The main selling point of the new Kindle line-up is its cheap price. At the low end, $79 buys the classic Kindle, an everyman reader. $99 gets you a slightly fancier Kindle Touch. For $149, you can add cellular functionality with the Kindle Touch 3G. And at $199, the full-color, touchscreen, iPad-killing Kindle Fire is the Cadillac model, and it's a full $50 cheaper than the rumored price which everybody already thought was crazy low. In the short term, Amazon will lose money--one analyst guesses $50 per device. In the long term, however, the low barrier of entry to buying a Kindle will position Amazon, self-described as the world's largest store, to sell more things to more people at lower prices.
The strategy is both recession-friendly and somehow democratic sounding. (Everybody gets a tablet!) It's the anti-Apple approach. But Amazon is a business, and while it's touting the low prices upfront, its bottomline relies on a long-tail of purchases from customers over time. "What we are doing is offering premium products at non-premium prices," CEO Jeff Bezos told BusinessWeek in the days before unveiling the new Kindles. "[Other tablet contenders] have not been competitive on price [and] have just sold a piece of hardware. We don't think of the Kindle Fire as a tablet. We think of it as a service."