What impressed me most, however, is not the new gadgets. Instead, I was interested to hear Amazon CEO Jeff Bezos say that the hardware is no longer the most important thing. He says the hardware details don't matter and that the service is the important thing. In effect, the new Kindle devices are simply the delivery mechanism for Amazon's many video, music and shopping services. I suspect he is right. It's not what the gadgets can do, it's what the gadgets can deliver.
The Amazon business model is simple: price the tablets and e-readers aggressively, even below cost. Amazon will make money by delivering service. It is similar to the business model of cell phone companies. They sometimes sell phones for as little as one cent and yet they are making millions of dollars in profit on the cell phone calls, web services, and text messaging.
This isn't rocket science, but Amazon may be well ahead of its competitors. Google has produced great operating systems and first-class tablet hardware, but cannot match the services. Google has to depend upon others to deliver the books, movies, and music. Of course, these other companies want to make their own profits, leaving very little for Google. Perhaps the biggest competitor of all, Apple, has the infrastructure to challenge Amazon, but (so far) has concentrated more on making great hardware.
In the Kindle Fire press conference today, Bezos stated, "We want to make money when people USE our devices, not when they BUY our devices."
You can watch the Amazon press conference introducing the new Kindle Fire devices and all the services at http://www.youtube.com/watch?v=VYi1jZXz9Kg or click on the image below:
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