Kindle Fire’s ‘Hardware, Software, Infrastructure/Ecosystem, 5 Main Uses’ Challenge

Kindle Fire HD and Kindle Fire 2 seem to be putting Amazon into a strong #2 Tablet Position this holiday season. My totally uneducated and random guesses would be -

  1. 12 to 19 million iPad Minis sold. Not sure at all about iPads.
  2. 4 million to 7 million Kindle Fire HDs and Kindle Fires sold.
  3. 1 million to 2 million Nook HD and Nook HD+s sold. If B&N is coming right out and saying sales were bad then it’s not inconceivable they were really bad. Note: I suspect there were 1 million to 2 million Nook Colors and Tablets sold on top of this.
  4. 2 million to 3.5 million Nexus 7s sold.
  5. 2 million or so Galaxy Tabs sold.

Basically, there’s a very high chance that Amazon will have the #2 Tablet Spot for this Holiday Season.

The questions that come up are -

  1. Will Amazon be able to maintain the #2 Spot?
  2. What does Amazon need to do to challenge iPad for the #1 Spot?

My guess is that both questions will be answered by the exact same things. That Amazon doesn’t really have a shot at maintaing the #2 spot if it doesn’t make a HUGE challenge for the #1 spot. That, in fact, Amazon will either beat the iPad Mini and get the #1 spot OR it will languish in the #3 spot.

Let’s take a look at why.

Hardware, Software, Infrastructure/Ecosystem

Looking at it from the company perspective, there are three big things Amazon has to master and deliver -

  1. Excellent Hardware. Amazon is doing a good job here. However, it has a way to go before it can beat iPad Mini. It is also, unfortunately, a bit behind the Nook HD+ and HD.
  2. Excellent Software. Amazon’s weakness is software. It tends to make software that is very stunted. This might well be a strategy. Make things that you don’t want users doing (surfing the web, arranging shelves, email) inconvenient. Make things you want users doing (shopping, reading, watching movies) easy.
  3. Excellent Infrastructure and Ecosystem. Amazon has a big advantage here over everyone other than Apple (ecosystem, Apple is far ahead; infrastructure, Amazon is slightly ahead).

Whether or not Kindle Fire can beat iPad Mini depends on whether or not Amazon can beat Apple in 2 out of these 3 areas. Apple will be forced to go with lower prices (it already has with iPad Mini) and the price advantage can’t be a competitive differentiator.

That leaves just – Software, Hardware, Infrastructure+Ecosystem.

Amazon has the best shot at beating Apple on Infrastructure+Ecosystem. After that software. Hardware is the toughest because Amazon can’t even beat Nook HD and Nexus 7 on hardware right now.

The #2 Spot is by no means safe

If B&N can keep improving its infrastructure and ecosystem (which is good but not great). If B&N can fix its software issues (its tendency to release its alpha software as its V1). Then B&N can take the #2 spot from Amazon. Frankly, I really don’t see B&N fixing its software issues. It’s just too hard to change your mindset after already shipping 3 generations of your Tablet. If you’re addicted to the idea that your users are your beta testers then you can’t switch to an ‘Our V1 is actually a V3′ mentality.

Nexus 7 is far more dangerous. Its software is improving even though it is both aesthetically challenged and ‘real users are not PhDs’ challenged. The hardware is good. Its big advantage is that it offers a huge, mostly free app and services ecosystem. The downside is that such an ecosystem tends to attract customers who don’t want to pay for things (to be honest, Google is probably happiest with users willing to trade personal information and data for free services).

Samsung keeps failing. It might, however, eventually succeed and release a Tablet that is actually markedly better than other Android Tablets.

There are dark horses like Microsoft Surface (the Pro version, not the RT version) and Nokia’s rumored Tablet.

Fundamentally, if Amazon doesn’t win in at least 2 of 3 areas over Android and Windows 8 Tablets and Nook, then it runs the risk of losing the #2 Spot it seems to have comfortably taken possession of (this holiday season).

Before we look at what Amazon needs to do to get the #1 Spot in Tablets, let’s look at the User Perspective on Tablets.

