Amazon Tablet: Why it’s a Big Deal

Slowly but surely, the Amazon tablet is becoming one of the biggest tech rumors of 2011.

Every week, there seems be another story about this fabled device -- or series of devices. Most recently, PCMag reported that the Amazon tablet will ship in 7- and 10-inch configurations by the holidays, priced at $349 and $449, respectively, running on Nvidia's upcoming quad-core processors. Although Amazon won't officially confirm the existence of these tablets, CEO Jeff Bezos said to "stay tuned" when asked point blank about the devices by Consumer Reports.

What's the big deal here? After all, the tablet market is growing increasingly crowded with devices from Acer, Asus, HTC, Motorola, Research in Motion and Samsung. If you're looking for a tablet right now, there's no shortage of options.

Still, the Amazon tablet would be a major development in consumer tech. Let's take a step back and look at why:

The Content Problem

The scene for books, music and movies on Android devices is, for better or worse, a hodgepodge. As a user, you're free to snag e-books from Amazon, Google Books, Kobo or Barnes & Noble. Amazon is the de facto music and movie provider on many phones and tablets, but now you've got Google moving in with its own movie store and music player.

Freedom of choice is a wonderful thing, but Android still needs a single, simple solution built into the operating system. An Amazon tablet would likely provide this, integrating the retailer's media stores and players throughout the device. When a consumer wants to watch a movie, listen to music or read a book, there would be no confusion on where to go.

The Price Problem

We're starting to see some tablets beat Apple's iPad on price. The Asus Eee Pad Transformer costs $100 less with similar specs, at $400. The Acer Iconia Tab A500 costs $450. But these tablets makers have a fundamental problem: Once they've sold a device, their ability to make money on it greatly diminishes, because they're not in charge of selling content. These device makers may have partnerships with other content providers, or they may provide their own apps here and there, but because they don't control the entire flow of apps, music, movies and games, their best bet for profits is on hardware. That means higher upfront prices.

Amazon, meanwhile, can sell cut-rate hardware in hopes of making the money back on its music, movie, e-book and app stores. That explains why the latest Amazon tablet rumors point to such low prices, even when the devices are reportedly packed with cutting-edge quad-core processors.