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The Tablet Market: Act 2

October 05, 2011 by John Rose, Dominic Field, Ameeth Sankaran, and Mike Chao
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In This Article
  • Consumers are moving more and more activities, particularly those involving content consumption, to tablets.

  • Manufacturers are designing devices that meet this demand; they will segment the market based on functionality and price.

  • Amazon’s Kindle Fire is the latest manifestation of this trend—and a salvo in the emerging battle among competing ecosystems.

 

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In the third article in our series on the post-PC era, we look at recent research conducted by The Boston Consulting Group that reveals how emerging usage patterns among consumers and business buyers in the U.S. and China are shaping the tablet market as it enters a new phase of growth and segmentation.

With the launch of Amazon.com’s Kindle Fire, the curtain rises on the second act in the rapid evolution of the tablet market. If Apple’s iPad, launched just 18 months ago, pioneered broad functionality and a wide range of features in a portable package, then the next generation of devices will likely be designed to meet a growing desire among consumers and businesses for choice in functionality, price, and supporting ecosystem.

Employing its own take on Google’s Android operating system, the $199 Kindle Fire is optimized for reading, watching, and listening on a seven-inch screen. Amazon is betting that there is a large segment of users who want primarily to consume content, are satisfied with WiFi and limited local storage, and do not want to pay the iPad’s $499 entry-level price. Like the Kindle Fire, Sony’s entertainment-oriented Tablet S and Cisco’s business-focused Cius are tablets designed with specific user segments in mind.

More than any other tablet introduced since the launch of the iPad, however, the Kindle Fire is built around an ecosystem—of books, music, and movies—and is thus aimed directly at Apple’s competitive edge of locking in users. In an adaptation of the time-tested razor-and-blades strategy, Amazon appears to be willing to swap some profit margin on the device for the longer-term revenue to be generated from the rest of its ecosystem. As Jeff Bezos, Amazon’s CEO, puts it, “We don’t think of the Kindle Fire as a tablet. We think of it as a service.”

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