Amazon will reportedly launch a tablet on the Android operating system in the fall, a move that could help it drive its own digital content business.

While Amazon started out as a retailer of books, CDs and DVDs, the company also sells  digital media and made a successfully foray into hardware with its Kindle ereader. Amazon?s plan for a tablet is most likely centered on content distribution but, a lot also depends on how well the tablet performs.

?There have been issues to date regarding the Android operating system and its robustness for tablets,? said Rhoda Alexander, a tablet analyst at IHS iSuppli, El Segundo, CA.

?Android still has some maturation to do before it can compete head-to-head with iOS,? she said. ?This could impact Amazon?s success here.?

Content is king
Amazon may be looking at the growth in the tablet and wondering how it will impact its Kindle business.

?One category negatively impacted by tablets is the ereader,? Ms. Alexander said.

?As one of the leading ereader vendors, it would make sense that Amazon is jumping into the tablet market,? she said.

One of Amazon?s advantages in the tablet market is that it already has a relationship with consumers around purchasing digital content.

?One of the challenges for anyone entering the space is the content,? Ms. Alexander said. ?You can put together a very good hardware product but, if you don?t have the content, it doesn?t matter.

?Amazon can compete from a content perspective,? she said.

However, content could also prove to a potential pitfall if Amazon is not able to drive enough revenue from content.

?This could backfire if Amazon doesn?t have enough profit in the hardware piece and it is not able to push enough content to offset this,? Ms. Alexander said.

The potential issue for Amazon is its competitive pricing strategy for Kindle, which helped drive down the price of ereaders.

?Amazon has a history of coming into the market with a hardware device and being extremely competitive on pricing,? Ms. Alexander said.

?There is an expectation in the end users mind that Amazon will enter tablets with a competitive price point,? she said.

With the Kindle, Amazon was able to make up for any lost revenue on the hardware side through content sales.

If Amazon introduces a competitively priced tablet, the question is whether consumers will purchase as much content for a tablet device as they do for an ereader.

?With an ereader you have to purchase content to make it useful,? Ms. Alexander said. ?With a tablet, there are a lot of other things you do with it without having to put a substantial amount of content on it.

?Content is an important piece but not an essential piece from the end user?s perspective,? she said.

Video on demand
Just as Amazon?s introduction of the Kindle was an attempt to address consumers? growing interest in digital books, an Amazon tablet would address consumer interest in digital audio and video.

A tablet play would be in step with other steps taken by Amazon, including launching a video on demand service and the recent introduction of a cloud services offering.

?Amazon is saying, we need some sort of a device that will help us sell as much video and other kinds of multimedia content as possible,? said Dmitriy Molchanov, a senior analyst with Yankee Group, Boston.

?This is not to profit off of sales of a device but more to get into consumers? pockets when they are saying we need digital content and who do we go to,? he said.

Amazon already has some of the infrastructure in place to support such a device, per Mr. Molchanov. For example, Amazon Whispersynch automatically syncs the last page of an ebook read by users across devices. 

?This is a platform that helps deliver content and could be translated to a tablet,? he said.

Additionally, Amazon Cloud Drive provides a way for customers to store digital content.

Good for everyone
If Amazon does introduce a competitively-priced tablet, it could look to help subsidize the price with advertising, a strategy it has used for the Kindle.

?The tablet could be priced between $350 and $450 because there is advertising in it,? Mr. Molchanov said. ?If Amazon uses this model, it could help them compete with other Android devices out there.?

Mr. Molchanov does not see an Amazon tablet cannibalizing Kindle sales.

?We haven?t really seen that consumers are using tablets to read all that much,? Mr. Molchanov said.

?I don?t really see the cannibalization effect coming into to play,? he said.

Given Amazon?s size and its success with Kindle, competitors are sure to be watching this development closely.

However, in the end, the entry of big brand like Amazon into the tablet market could help boost sales for everyone.

?All of this make helps make the tablet category a richer category and more dynamic category,? IHS iSuppli?s Ms. Alexander said.

?While Amazon has the potential to affect sales for anyone else, it also has the potential to drive more tablet sales.?

Final Take
Chantal Tode, Assoc. Editor, Mobile Marketer