John Gruber, at DaringFireball.net, in a post about a comparison between the Kindle Fire and RIM's PlayBook, quoted Ryan Block regarding the Kindle Fire's resemblance to the PlayBook:
From there, Amazon’s team determined they could build a tablet without the help and experience of Lab 126, so they turned to Quanta, which helped them “shortcut” the development process by using the PlayBook as their hardware template. Of course, it’s never quite that simple, and as I’m told Amazon ran into trouble, and eventually sacrifices were made (like using a slower processor).
Although Amazon did refresh the ID of their PlayBook derivative, I’m told that this first tablet of theirs is “supposed to be pretty poor” and is a “stopgap” in order to get a tablet out the door for the 2011 holiday season — which doesn’t exactly leave the best taste in my mouth.
John then follows up by asking:
My question, though: if it’s based on or even just very much similar to the BlackBerry PlayBook, why is the Kindle Fire only $199 and the PlayBook started at $499?
My response: Amazon is hoping for a halo effect, subsidizing a reduced cost tablet, perhaps sold at or even below cost, with the expectation of additional revenue from services provided by the tight integration of the Kindle Fire with Amazon products and services. This halo effect, which is something Apple has counted on with their hardware products, selling Macs and Macbooks because users purchase iPods and iPhones, is also something RIM never counted on. RIM never had services they could push toward PlayBook users which would grow revenue beyond the simple sale of the hardware.
I actually mentioned the idea of Amazon subsidizing Kindle Fire through service revenue a few weeks ago. What makes sense for Amazon didn't for RIM, and I think for anyone trying to break into the tablet market against the iPad, they're going to have to provide a clear improvement on price because the quality and content aren't likely to be matched or beaten well enough to make a difference. And for that to hold true, someone's going to have to take a loss on the hardware and make it up elsewhere. Amazon is one of the few who can do so at this point.