computer.

Kindle Fire must be selling well for Amazon to already sign a deal for Kindle Fire 2. It must be selling particularly well for Amazon to target the first half of 2012 for the Kindle Fire 2 release.

How well is Kindle Fire selling?

Kindle Fire might sell 4 to 5 million units in 2011

DigiTimes thinks 4 million Kindle Fires will be sold by end 2011 -

Sources said sales of Kindle Fire may reach four million units by the end of 2011, which may contribute to shipment growth of its suppliers.

Meanwhile, market observers expect Amazon to drop the 7-inch Kindle Fire’s price from the current US$199 after the release of the 10-inch version in 2012.

Given that ‘leaked’ inventory records show sales of 50,000 Kindle Fires a day, it’s not a stretch to say that 2 million Kindle Fires might sell in 2011.

4 million still seems a high estimate. However, Analysts mostly agree.

A Rodman & Renshaw analyst lifted his estimate from 4 million Kindle Fire sales in 2011 to 5 million Kindle Fire sales. He points out that the monthly run rate (based on ‘leaked’ inventory records) is over a million Kindle Fire sales a month. He also points out that Amazon is constrained by display availability.

Forrester has also predicted Kindle Fire sales of 5 million in 2011.

Barclays analyst Antony DiCelemto threatens to destroy analysts’ years of built-up undependability by predicting a very realistic 2 million Kindle Fire sales in 2011. He also predicts 6.4 million Kindle Fire sales in 2012, and a further 1.5 million sales of Kindle Fire 10″.

Why no love for Asus Transformer and Nook Color?

It’s quite remarkable that in all the iPad and Kindle Fire hysteria everyone is forgetting two Tablets that have been quite successful i.e. Nook Color and Asus Transformer.

Transformer is supposedly selling half a million units a month. Nook Color has sold millions of units. Why don’t they qualify as successes?

For that matter, why is everyone ignoring a potential Nook Color 2?

There seem to be two fallacies that the Press and Analysts are wedded to -

  1. The $199 Tablets couldn’t possibly affect sales of the iPad.
  2. The $199 Tablet market is automatically handed over to Kindle Fire.

In this stark black and white world there are no shades of grey (obviously, since no eReaders are allowed to exist). The Tablet market is magically carved into two sections – High End and Low End. Apple is then handed over the High End market which not only is permanently exclusive to Apple but also immune to whatever happens in the low-end Tablet market. The Low End Tablet market is handed over to Amazon even before anyone has seen what Kindle Fire is like.

All the Kindle Fire sales estimates (both ones for 5 million Kindle Fire sales in 2011 and ones for 10 million+ Kindle Fire sales in 2012) assume that no other low-priced Tablets exist. They do, and they will play a role. Sales of either Kindle Fire or iPad are going to be affected - Probably both.

Kindle Fire vs Nook Color

This isn’t a Kindle Fire vs Nook Color review. This is just a comparison of Kindle Fire and Nook Color features and technical specifications.

  • Experience with Kindle Fire: None. We use Kindle Fire information Amazon has shared.
  • Experience with Nook Color: Nearly a year of ownership.
  • Biases: This is a Kindle Blog. I do love my Nook Color.

Nook Color is a Reading Tablet and is a bit more oriented towards reading. Kindle Fire is a general Tablet.

The wild card is Nook Color 2. A Nook Color 2 and a Nook Color 2 Acclaim (high-end version) might arrive by the time Kindle Fire ships. Then Kindle Fire vs Nook Color 2 would be the more apt comparison.

Kindle Fire vs Nook Color – Price

The elephant in the room is the $199 price of the Kindle Fire.

Nook Color at $249 is a steal. However, at $50 cheaper, Kindle Fire clearly wins the pricing war. This might mean that a whole segment of people (those who won’t pay more than $199 for a device that only does everything) will only consider Kindle Fire.

If price is your primary criteria, Kindle Fire is probably your first choice. You might as well skip the rest of this Kindle Fire vs Nook Color comparison.

