Amazon Trumps Competitors, Opens Kindle to App Developers

(MoneyWatch)  Amazon (AMZN) has done it again, completely upsetting competitor expectations, this time by breaking the Kindle out of the e-reader category and turning it into a programmable platform to redefine media. Combine that with Amazon's cloud offerings, and you have a start at something that could give an Apple (AAPL) tablet a long-term run for its money.

The company is "inviting software developers to build and upload active content that will be available in the Kindle Store later this year." Talk about trying to pre-empt the expected Apple announcement next week. For the fanbois who would immediately chime in, I agree in advance that Apple's user interface and look-and-feel is likely to be slick and compelling, and clearly there's been noise about it making deals with a number of publishers. But Amazon is going to have a good number of advantages:

• Price -- If Apple prices its tablet at roughly $1,000 as some are guessing, it's again taken the path of premium device for a small slice of the market. But Amazon's Kindle pricing is far more affordable.
• Content -- There's already a huge amount of content potentially available for the Kindle, including books, magazines, newspapers, and music. Amazon would need to do some work to get video on there, but I wouldn't be surprised to see that happen in a new version.
• Established Base -- Apple will sell a relative boatload of devices, but there are many Kindles already out there, which means developers will weigh the likelihood of facing an expanded iPhone app store, and getting lost in the crush, with a currently open market. Yes, there's opportunity for existing apps, but I suspect they'll all have to be ported to the new tablet. And there are already a good number of potential customers with the Kindle.
• Whispernet -- A wireless delivery mechanism exists that doesn't require consumers to pay extra for connectivity. That turns into another price advantage.
• Flexible Developer Business Model -- One problem and strength for Apple is the control it wants. Amazon is a bit more relaxed, and is offering a number of ways developers can price, including free apps that are under 1MB and that use less than 100KB per user per month, one time purchase for larger apps that are also under the data limit, and monthly subscriptions for larger bandwidth users. Apps under 10MB are downloaded via Whispernet. Larger ones (under 100MB) are downloaded over the Internet to a computer and then transferred. Amazon wants 30 percent of the sale and data fees of $0.15 per megabyte, so developers have to price with transfer costs in mind.
• Cloud Services -- This ultimately may be the biggest strength. Developers can leverage Amazon's cloud services to extend the Kindle far past what the native hardware might allow, all at relatively low cost, turning it into a real client for cloud services. Apple doesn't have anything in the way of such an infrastructure that's open to developers.

There are some noted limitations, such as no VoIP applications and no advertising. But it's a strong start.

Getting away from the Amazon versus Apple view for a moment, consider the other competitive ramifications. This is like taking a club to Barnes & Noble (BKS), Sony (SNE), and all the other competitors that have been satisfied with simply going after the e-book market and not thinking bigger. As I've argued before, what's needed in e-media is finding the native ways it should work. Amazon has just made it possible for people to start experimenting. I also argued that what Amazon must do is embrace open standards. It has cleverly done that by creating the only open platform. Kudos to Jeff Bezos and company for proving just how smart they can be when it comes to business fundamentals. If they get a color screen that can also do video, I may have to go buy one myself. And a software development kit.

Image via Flickr user goXunuReviews, CC 2.0.