5 Main Tablet Uses

Looking at it from the end user perspective, there are 5 Main Tablet Uses Amazon has to deliver on. Since different users are different we actually have 10 Main Tablet Uses we’ll look at -

  1. Reading.
  2. Movies.
  3. Music.
  4. Surfing the Web.
  5. Games.
  6. Apps that are not Games.
  7. Shopping.
  8. Email.
  9. Facebook.
  10. Feeling Good and In Control.

Shopping

I find it interesting that the first link on the Kindle Fire HD is now ‘Shop’ and it lets you shop – Books, Videos, Apps, Audiobooks, Music, Newsstand, Games, Amazon Prime.

By Kindle Fire 4 we’ll see that this includes EVERYTHING you can buy at Amazon.

This is an important use case because a Tablet is much more convenient to buy things on than a Phone and it’s much more portable than a PC. Showrooming is going to be modified to be Showrooming+TabletBuying soon.

Reading

Reading includes books, magazines, and newspapers. It also, to an extent, includes reading websites and articles and PDFs.

There’s actually a TON of reading that we do and a device that makes reading easy and fun and pleasurable and convenient will ALWAYS have a big advantage over devices that don’t.

Movies

Movies are big for Tablets for a variety of reasons -

  1. Watching movies on Tablets.
  2. Second screen while watching TV.
  3. Using HDMI out to stream movies to TVs.
  4. Trips.
  5. Ease of Use.

Movie studios used to make it amazingly difficult to give them money. Now things are getting better and Tablets have a big role to play in making movie buying and renting and watching frictionless.

Music

Smarphones are killing off dedicated music players. However, Tablets are really good for music too. In some ways they are better since you can search for information about artists easily and you can browse for and buy music more conveniently. Lots of things (making playlists, searching, buying) are easier on Tablets.

All that was missing was good speakers and a committment to high quality sound. Amazon has started on that.

Surfing the Web

This is a huge use case. One where Amazon is shooting itself in the foot.

Perhaps it’s because it wants to harvest browsing patterns. Perhaps it’s to deter users from surfing the web. Whatever the reason, Amazon is making a mess of its web surfing experience.

It has to fix this quickly or it will be the end of its hopes of being a #1 or a strong #2 in the Tablet Market.

Games

This is a big use case. There are three categories we’ll look at (though there are more) -

  1. Casual Gamers. Bored people who just want something to interest them for a short duration. These are necessary to target since they are often the decision makers for Tablet purchases.
  2. Hardcore Gamers. A bit pointless really. They will tend to prefer platforms that are optimized for games.
  3. Babysitter Games. This is a big and necessary category to provide. Tablets are increasingly being used as ‘amusements’ for children. Towards that end Amazon must ensure it has all the bird throwing and rope cutting games it can get its hands on.

Games to keep Kids Occupied. Games to keep Bored Men and Women Entertained. These two categories of games are an absolute must-have. Without them no ‘Entertainment’ Tablet has a chance.

Apps that are not Games

Yes, there are actually people who prefer checking their financial accounts and stocks to finding water for OCD crocodiles.

Tablets have become a channel to various services and websites.

In effect a website is just a portal to a service. Tablets (or Tablet Apps if you want to be particular) are a portal to the service too.

People want portals to the services they use. It’s not enough that they can access the website (though that satisfies some users). The portal should be built for and optimized for the device.

So people want apps that provide the services they know and love.

Amazon has a lot of catching up to do here. Get enough users to force service providers to make apps. Get enough apps to entice users into choosing Kindle Fire HD.

Email

Email is absolutely critical. One of the top three uses. Perhaps even a top two use.

Amazon needs to improve support for email providers of all types. It needs to make the Email app better.

Without an excellent Email App the Kindle Fire HD can’t really be the #1 Tablet.

Facebook

Not my area of expertise. It seems to be a top 4 use case for tablets.

Feeling Good and in Control

I can’t explain this. You’re either a company that gets this or doesn’t. If you don’t get this then hire someone who can convince you that users value feeling good about themselves and feeling good about their devices more than anything else.

What does it mean to be excellent in the 5 Main Tablet Uses

Each user has a different set of ’5 Main Tablet Uses’. However, the above 10 items will show up for most users. Usually account for 3 or 4 of the Top 5.

If Amazon can excel in most or all of these 10, then most users will be HAPPY and SATISFIED with a Kindle Fire HD purchase.