  1. Kindle Fire is probably going to be cheaper than Nook Color 2. If B&N comes in at $199 Amazon is likely to lower the price of Kindle Fire further.
  2. Refurbished Nook Colors are available for $179. If you don’t mind refurbished and are looking for ‘lowest price possible’ above all else – consider a refurbished Nook Color.
  3. Amazon has a lot more flexibility to subsidize prices as it can sell users all sorts of things. B&N is limited to books and toys and a few other things. Amazon is probably going to win the Lowest Price Tablet battle against B&N every time.

By the end of this Kindle Fire vs Nook Color comparison we’ll have a good idea whether Amazon’s price advantage also translates into a value for money advantage.

I’ll put up a Kindle Fire vs Nook Color 2 comparison when B&N reveals Nook Color 2.

Kindle Fire vs Nook Color – 5 Things Kindle Fire brings to the Table

The 5 biggest things Amazon brings to the Tablet table are -

  1. The $199 Price – which is very impressive for a 7″ Tablet.
  2. Access to content of all sorts – books, music, TV shows, movies, games, apps. For example – 100,000 movies and TV shows.
  3. Amazon Silk – A browser that promises faster browsing. The slight negative is that it might be a privacy nightmare.
  4. Amazon Android App Store – which has thousands of apps and games (exactly how many will work well on Kindle Fire’s 7″ screen is not known). B&N’s App Store only has around 790 apps and games (though those are all optimized for Nook Color).
  5. Amazon Infrastructure – By virtue of running the most successful set of Cloud Services in the world, Amazon has an advantage in infrastructure.

There are some other Kindle Fire advantages which you might find compelling -

  1. Amazon’s custom-built UI for Kindle Fire looks rather fetching. People who’ve seen it first-hand are also impressed by how fast and responsive it is. It’s also built on a later version of Android (2.3.4 supposedly).
  2. When it comes to eBooks, Kindle Store has the better prices.
  3. Faster dual-core processor. Nook Color has a 800 Mhz single core processor while Kindle Fire’s dual core processor is rumored to run at 1.2 Ghz.
  4. [Not Sure of This] It seems that Nook Color does not have the reinforced higher-strength glass display that Kindle Fire does. It’s not mentioned anywhere in Nook Color specs.
  5. Light Weight – At just 14.6 ounces (413 grams) it’s lighter than Nook Color (442 grams) and considerably lighter than 10″ Tablets. This isn’t a big advantage but might matter to you.
  6. Cloud Storage. There is free Cloud Storage for all content you buy from Amazon. There may or may not be the option to store your own content in the cloud. If it matches Amazon’s usual Cloud offering then the first 5 GB of your own content will be stored for free.
  7. More Compact – Kindle Fire is 7.5″ by 4.7″ by 0.45″ while Nook Color is 8.1″ by 5″ by 0.48″. Again, not a big advantabe but it might matter to you.

We’ll take a look at Amazon vs B&N later and that will cover Amazon strengths such as Cloud Services/Infrastructure and Customer Service.

Kindle Fire vs Nook Color - 4 Things Nook Color has that Fire doesn’t

Nook Color holds up surprisingly well for a Tablet that was released a year ago and is a ‘Reading Tablet’.

  1. SD Card Slot and Rooting. Nook Color is very easy to root and you can even set up a SD Card such that it lets you switch between default B&N OS and rooted Android OS easily. The SD Card also lets you add as much storage as you like (SD cards up to 32 GB are supported). The easy rooting means things like access to Android Market and access to reading apps from other eBook companies. Kindle Fire rooting is probably going to be tougher.
  2. ePub Support by Default. Get ebooks from any store except Amazon (though you can root your Nook Color to get access to Kindle Android App). While there are apps like Kobo in Amazon’s Android App Store which support ePub, it is unknown whether they will be approved for Kindle Fire.
  3. Nook Color is a proven device and it’s available now. B&N confirmed last year that it was selling 700,000 Tablets a month during Holiday Season. After 10+ months of use by millions of users and a few software updates (that added an app store and email and other improvements) Nook Color is a battle-tested Reading Tablet. Kindle Fire won’t be available until November 15th and then we’ll have to see what people and Kindle Fire reviews say. Nook Color is also a good ownership experience. Most of the Nook Color owners I’ve talked to love it. There are certain intangibles that you only experience after owning a device – likability and usefulness and satisfaction. Nook Color has that. Kindle Fire probably will too – but we’ll only know after people have owned it for a while.
  4. Nook Color is a Reading Tablet and likely to be better for reading. While both Kindle Fire and Nook Color have ‘specially treated’ screens (which aren’t really as effective as you might think) Nook Color is a reading Tablet and more focused on reading. Unless Kindle Fire has some features we haven’t yet heard of, Nook Color is likely to be the better device for reading.

