Amazon Stays True to Profit Model; Peculiar Showcase Tablet Prior to FCC Approval

by Holly Shoemaker

As expected, Amazon announced its new Kindle lineup on Thursday. The standout item, designed to compete with Apple's iPads, but at a lower price point, is the Kindle Fire HD 8.9" 4G LTE Wireless for $499. Amazon expects the item to ship on November 20, 2012. However, there is one issue with the device – it has yet to receive Federal Communications Commission (FCC) approval.

Potential Roadblock?

I received the email from Amazon shortly after the company’s announcement on Thursday. The email said the following, “The 4G device has not been authorized as required by the FCC. This device is not, and may not be, offered for sale or lease, or sold or leased, until authorization is obtained.”

The FCC must approve tablets and other devices before companies start selling them. The FCC checks to ensure electronics do not interfere with signals and that they adhere to safety standards. Amazon expects to receive approval by the November 20, 2012 shipping date, but its move to announce a non-approved tablet seems unusual. At the same time, the company clearly has faith in its direction and expects to receive the required approval in time.

My Additional Findings

Amazon has once again updated its “Compare Kindles” section and the Kindle Fire HD is now available for $199 with16 GB of storage, and the tablet will start shipping on September 14, 2012. The Kindle Fire has a list price of $159, which will also ship on September 14, 2012.

e-Readers Not Forgotten

Amazon also introduced the Kindle Paperwhite, showing consumers the company still believes in its e-readers. E-readers still provide a good choice for those mainly interested in online books.

Concluding Thoughts

Amazon designed the Kindle brand for expansion. Its ability to offer different price points depending on a user’s needs and budget should appeal to a larger consumer base. While that in itself differentiates Amazon from Apple, Amazon has remained true to its profit model. While Apple makes more money off its devices, Amazon remains focused on content and accessories, showing that it understands the company’s revenue stream. Owning a device is only the start – customers need to build libraries, stream video and download apps, to name a few, to truly get the most out of owning a tablet.

Consumer Reports Buying Guide 2012 Part Two: Rankings For Tablets and e-Readers

by Holly Shoemaker

Earlier in the week I discussed how Verizon topped Consumer Reports Buying Guide 2012 and summarized the guide's smartphone buying tips. For those more interested in tablets and e-readers, I have the rankings and advice for those too.

Tablet Buying Guidelines

• Portability – For those unconcerned with portability, Consumer Reports recommended buying a 10-inch screen.
• Viewing Angle – The guide recommended a wide viewing angle.
• Upgradable Operating System – Consumer Reports recommend to always look for an upgradeable OS.
• Apps – The guide encouraged consumers to opt for a tablet that offers a variety of apps as that will vary based on the OS manufacturer.

Tablet Rankings

In the six- to seven-inch range, the Samsung Galaxy Tab 3G 16 GB ranked first with a score of 73, followed by the WiFi model at 71. Research in Motion (RIM) made the list with its BlackBerry PlayBook WiFi 32 GB model with a score of 67. However, it was not a recommended buy, which should come as no surprise.

In the nine- to 12-inch range, Apple comes out on top with the iPad 2 3G with a score of 83. The Samsung Galaxy tab 10.1 ranked third with a score of 78.

e-Reader Buying Guidelines

• Screen Size – The guide recommended that consumers look for a six-inch screen as that provides the best value.
• Touch Capability – The guide recommended that consumers look for an e-reader that offers this feature to allow for easy content selection.
• Network – As the guide covered a certain period of time, it discussed more 3G capability. Consumer Reports recommended skipping 3G access citing that WiFi access costs less.

e-Reader Rankings

In the six- to seven-inch range, the Barnes & Noble Nook Simple Touch Reader ranked first with a score of 76, followed by Amazon's Kindle 3G and then the WiFi version with a score of 75. The Barnes & Noble Nook Color came in seventh with a score of 70.

DOJ Looks into e-Book Price Fixing

by Holly Shoemaker

The Wall Street Journal has reported that the U.S. Justice Department (DOJ) may sue Apple and five U.S. publishers, Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan and HarperCollins for anti-trust violations related to price fixing of e-books.

Overview of Issues

At the center of the complaint is how Apple charged for e-books when it launched the iPad in 2010. Apple employed the "agency model," where publishers set the price for an e-book and Apple received 30 percent of the profits. This is the same as Apple’s education strategy. Apple also said publishers could not let rivals sell the same book at a lower price. This is the point that I see difficult to enforce and one that does conjure up concerns.

Prior to this launch, publishers sold books to retailers for half of the typical cover price. This allowed sellers to discount books for less than the cover price. Book publishers did not respond well when Amazon sold new best sellers for $9.99 to boost sales of its Kindle devices. Amazon also forbid publishers to offer discounts to other retailers. Those who accuse Apple of price fixing have some legitimate reasons to conclude Amazon did the same. The issue is whether it is legal or not, and that answer is, "It depends."

Publishers have also said that retailers such as Barnes & Noble would not have the ability to compete with discounting, like Amazon does. However, Amazon agreed to raise prices.

Concluding Thoughts

E-books operate differently than regular books. There has to be some leeway to ensure all parties get their fair shares, this includes consumers. Apple and other companies have the right to come to contractual agreements. The issue is sorting out if those agreements did violate anti-trust laws. On the surface it appears price fixing occurred, but the issue is also one of capitalism and honoring agreements - if they are legal of course.

Reports have circulated that some of these major publishers are in talks to settle this case. No matter the outcome, consumers keep benefiting. Consumers have already spent money on tablets, smartphones or e-book readers. They will expect to receive e-books at a cheaper cost. This could mean that e-books will become even cheaper for consumers.