For their next Tablet they’ll choose the Kindle Fire HD 2. They’ll tell their friends. They’ll gift Kindle Fires to their kids and wives and husbands and parents. They’ll go to websites and fight against wrong allegations and claims.

To be ‘excellent in the 5 Main Tablet Uses’ means that the user LOVES her experience with the device. That, for the 5 main things she does with the device, it just absolutely rocks.

Why is this necessary to be #1?

Firstly, because people aren’t buying the device to feel miserable or out of control or stupid or lost or disheartened. They are buying the Tablet for it to serve their needs, for the Tablet to be a loyal servant to their desires.

Secondly, because competitors are getting lots and lots of these things right. Apple gets 3 or 4 out of the 5 Main Tablet Uses right for lots of users. Samsung does it in phones and might figure out how to do it in Tablets (or it might get ‘inspired’). B&N might wake up one day and realize that software is just as important as store and hardware. Nokia might find some inspiration in its last few heartbeats.

Most importantly, Microsoft might deliver a Tablet that can be used for BOTH productivity things and the current ’5 Main Tablet Uses’. If that happens then ALL existing tablets get reduced to ‘Babysitting Tablets’ and ‘Entertainment Tablets’ – speciality tablets with a market of 100 to 200 million devices a year.

Kindle Fire HD has an excellent chance to solidify its grip on the #2 Tablet spot and fight for the #1 Tablet spot. At this point Jeff Bezos and Amazon need to get out of their ‘We are so smart. We can use path of least resistance to channel users away from what they want to do, and to where we want them to go’ thinking. Don’t give up on the chance to take over the Tablet Market because you are under the delusion that you can make horses drink water when they aren’t thirsty.

If Amazon can let go of its ’5 Best Uses for Amazon’ thinking and embrace ’5 Most Important Tablet Uses for Users’ thinking, then it really has a chance to take over the Tablet Market. Before the giant thrashing snake with its head cut off grows a new head. Before the monster bear that has been hibernating in its cave having dreams of ‘Developers, Developers, Developers’ wakes up and climbs out to the surface.

Why are so many companies investing in Nook Media (B&N’s Nook spin-off)?

The news that Pearson just invested $89.5 million in Nook Media, giving Nook Media a $1.8 billion valuation (more than B&N itself), means that we now have -

  1. Microsoft having invested $300 million for a 18% stake in Nook Media. It has also promised $300 million more.
  2. Pearson having invested $89.5 million for a 5% stake in Nook Media.

Here is Pearson’s official announcement of its investment in Nook Media. An interesting snippet -

Pearson will invest $89.5 million in cash in NOOK Media, gaining a five per cent equity stake. Following the transaction, Barnes & Noble will own approximately 78.2 percent of NOOK Media and Microsoft will own approximately 16.8 percent. Subject to certain conditions, Pearson will earn the option to purchase up to an additional five percent ownership in NOOK Media.

Pearson’s strategic investment in NOOK Media will help accelerate customer access to digital content by pairing the company’s leading expertise in online learning with NOOK Media’s expertise in online distribution and customer service.

There are two very interesting things here:

  1. Microsoft and Pearson have both invested in Nook Media at a very high valuation. They have both added in provisions to invest more.
  2. Nook Media gets $389.5 million now and another $300 million from Microsoft in future (surely, there must be conditions) and some undisclosed sum from Pearson in future if Pearson decides to get another 5% stake.

Suddenly Nook Media is a $1.8 billion valued company with $389.5 million cash. That’s stunning if you consider that -

  1. ALL of Barnes and Noble currently has a market valuation of $883 million.
  2. B&N just announced that Nook Holiday Sales have been below par and it’s not going to meet its projections for Nook Sales for 2012.

It all makes you wonder.

Why are so many companies investing in Nook Media?

