Kindle Fire HDX keeps Amazon's low price, adds extra features

Amazon's new tablet offering ups the hardware and feature game, plus keeps its barely-profitable price in hopes Kindle Fire HDX users will buy more Amazon services.

Amazon is looking to beat out Apple, Google, and niche manufacturers like Tesco with the new generation of its tablet, the Kindle Fire.

Amazon released three new versions of its Kindle Fire at a press conference Wednesday: an updated Kindle Fire HD, and two sizes of the new Kindle Fire HDX, which adds impressive features to the existing model. But Amazon's real feat is its ability to keep tablet prices so low it barely profits from device sales, yet makes money off features that direct customers to online Amazon services.

Hardware-wise, the improvements are standard but keep the Kindle Fire on par with competitors. The Kindle Fire HDX, which comes in a 7-inch or 8.9-inch screen size, has the highest definition screen and the fastest processor currently on the tablet market, all in a compact size – the 8.9-inch version only weighs 0.82 pounds. The 8.9-inch version also has a rear-facing 8-megapixel camera. The devices will also run on the new Fire OS 3.0 “Mojito” software, an Android software configured for the Kindle.

The unique improvements to the Kindle Fire HDX, however, are more in services and features, which is where Amazon has excelled in the past. Amazon often sells its tablets below manufacturing cost then reaps profits from people using their services, such as e-books, shopping, and online TV and movies.

"We want to make money when people use our devices, not when they buy our devices," said Amazon Chief Executive Jeff Bezos in an interview with the Wall Street Journal.

The Kindle Fire HDX offers the ability to download movies and TV shows from Prime for later viewing, revert to a low-power mode when reading e-books, and send videos to a video game console or smart TV with the Amazon Instant Video app. There will also be a new feature called “X-Ray for Music” that allows customers to find out what song is playing in a TV show or movie and then download it from the Amazon store.

In addition, the Fire HDX will offer a service called ‘Mayday’, where customers can video chat with a customer service representative if they have any issues with their device. Amazon is shooting for a maximum 15-second response time. Customers can move the video around their screen and customer service representatives won’t be able to see the customer (so you don’t have to change out of your pajamas to figure out how to load a video). This feature will be free for Fire HDX users.

iSuppli, an global technology chain researcher, regularly takes devices apart to estimate their manufacturing cost. The site has previously disassembled Kindle Fire devices with surprising results. The original Kindle Fire cost $201 to make, but retailed for $199, which meant Amazon was actually losing money on each device. Amazon cut costs on the next generation, the Kindle Fire HD, dropping the manufacturing cost to $174, but kept the price at $199, still only a $16 profit on each device (not accounting for research, development, and advertising). In a blog post, iSuppli reiterates that Amazon's focus is sending customers to services.

"The idea is to create a product at a compelling price point and then get a lot of consumer traction in order to put Amazon content and the Amazon online store into consumers’ hands," writes Andrew Rassweiler, senior principal analyst of teardown services at iSuppli. "However, for its second-generation Kindle Fire, Amazon has reduced the cost to make the tablet, cutting the cost of the hardware subsidy that the company must put out to pursue its strategy."

The manufacturing breakdown of the Kindle Fire HDX remains to be seen, but its new prices once again sets Amazon apart.

The new Kindle Fire HD (which has a faster processor and better display) is now $139 and will be available Oct. 2. The Kindle Fire HDX 7-inch screen is $229 and will be available Oct. 18, and 8.9-inch screen will be available Nov. 7. These models are currently 16GB Wi-Fi devices, but for $100 more, the 4G versions will be available later in the year.  

Time will tell whether the Kindle Fire HDX can hold its own against Apple’s iPad powerhouse and Google’s quick and cheap Nexus 7. But a combination of Amazon-specific features and budget price could let the Kindle Fire HDX smoke the competition.