While launching the new range of Kindle Fire and e-readers, when Jeff Bezos reportedly said, “We want to make money when people use our devices, not when they buy our devices,” he immediately achieved two key objectives for Amazon.
One, he took the glare away from the devices to platform and services, even if he didn’t use the word service. But after all, people have almost always bought the Kindle readers for the rich content that the devices serve at affordable prices and in highly readable manners.
Next, he literally said that Amazon was not making any money when it was selling the devices and therefore the price was as low as it could get.
A catch is that Bezos’ statement is applicable to Kindle as a whole and not to the e-reader and the tablet categories taken separately.
While the Kindle readers command a dominant share of their category, the Kindle tablets, Fire, have paled so far against Apple’s iPad. Bezos would be looking to effect a change while launching the new HD Fire devices that pack more features at lowered prices to make it more attractive to buyers vis-à-vis the iPad.
The timing of the launch is extremely good: it gives the Fire tablets a fairly long window of attention, given that Apple’s upcoming event on Sept 12 would expectedly be dealing with the next iPhone and not the next iPad. But could Apple, pressured by the new Fire, attempt to do a hurried launch of its widely rumored but otherwise not-now-expected seven-inch iPad? Unlikely, as neither Apple nor the market is used to seeing half-cooked launches from Apple.
Amazon has also benefited from the thumbs-down given by markets to Nokia’s next Lumia, so what if that was in the smartphone category.  The benefit comes through the contrast Amazon has been able to create in the form of preparedness with its devices and the services around those and hence the details it was able to spell out in terms of pricing, annual data plans, networks supported, et al. (See also http://www.businessandmarket.net/2012/09/one-word-that-explains-why-nokia-got.html)
A third benefit for Amazon has come from the speed blocks, no matter how minor, generated for Samsung after Apple’s big patents win recently.
Amazon will need to use all this to the Fire’s advantage, for it to be able to develop into a long-term challenger for the iPad.
There are some key things that Amazon can make work to its advantage, the most important being its own ecosystem of content and apps. There are challenges though, especially when it comes to apps, and Amazon will need to work a lot, yes a lot, with developers to win them back to its store. It may need to review its policies regarding the extent of control over pricing of apps and developers’ share of revenues, among other things. That may not be easy for Amazon to do, not because it poses any technological challenges but because it requires a change in the thought process and the mindset, which is very hard to bring about. 
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