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A $99 Amazon tablet would be good for consumers, bad for everyone else

We look at what ever-cheaper tablets mean for competition and innovation.

When Amazon undercut its rival tablet makers in 2011 with the $200 Kindle Fire tablet, the company was just getting started with its price-cutting strategy.

Since then, Amazon dropped the original Kindle Fire's price to $159, and launched an 8.9-inch tablet for $299. (That model's price has since fallen to $269.) Now, an unnamed source tells TechCrunch that Amazon is prepping a $99 Kindle Fire for later this year. The tablet would reportedly have similar specs as the existing 7-inch Kindle Fire HD, including a TI processor and a 7-inch, 1280-by-800 resolution display.

Amazon has subsequently told Business Insider that a $99 Kindle Fire HD is "not happening." But even if this rumor doesn't pan out, there's little doubt that Amazon is working to lower the base price of its tablets, just as the company has done with its Kindle e-readers over the years. CEO Jeff Bezos has said that Amazon sells its tablets at a break-even price in hopes of making money on apps, content, and Amazon merchandise. As hardware costs fall, so too will the price of Amazon's tablets.

Some have worried that these ever-cheaper tablets are bad for competition and innovation. As Engadget's Jon Fingas argued last year, cheap tablets like Kindle Fire create an expectation of rock-bottom prices that other companies like Acer and Samsung can't sustain; that, in turn, discourages them from investing in innovative--and more expensive--new features. In general, there's a fear that Amazon and no-profit rivals like Google and Barnes & Noble will commoditize the entire tablet market--that is, a market where one manufacturer's tablet is indistinguishable from another.

But that argument doesn't entirely hold up. For one thing, it assumes that traditional hardware makers are innovating much with tablets to begin with--that's a hard point to argue. Before cheap tablets took over, products like the Motorola Xoom and Galaxy Tab 10.1 were little more than me-too tablets that did nothing to stand out from Apple's iPad. Not surprisingly, they flopped. Now those same hardware makers are eying the cheap tablet market, but again they're not doing much to stand out. The Kindle Fire's success hasn't really changed anything in terms of innovation from hardware makers. The tablets these companies sell now are a lot cheaper, but they're just as unexciting.

Besides, Amazon isn't really competing with those companies. As one analyst told TechCrunch, with a $100 tablet, Amazon would compete more with those awful budget tablets you find at Walgreens or CVS--essentially, a part of the market that's already been commoditized. The difference, of course, is that Amazon can still provide a decent experience at those low prices. It has to, because the whole business model relies on people actively using their tablets and buying more content. If Amazon can save the uneducated customer from buying a bad tablet, that's a good thing.

Finally, it's just not true that consumers are turned off by premium products now, as Apple has repeatedly proven. After the iPad mini debuted, Apple was selling those slimmed-down tablets as fast as it could make them, and overall iPad sales are still up despite the existence of lower-cost competitors. The truth is that great hardware with great software and services can still sell at a fair price. The reality for many hardware makers is that they offer none of those things, so the price is irrelevant.

If Amazon releases a $100 tablet, it might spell more danger for other hardware makers. It might force Google to release a cheaper tablet of its own, and it might even steal a few sales away from Apple. But it wouldn't decimate the tablet market as we know it. It would only make it better.


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