Study: Amazon.com Tablet Threatens iPad On Price

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Amazon.com could tap into significant demand amongst consumers if its price significantly undercuts Apple’s iPad

If Amazon should sell its first tablet computer for $249 (£160), it will easily become the most successful alternative to Apple’s iPad, according to financial services researcher Piper Jaffray.

Piper Jaffray analyst Gene Munster polled 410 US consumers last week and found that 62 percent of those surveyed said they would pick a 7-inch Amazon tablet that costs $249, compared with 21 percent of consumers who said they would pick a 9.7-inch iPad that costs $599.

Price sensitivity

“We believe this shows there is a high degree of price sensitivity in the tablet market,” Munster wrote on 27 September in a research note. “Tablets are mostly supplemental devices (in addition to a computer and a smartphone), so the data makes sense.”

Amazon is expected to unveil Kindle Fire in New York City on 28 September. It’s a 7-inch slate based on Google’s Android operating system and built by Quanta, which makes the RIM BlackBerry PlayBook. Many of the tablet’s features have been unearthed by TechCrunch, though the device’s cost remains a mystery.

Amazon could sell the Kindle Fire for anywhere between $250 and $400, a bid to properly challenge the iPad, which has sold more than 30 million units at a base price of $499.

However, the industry consensus is that Amazon will be most aggressive in its pricing, hoping to make up the low price point of the hardware with sales of movies, music, storage and other content services.

For his survey, Munster used the $599 price point of the iPad 2’s 32GB version instead of the $499 $16GB base model because he said it’s an estimated average price of $599.

Munster also offered the caveat that his survey comes with the Kindle Fire sight unseen, and he cautioned against putting too much stock in his poll until the public knows more about the device.

Content services

That should come on Wednesday morning in Manhattan, where Amazon chief executive Jeff Bezos will show off the device, which is based on a custom version of Google’s Android operating system.

The Kindle Fire is expected to push users toward Amazon content services, including the Kindle application for books, Amazon Cloud Player for music, Amazon’s Instant Video player for movies, and the Android Appstore for mobile applications. Munster noted that respondents’ uses for tablets included web browsing, reading, movies and games.

“If Amazon can do these four things at the $249 price point, we believe there will be strong interest in the tablet,” Munster added.

To that end, Munster said he expects Amazon to sell 2.5 million Kindle Fire tablets and an additional 3.5 million Kindle e-reader devices in the December quarter. The company’s Kindle brand will account for $5.4 billion, or 8 percent, of Amazon’s total revenue.

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