There are a few reasons -

  1. Amazon. Amazon looms over all of books as a very, very dangerous adversary. Sooner or later we are going to see Publishers start to team up against it much more obviously. First, they used Apple and the Agency Model. Now, it’s going to be Nook and some new strategy.
  2. Nook Media actually has a good chance of doing well. It’s almost like a recurring revenue business with high up-front costs and relatively lower costs down the line. Customers that B&N has on Nook are going to stay with B&N until and unless something markedly better comes up.
  3. Transition. The Dinosaurs are figuring out that they have to transition. How do they transition? First, they invest in companies that will let them invest. Second, they start making their own companies. Third, they figure out which works better.
  4. B&N customer base. This might come as a surprise to some people – B&N customers will pick Nook if all other things are equal or close. Time after time we see Amazon customers and B&N customers disregard lots of flaws in the devices and in the closed garden. Why? Because there is trust and a relationship built over years (sometimes over decades).
  5. Nooks are very good devices in physical device terms. B&N tends to ship devices before the software is polished. This time, with Nook HD and Nook HD+, it really stretched things to an extreme – amazing hardware, alpha-level software. If B&N figures out how to make great software for Nooks right from launch (and it’s a big IF) then Nook Media has a bright future.
  6. B&N is still a player in the Tablet Market and it’s still a strong player in the Reading Tablet market.
  7. What other option do companies like Microsoft and Pearson have? Will Apple take an investment? Will Amazon take an investment? Will Google take an investment? What’s left?
  8. B&N Stores. B&N has very good retail footprint. It’s safe to assume Nook Media will enjoy a special relationship with the 700+ B&N Retail Stores and the 660+ B&N College Bookstores.

We are going to see a LOT more of this.

We have the Big Six Publishers merging with each other. We have Publishers and Companies investing in Nook and colluding with Apple.

It might be 4 years too late. But Publishers are finally waking up to the fact that Amazon wants the ENTIRE cake for itself. Perhaps it’s not too late. Perhaps there’s still time to prevent the New Gatekeeper from destroying the Old Gatekeepers.

Kindle Fire HD is the Dream Tablet for Amazon

Was reading a Kindle Fire HD article where Apple’s External PR Department (the main stream tech blog zombie horde) was complaining about Kindle Fire doing so poorly (estimates of ‘only’ 6 million Kindle Fires being sold this holiday quarter). It was at Business Insider.

The comments were very interesting. They seemed to fall into two categories -

  1. Kindle Fire is terrible.
  2. Kindle Fire is great for what it is.

And then it hit me. Every Tablet is the Dream Tablet for someone. iPad is the dream tablet for someone who wants ease of use. It’s also the dream tablet for someone who wants a fashion accessory (there are only so many times you can wear a pair of designer shoes in a month, the iPad you can carry every day). Google’s Nexus 7 is the dream tablet for people who want some elusive thing called ‘freedom’ and ‘choice’ – all with the considerate and loving overview of Big Brother keeping note of every click. It’s also the dream tablet for those that want a tablet for games and apps but don’t want Apple’s or Amazon’s controls and checks on how and where they get the aforementioned apps and games.

What about Kindle Fire HD?

Well, that’s the twist. Kindle Fire HD is the Dream Tablet not for a set of users, but for Amazon.

Amazon basically made what it thought would be the best Tablet for its business and for its long-term ambitions. Then it sent it out hoping enough people would like it.

It’s sort of working so far.

From the set of people who buy the Kindle Fire HD, there might very well be some who consider it their ‘Dream Tablet’. However, my guess would be that it’s Amazon itself for whom the Kindle Fire HD comes closest to being a ‘Dream Tablet’.

Consider the Dream Tablet wish list for Amazon -

  1. People can shop at Amazon. Check!
  2. People can buy books and read them. Check!
  3. People can rent movies and watch them. Check!
  4. People can subscribe to Prime and get the benefits. Check!
  5. People can be shown other things they can buy. Check!
  6. People can be shown advertisements. Check!
  7. People can buy music and listen to it. Check!
  8. Other companies are permanently or mostly kept out. Check!
  9. It strengthens users’ relationship with Amazon. Check!

Kindle Fire HD does ALL of those things very well.

A Dream Tablet wish list for Kindle Fire 2 from an actual user would perhaps be somewhat different -

  1. Great Screen and great for watching movies. Check!
  2. Great resolution screen for reading. Check!
  3. No bothersome Ads or Recommendations. Sorry!
  4. Great choice of where to buy things from. Sorry!
  5. Great speakers for movies and music. Check!
  6. Great range of Apps. Sorry!
  7. Very Stable and Well Tested. Incomplete!
  8. Great Value for Money. Check!
  9. Lots of additions and options like a charger and SD Card. Sorry!
  10. Great for Skype. Sort of.
  11. Great for Facebook. Not really.
  12. Great for Internet Surfing. Sort of.

