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Apple iPad2 v. Amazon Kindle Fire: The battle royal that will define holiday gadget shopping

Amazon Introduces New Tablet At News Conference In New York

Spencer Platt/Getty Images

The new Amazon tablet called the Kindle Fire is displayed on September 28, 2011 in New York City.

Back in the good old days — you know, 2009 or 2010 — there was the Apple iPad and everything else. When it came to tablets, there wasn't really a true tablet market; there was an iPad market, as my favorite tech writer, Zach Epstein of BGR.com, has pointed out. But now there's another tablet in town. Here is Forbes' Tim Worstall on how the Amazon Kindle Fire will be different from the Apple iPad, business-model-wise:

Apple makes great kit, no doubt about that, but it charges great kit prices for it too. Then it makes a further margin on selling content (music, videos, movies, books) to go onto that kit. Nothing wrong with it but it is a model that might be vulnerable. Vulnerable to someone using the Gillette tactic (“give away” the razors in order to sell more razor blades) as Amazon is. Price the Kindle Fire at just about break even point and hope to make the profits by having a larger installed base to sell the content onto.

In other words, it's all about the price, stupid. This is Apple's Achilles Heel. With consumers, it relies on a reality distortion field for pricing: Is the iPhone worth the price premium over an Android phone that does all the same stuff and does some things better? Who cares? I want an iPhone, dangit!

As long as the tablet market was defined by iPads, Apple could enjoy a happy, happy time, gobbling up market share for a market that it was playing in, for all practical purposes, alone. 

But here comes Amazon, which had done essentially the same thing with the e-reader market, prior to the iPad's arrival. Amazon's CEO Jeff Bezos has been pretty clear in his characterization of what the Kindle Fire is all about: it's a much cheaper tablet than the iPad, with access to Amazon's content hose. 

The fun is now over for Apple on the smartphone and tablet front. This holiday seasons is going to be a pitched battle. Sure, Apple will hang on to its dominant market share for tablets. But it's also now in awkward position of...having to hang on. This is not Apple's strength as a company. Post-Steve Jobs, it may be entering a episode between major innovations. 

All eyes will now turn to what the company does next. Will it be an Apple TV? I wouldn't be surprised.

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