Ahead of Apple Tablet Launch, Kindle Repositions As Apps Device

Next week Apple is launching its much anticipated tablet/media pad device. There is much speculation that the device is coming to Verizon and that it may cost $800 "unlocked" and roughly $600 with a two-year service agreement. That price is going to be high for most people. By contrast, the basic Kindle is about $250 and the DX (larger format) is about $500.

The eReader market is getting more competitive by the day. The Apple device is going to be much more than an eReader, however. It allegedly will have a docking station or capability and the option to plug in a keyboard; so it may double as a netbook alternative. But the pricing of the device will be largely determinative of how successful it is. Kindle's $250 price will help it survive vs. $600 or $800 for the Apple tablet. 

In September of last year there was discussion and speculation about whether Kindle would open up (a la the iPhone) to third party developers. At the time we said: 

Yet, to succeed long term, opening up and building an ecosystem like what the iPhone has done is precisely what Kindle must do . . . 

Apple's forthcoming tablet will likely be compatible with iTunes and iPhone apps and provide most of the eReader functionality that Kindle has. It will be expensive, relatively speaking, but Apple's brand strength can support a higher priced media tablet, provided the functionality is there. Amazon is thus likely to confront a host of competitors with color screens and broader capabilities on the one side and cheaper models on the other.

Now Amazon has done just this and introduced an SDK:

Today, Amazon announced that it is inviting software developers to build and upload active content that will be available in the Kindle Store later this year. The new Kindle Development Kit gives developers access to programming interfaces, tools and documentation to build active content for Kindle--the #1 bestselling, most wished for, and most gifted product across all categories on Amazon. Developers can learn more about the Kindle Development Kit today at http://www.amazon.com/kdk/ and sign up to be notified when the limited beta starts next month.

This is the only direction for Kindle to go to make itself more broadly useful and ensure its survival. It now becomes, potentially, a competitor to the iPod Touch. There's speculation that Amazon has sold roughly 1.5 million Kindles to date. That compares with 70 million (roughly) iPhone OS devices around the world. Still a million devices is enough to get many developers interested. 

If they bite and we see a rich ecosystem of apps (need a color screen too) then Kindle becomes much more useful. Kindle can survive the Apple challenge by being more broadly useful, offering a color screen and being cheaper. On the other side of the fence, it can survive the challenge of Nook and others by developing an apps ecosystem. 

Apple has historically said that the company can't really sell a full-blown computer for less than $500. That's disappointing because if it really wants to push its tablet into the mainstream it would price it around that level or just above, with a carrier subsidy taking the price down to $300. But then you'd have iPod Touch cannibalization. 

Apple sees the device serving a wide range of goals, presumably to justify the higher price point. But if Kindle's SDK strategy succeeds it may ultimately put pressure on Apple to lower the price of the iPad or whatever it turns out to be.

____

Related: Retrevo survey on most desired features/content for Apple Tablet.