There are some additional areas where Nook Color has an advantage -

  1. Nook Color has wider support for document and file formats. Kindle Fire supports MP4 and VP8 video formats while Nook Color supports 3GP, MP4, 3G2, and FLV. Nook Color supports Word, Excel, and Powerpoint formats natively (DOC, PPT, PPS, DOCM, XLSM, PPTM, PPSX, PPSM, DOCX, XLSX, PPTX) and also supports RTF (real text format). While Kindle Fire supports quite a few audio formats (Audible, non-DRM AAC, MP3, MIDI, OGG, WAV) Nook Color supports more i.e. 3GP, 3G2, MP4, AMR, MP3, MID, XMF, MXMF, RTTL, OTA, IMY, FLV, SWF, WAV, OGG,  and ACC. You could get apps on Kindle Fire to support these – However, it’s far more convenient to have in-built support.
  2. B&N seems to be going after the Kids market very aggressively. While Amazon promises 1,000+ illustrated children’s books we’ll have to see if it can match the range of children’s books and apps Nook Color has.
  3. You can go in and see a Nook Color in a physical store. You can buy it right now. If you have questions you can jump into a store and ask your questions.

It makes Nook Color all the more impressive that even a year after release it matches Kindle Fire on important aspects like screen quality and even holds some clear advantages.

Amazon vs B&N

Almost as important as the devices are the companies behind them. Here are some key areas and how Amazon and B&N do in them -

  1. Customer Service – Amazon is the clear winner with its better customer service. B&N’s advantage is having all these stores you can go into for help.
  2. Innovation – Surprisingly, it is B&N that is leading in Tablet innovation. Nook Color from November 2011 is nearly as good as Kindle Fire from November 2012. Will Nook Color 2 be as innovative and ahead of the curve as Nook Color 1?
  3. Financial Stability – Amazon is the clear winner here. B&N’s disadvantage is its shaky financial situation. There are however two escapes – Nook Color is easy to root, B&N books are in epub format and Nook Color supports ePub format.
  4. Return Policy – Amazon’s 30 day return policy is better than B&N’s 14 day return policy. Both stores have generous Holiday Return Policies but Amazon’s is better. You could always get Nook Color from Best Buy and take advantage of its return policy.
  5. Store and Website. Both sites do a good job. Amazon has the advantage as it sells a lot more things and has a lot more web experience.
  6. Trust. This is a tough one. Both companies have a lot of loyal customers.

Financial Stability is the big one here. B&N is not in any danger of disappearing any time soon – In fact, Nook and Nook Color pretty much guarantee that. However, Amazon is more stable and more capable of fighting a price war.

Kindle Fire, Nook Color are uncomfortably close

Kindle Fire and Nook Color are currently close with Kindle Fire slightly ahead (mostly due to its cheaper price and better access to content of all sorts).

Kindle Fire is better for people who want a Tablet that – is cheaper, offers easy access to all types of content, has a tougher screen, is faster, has a faster browser, is compacter and lighter, offers Amazon’s backing and customer support.

Nook Color is better for people who want a Tablet that – is tested and safe, offers a SD Card slot, is easier to root, is probably better for reading, offers ePub support, offers wider format support, is available now, you can go to a store and try out.

Kindle Fire is the winner - provided that it does indeed deliver on all it promises. We’ll know once it is out and journalists’ and real users’ Kindle Fire reviews arrive. Kindle Fire also seems to be better value for money.

Before we make any recommendations, there is one last twist - Nook Color 2 is almost certainly around the corner.

