How the Kindle Fire Works

Content is King

Perhaps the Kindle Fire's biggest selling point is the fact that you can buy so much content directly from Amazon. The company offers up thousands of music files, movies, television shows, magazines and books. And with Amazon as both content and hardware provider, the integration of purchase services makes it easy to buy lots of content right away.

Companies like Google and Apple also have their own media-store solutions. But Amazon has one of the largest libraries of media content online and campaigns hard to keep prices low for customers. This stance puts Amazon at odds against the publishing industry. It's an ongoing battle between protecting the rights of a major business sector and meeting the needs of customers.

Another big advantage of the Kindle Fire over other devices is its relatively low price. It's significantly less expensive than the base model of Apple's iPad. Amazon may even be taking a loss on the sale of the device. Research firm IHS estimated that it cost $201.70 US to manufacture a single Amazon Kindle Fire tablet. The selling price for the Kindle Fire as of this writing is $199 [source: Svensson].

Why would Amazon sell its hardware at a loss? Part of the reason is that it's hard to compete against the iPad, a device that succeeded where other tablets failed. By pricing the Kindle Fire significantly below the iPad, Amazon created an attractive alternative for people who may not have a lot of money to spend on electronics. But the main reason comes back to content. The Amazon Kindle Fire is essentially a conduit for Amazon content. Amazon could make up the loss in sales by selling movies, books and more to Kindle Fire owners.

Today, the Kindle Fire is in an increasingly competitive market. Apple still rules the roost with the iPad. But other Android tablets have seen some success as well. Google's Nexus 7 tablet launched at the same price point as the Kindle Fire, but with beefier hardware and a higher-resolution screen. And Microsoft's announcement of its Surface Tablet introduced another competitor in the space. Has the Kindle Fire lost its spark, or will an update to the hardware keep the embers burning for Amazon? One thing is likely -- the company will make sure it doesn't disappear in a puff of smoke.