While Kindle Fire 2 (Kindle Fire HD) does check off quite a few items from the ‘Dream Tablet’ wish list, it by no means checks off 100% (or even 80%) of the list. Contrast that with how it checks off nearly every single item on Amazon’s Dream Tablet wish list.

It’s a marvellous stunt that Amazon has pulled off

Ads = Special Offers.

Amazon Shopping Tablet = Kindle Fire Reading Tablet

Amazon Loyalty Club = Amazon Prime you pay $79 a year for.

It really is impressive in a lot of ways. Perhaps not as impressive as Apple selling electronics as status symbols and therefore getting people to trade in perfectly functioning devices every 1 to 2 years to ensure they appear ‘cool’ and ‘more hipster than their Williamsburg cronies’. Impressive nonetheless.

How could we make Kindle Fire more of a Dream Tablet for Amazon?

I was sitting down to write a ‘Kindle Fire 3 Wishlist’. For some strange reason this is where I ended up.

If you start with a features wishlist to make Kindle Fire 3 the Dream Tablet for you and me – there are loads of items you can come up with. However, it’s hard for us (in my opinion) to conceive any major feature that could be added to Kindle Fire HD to make it ‘even more suitable’ as an Amazon shopping and consumption device. If we stay within the realm of things that are ’reasonable’ and ‘possible in the next 1 to 3 years’ then it becomes hard to come up with features that could be added to Kindle Fire HD to make it a better Amazon Shopping Channel. Kindle Fire HD may or may not be our ‘Dream Tablet’ – It certainly is Amazon’s Dream Tablet.

Top Kindle Public Domain Book Lists Updated!

If you are looking for some great classics to read over the Holidays, check out two Top Kindle Public Domain Book Lists we just updated -

  1. The Top 250 Kindle Public Domain Titles. IMPORTANT: Only the Top 100 were updated.
  2. The Very Best Kindle Public Domain Titles. Probably not an accurate title but some good classics.

Kindle Fire is the biggest threat to the Kindle, Nook Tablet/HD is the biggest threat to the Nook

The Kindle Fire and the Nook HD are the biggest threats to the Kindle and the Nook.

First, let’s understand what dedicated eReaders are up against.

The Perception War eReaders have had to Fight

Dedicated eReaders have always had to fight a lot of ‘perceptions’ and ‘prejudices’. Basically, 2007 to 2012 has been an all-out ‘Perception War’.

  1. No one reads any more. It’s a $25 billion a year business in the US (or at least was in 2007) and yet people seem to believe this nonsense.
  2. Readers will not buy a device dedicated to reading. Again, this is beyond ridiculous. For some reason it’s OK for people in every other passion/interest to buy specialized equipment and devices – However, readers are supposed to not buy a device dedicated to reading.
  3. eInk is not better than LCD. Again, we have LCD-compatibles and they exist in a world where they think of LCD-incompatibles much as we think of werewolves and vampires. Surely, they don’t really exist. How could there be someone who wants to read a book in black and white?
  4. If a device can do more than just read, then it’s the best choice for reading. This is one of the funniest arguments. A reader wants to get ‘the best reading device’ and his non-reader friend says – Why not get something that you can do more than just read on? Why do you care if the reading experience isn’t as good?
  5. Readers don’t want to let go of the touch and smell of books. Apparently, from the number of eReaders being sold, they are getting over it.

However, that wasn’t all. Reality wasn’t kind to eReaders either.

The Reality of what eReaders had to Face

In addition to the Perception War, eReaders had to fight some harsh realities -

  1. LCD screens were far, far advanced in their evolution. eInk had (and still has) a really, really difficult task in front of it.
  2. LCD Screens were evolving faster than eInk.
  3. The companies making eReaders (with the exception of Sony) had zero prior hardware experience.
  4. Getting people to spend $399 or $299 and then having to pay again for books.
  5. Users were used to books and bookstores. eBooks was very new and scary.
  6. Publishers were very reluctant to let ebooks grow.
  7. Tablets were evolving much faster than eReaders. The Tablet reading experience (thanks to things like retina displays) was coming closer to the eInk reading experience in overall satisfaction.

