Amazon to Battle Apple iPad With Tablet
By STU WOO And YUKARI IWATANI KANE
JULY 14, 2011
Amazon.com Inc. has battled Apple Inc. over digital books, digital
music and mobile applications. Now the two companies are taking their
clash to another front: the tablet market.
Amazon plans to release a tablet computer by October, people familiar
with the matter said, intensifying its rivalry with Apple's iPad.
Amazon will launch a tablet by October, intensifying the rivalry with
Apple and its iPad. WSJ reporter Stu Woo gives Lauren Rudser the
details we know so far.
While Amazon has long offered digital content on its website, it has
lacked much of the hardware to go with it. Now the Seattle company
hopes customers will use its tablet to buy and rent that content, said
people familiar with its thinking.
An Amazon spokesman didn't respond to requests for comment.
Amazon's looming entry into the tablet market, which Chief Executive
Jeff Bezos has hinted at in his appearances this year, is the latest
example of how technology companies, once focused on a particular
segment of the industry, are increasingly jostling one another on
multiple fronts.
That trend is evident in the enterprise-technology arena, where
onetime partners such as Hewlett-Packard Co. and Oracle Corp. became
enemies in markets including server computers, and it is now becoming
evident in consumer technology.
In recent years, Apple, Amazon and Google Inc. have found themselves
competing in areas such as the mobile software market and digital
content. The overlap stems from a race to tap into the young and
growing field of selling digital goods, such as video, music and
books, which are potentially vast markets as more consumers turn to
downloads.
Apple and Amazon have already had some bitter clashes. In March, Apple
sued Amazon alleging the online retailer had violated the trademark on
the name "App Store." Apple Chief Executive Steve Jobs also has poked
fun at Amazon's Kindle electronic-book reader, saying that few people
read and that general-purpose devices like the iPad are superior to
single-purpose ones.
"Amazon and Apple are frenemies"—both friends and enemies—said Sarah
Rotman Epps, a Forrester Research analyst. They "rely on each other as
partners"—Amazon, for example, sells digital books via its Kindle app
in Apple's iTunes Store—but "at the same time, they aggressively
compete for customers' attention and dollars," she said.
Amazon faces a tough road against Apple in the tablet market. Since
introducing the iPad last year, Apple had sold 19.5 million of the
devices as of the end of March. It is far and away the leader in the
tablet market.
The Digital Solution
The iPad has been bolstered by its connection to Apple's App Store,
which sells videogames and other software, and Apple's iTunes store,
where people can easily download music, videos and books.
Apple officials didn't respond to a request for comment.
Amazon's tablet will have a roughly nine-inch screen and will run on
Google's Android platform, said people familiar with the device.
Unlike the iPad, it won't have a camera, one of these people said.
While the pricing and distribution of the device is unclear, the
online retailer won't design the initial tablet itself. It also is
outsourcing production to an Asian manufacturer, the people said.
One of the people said the company is working on another model, of its
own design, that could be released next year.
The introduction of a tablet poses a conundrum for Amazon on how to
keep from cannibalizing sales of its popular Kindle. Amazon has long
said the Kindle is its best-selling device, though it has declined to
disclose sales.
A person familiar with Amazon's thinking said it still figuring out
how to market the tablet computer. One issue is whether customers will
want to buy both the tablet and Kindle, which is viewed as a
dedicated-reading device for bookworms.
But Amazon will be facing competitors other than Apple. Sony Corp. on
Wednesday unveiled prototypes of a tablet and a wallet-shaped
dual-screen portable device that will offer movies, apps, music, books
and PlayStation games. Sony said the devices would be available later
this year.
Amazon plans to introduce two updated versions of its black-and-white
Kindle in this year's third quarter, people familiar with the matter
said. One of the new Kindles will have a touch screen, which current
models don't have.
Amazon is better-positioned than other companies to go up against
Apple, said Ms. Epps, the Forrester analyst. Part of the reason is
because Amazon already has a digital-content store with a significant
selection and following. Amazon has heavily promoted its digital
offerings this year. It launched a streaming video service in
February. And in May, it undercut Apple's iTunes store by selling an
album by pop singer Lady Gaga for 99 cents.
Amazon is also in a position to offer a cheaper alternative to the
iPad, said Ms. Epps. It could sell the tablet for a loss while hoping
to make money on sales of movies, music and books.
Customers are "looking for a cheaper alternative, and they're looking
for a compelling experience, in terms of both content and shopping,"
which Amazon can offer, Ms. Epps said.
Nonetheless, she noted that unlike Apple, which has its own retail
stores, Amazon lacks a natural brick-and-mortar outlet to sell its
products. In addition, Amazon's product may be less refined than the
iPad, which is in its second generation.
"I don't know whether Amazon will be able to compete with Apple
head-to-head on hardware sophistication," she said.
—Amir Efrati contributed to this article.
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