Many buyers of basic color inkjet printers have wondered how such a complex piece of machinery can be sold for less than a polo shirt until they take it home, print a handful of pages and realize that they need to replace the ink cartridges at a cost approaching $100. A similar philosophy has been adopted by Amazon in the introduction of their new Kindle series of four tablets starting at the jaw-dropping price of $79. The Kindles are attractive, feature-packed and technologically refined – but if you want to actually read anything on them, you’ll have to buy ebooks at anywhere between $10 and $15 each. Based on a calculation whereby a dedicated reader can polish off a book in a couple of days, that wondrous little Kindle can lead to a couple of thousand dollars a year of income to Amazon.

Amazon’s Interlocking Ecosystem

Regardless of the economics behind the four new Kindles, it cannot be disputed that buyers of the dramatically-priced full-color Kindle Fire at $199 are getting a tremendous bargain for such a capable device. This factor is especially significant considering that the hardware is an unabashed clone of RIM’s Blackberry Playbook, which up until recently was selling (or not) for up to $700 and didn’t even provide email capabilities unless you tethered it to a Blackberry smartphone. The Kindle Fire is a 7 inch tablet that runs a version of Android Gingerbread, which has been extensively customized to be an integral part of the Amazon ecosystem. Although that statement may trigger mental images of steamy Brazilian jungles, Jeff Bezos’ Amazon has built an ecosystem of interlocking book, music, app and video sales that challenges Apple’s established stores.

Punky Brewster, Anyone?

Ancillary sales are imperative in order to make up for the subsidy estimated at around a hundred dollars, which Amazon extends to each and every Kindle Fire, so the company proposes a variety of digital products designed to encourage you to buy as much content as possible. Some of these offerings come packaged: a subscription to Amazon Prime alone is $79 a year and it allows you to stream thousands of old movies and TV shows you really don’t want to watch anyway. Kojak, Growing Pains, Green Acres and Punky Brewster, anyone?
It’s All in the Cloud
Amazon is justly proud of its cloud services (when they work) and thus the Kindle Fire differs from the Playbook mold in another significant way: It only has 8GB of storage capacity. Although Playbooks come with as much as 64GB, the diminished storage is not a handicap, as the Fire is designed to interact seamlessly with the Amazon cloud, which is where most of the content resides.

Fire’s Fast Flash Browser

There is little doubt that the Kindle Fire is a shot across the bow of the Apple iPad in more ways than just the pricing. The Fire’s browser actually interacts with Amazon’s cloud to make web navigation and streaming much faster than tablets that have to use local processor power to power the internet experience. Another hit on the iPad is that the Fire’s browser runs Flash, which allows users to access about three quarters of all online games and videos that feature the Adobe multimedia standard… unlike Apple users who have no choice but to stare at the infamous blue Lego brick with the question marks on the side.

Amazon’s new Kindles are a vivid demonstration of the future of online entertainment. The real money is in selling the content, not in turning a profit on the technology required to experience that content. After all, no one buys a Fire or an iPad just to gaze at the welcome screen. These products essentially only demonstrate their full value as content delivery devices. This marks the transition between spending a lot of money on a new TV set to get free over-the-air channels and obtaining your viewing device at a relative pittance but having to shell out for everything you want to watch. Amazon is trying to prove that this new entertainment business model not only works but can turn a significant profit to boot.