Continued Disruption: Amazon’s Kindle Tablet

Ever since I ready Bill Gurley’s post Google Redefines Disruption: The “Less Than Free” Business Model I have been thinking about the power Google wields as it relates to Android and its features.  His point is that by providing and owning their own data they can give turn by turn directions in a free app, and share in ad revenue with partners.  Essentially they would be paying these partners to use their software in devices, thus title of the post having the offering be “less than free”.

This is a powerful and very disruptive approach, that has proven both lucrative for Google and a winning choice for the partners.

Fast forward to September 2011 and enter Amazon with a rumored Kindle Tablet that has been used and played with by MG Siegler of Techcrunch.

Aside from a slick sounding device that would be priced well below the Apple iPad, the Kindle Tablet will be playing its own “less than free” card by integrating their own “flavor” of android with the following features worth calling out from the post

But the key for Amazon is just how deeply integrated all of their services are. Amazon’s content store is always just one click away. The book reader is a Kindle app (which looks similar to how it does on Android and iOS now). The music player is Amazon’s Cloud Player. The movie player is Amazon’s Instant Video player. The app store is Amazon’s Android Appstore.

In case this isn’t clear, Amazon is putting 4 “stores” within reach of each consumer.  This is a possible up-sell opportunity for publishers in the book store and music store, studios in the movie store (as well as instant video), and of course developers in the app store.

But wait theres more!

Here is really where the “less than free” model kicks in.  If the rumors are true, you will also get access to Amazon Prime FREE ($79.99 value) as well as access to all the streaming content that Amazon Prime members get.

Doing the math, a $250.00 device (that most likely requires an Amazon account) has an immediate $79.99 discount (now its $170.01) with a single click away buying opportunity for apps, movies, shows, games, books, and more.

Put another way, I wonder what the lifetime value is of a Kindle Table owner?  Getting them to connect the device online seems almost a requirement, and the ability to load it up with “necessary” items and apps seems inevitable.

Many folks cite the finesse and polish of the iPad as a differentiating factor, but as Bill Gurley says in his post above, the difference here is made up of the lower cost.  A cheaper device, that has a arguable larger library, with real world benefits is a great way to tear into the market that seems dominated by the iPad 2 right now.  I don’t presume sales of the iPad will disappear, on the contrary I think they will continue to increase.  However I see the Kindle Tablet (if it has what I described) be the new underdog against the current eReaders, mobile notebooks, and certainly all the other non-apple tablets out there.

The less than free model worked well for Google in just one vertical, and I think will work very well for Amazon across so many.  I see this head fake that Amazon is doing as a way to leverage themselves into the media consumption, purchasing, and home viewing dynamic – with the real world distribution system as an added bonus!