It’s a miracle that we are seeing 10 million or so eReaders being sold every year. We started off with forecasts of ’40,000 Kindles sold and then it dies’. Now, with 10 million Kindles and Nooks and eReaders being sold every year, it’s again time to consider the mortality of eReaders.

Amazon and B&N are more focused on Tablets than eReaders

Somewhere along the way Amazon and B&N realized a few things -

  1. Tablets can evolve much faster than eReaders because the main ingredient (the screen) is evolving much faster.
  2. With Tablets they can sell users books and movies and music and eventually teddy bears and diapers and kitchen sinks.
  3. They can flip the Tablet encroachment (and they have). If this seems an exaggeration, consider that if it were not for Nook Color and Kindle Fire, Apple would not have released an iPad Mini and Google would not have released a Nexus 7. Nook Color and Kindle Fire created and cemented the 7″ Tablet Market.
  4. With Tablets they can reach casual readers who were choosing Tablets over eReaders.
  5. With Tablets they don’t have to wait another 25 years to get color eInk and sell movies.

It’s actually a very smart move by both companies to shift to Tablets. They are now selling to dedicated readers and casual readers. They are now selling books and movies. They are increasing their customer base.

This might be a great decision for Amazon and B&N but it’s very damaging for eReaders.

Amazon & B&N would rather sell Tablets to Readers than Dedicated eReaders

Imagine you’re B&N or Amazon. You have two options.

Option 1: Sell a reader a dedicated eReader. Then make money from ebooks sold. Also, watch while the reader buys an iPad and spends money on movies and music at Apple.

Option 2: Sell the reader both Tablets and dedicated eReaders. Then make money from everything – books, movies, music, apps.

There’s another aspect to Option 2. You’re adding a permanent mini-Store. You can, down the line, sell the user anything you and the user want.

It’s a no-brainer. Selling Tablets in addition to eReaders. Eventually, preferring to sell Tablets over eReaders.

Without Amazon & B&N focused on eReaders they will gradually stop evolving (not that they’re doing a very good job at the moment)

2007 – The First Kindle.

2012 – A Kindle with a built-in light, a touchscreen, and more clarity.

None of that is really very impressive.

Notice everything that’s missing: Color eInk, Flexible Screens, Unbreakable Screens, Video Support, Games Support.

eReaders were already evolving at a snail’s pace. Now that Amazon and B&N are focused on Tablets, where will the fire for eReader improvements come from?

Sony? (Please stop laughing. It’s a serious question.)

So we will see Kindle Fires and Nook Tablets get better and better. We will also see Nook eReaders and Kindle eReaders stagnate. This makes the contrast even sharper. Soon we’ll have eReaders that are stuck in 2008 (2009 if you’re generous) while Tablets zoom into 2013 and 2014.

Is the Inflection Point Past Us?

There was the first inflection point – when Nook Color did well. At that point the Nook eReader suddenly became B&N’s #2 Priority.

There was the second inflection point – when Kindle Fire did well. At that point, the Kindle became Amazon’s #2 Priority.

Amazon and B&N suddenly went from

Worldview 1: eReaders are going to replace paper. We will be selling hundreds of millions of eReaders per year.

to

Worldview 2: eReaders are going to be a niche market. Tablets will eventually replace paper and PCs. We will be selling hundreds of millions of Tablets per year.

We don’t know if either worldview is accurate. However, that’s the shift that happened in B&N’s thinking and Amazon’s thinking.

B&N saw the Nook Color as its future. Amazon saw Kindle Fire as its future.

Have we passed the inflection point of the death of eReaders. I don’t think so.

However, there are three things we can agree on -

  1. The single biggest threat to the Kindle is the Kindle Fire.
  2. The single biggest threat to the Nook is the Nook HD.
  3. eReaders have Tablets blocking their growth path to hundreds of millions of devices sold per year.

From Amazon and B&N’s perspective this is fine. They are exchanging a ‘one digital revenue stream’ device with a ‘multiple digital revenue streams’ device. They are also effectively safeguarding themselves from a world where they are made obsolete when it comes to digital products. However, for anyone who wants ‘dedicated reading devices’ to keep improving, this is sad and unfortunate. We are not going to see very many big advances in eReaders. We might even see them become a niche product and slowly die out.

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