The Importance of Nook Color 2

The biggest wild card in the Kindle Fire vs Nook Color decision is that two Nook Color 2s are around the corner – a spiritual successor to Nook Color that might be $249 or less, and a high-end Nook Color 2 that might be $349.

Since Nook Color is quite competitive with Kindle Fire - it’s quite possible Nook Color 2 ends up being the best 7″ Tablet available for Christmas 2011.

Kindle Fire isn’t out until mid-November. Nook Color 2 will benefit from all the lessons B&N has learnt in the course of selling millions of Nook Colors. Kindle Fire vs Nook Color 2 is the comparison to look at when deciding what Tablet to buy for Christmas 2011.

My Recommendation on Kindle Fire vs Nook Color: Wait to see what Nook Color 2 is like. B&N’s second generation Reading Tablet might outshine Amazon’s first generation Tablet.

Kindle Fire stealing Kindle’s thunder?

The Kindle Fire is supposedly selling at the rate of 25,000 devices per day. It’s supposedly selling more than all the other new Kindles combined.

The natural question that comes up is – Is Kindle Fire going to turn Kindle the eReader into an afterthought?

Customer Interest in Kindle Fire is overwhelming the official Kindle Forum

One data point supporting the claim that Kindle Fire sales are very strong is the amount of interest regarding the Kindle Fire at the official Kindle Forum -

  1. The first page (at 1:39 am EST) had 6 threads about the Kindle Fire and just one about the eInk Kindles.
  2. The second page had 8 threads about the Kindle Fire and 4 about the eInk Kindles.
  3. The third page had 7 threads about the Kindle Fire and 3 about the eInk Kindles.
  4. The fourth page had 5 threads about the Kindle Fire and 5 about the eInk Kindles.
  5. The fifth page had 7 threads about the Kindle Fire and 2 about the eInk Kindles.

Across the first five pages there are 33 threads about the Kindle Fire and only 15 threads about all other Kindles combined.

Search and News is dominated by Kindle Fire

Take a look at this image to see just how dominant Kindle Fire is (in terms of search interest and news coverage) -

Kindle Fire is taking over

Search Interest in the various kindles

The Blue line represents Kindle Fire interest. The upper graph is for Internet Searches and the lower graph is for News Articles. You can take a look at it at Google Trends.

By the way, the other device that is getting a lot more attention than eInk Kindles (though much less than Kindle Fire) – Nook Color.

Analyst Estimates and Forecasts are all claiming Kindle Fire is selling more than all other Kindles combined

While estimates vary, the common thread is that all of them suggest that Amazon is currently selling a lot more Kindle Fires than Kindles.

There’s still the 10″ Kindle Fire

There are very strong rumors that a 10″ Kindle Fire Tablet will arrive early in 2012. And that too at a low, low price of $299.

If the 7″ Kindle by itself is selling more than eInk Kindles, it’s a safe bet to assume that the two Kindle Fire tablets together will dwarf the eInk Kindles in total sales.

Are people going to start associating ‘Kindle’ with the Tablets?

Probably.

If we have a lot more people buying Kindle Fire and a lot more people searching for Kindle Fire and a lot more people asking questions about Kindle Fire – ‘Kindle’ will start being associated with Kindle Fire.

Does all of this even matter?

Well, in a way, it doesn’t. If you’re Amazon you leverage the ‘Kindle’ brand and make it stronger and sell a ton of Tablets and now people can buy movies and games and music in addition to books.

In a way, it does. If you want a dedicated reading device that keeps improving and evolving, then you have to wonder about what happens if this trend continues – if Kindle Fire keeps outselling all other Kindles combined, if it becomes what people think of when they think ‘Kindle’.

Amazon has shifted from ‘eInk is better for reading than LCD’ to selling both eInk and LCD devices. The lines are getting blurred and we don’t really know what future it’s going to lead us to.

There is a possibility that we’ve finally gotten a Kindle Killer - it’s strange that it’s the Kindle Fire. The rest of 2011 is going to be very interesting and 2012 even more so. Barclays is very optimistic and thinks 23.5 million eInk Kindles will be sold in 2012 and that eInk Kindles will outsell Kindle Fire in 2012. However, user interest and search trends and news coverage are telling a very different story.

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