Inside Amazon’s race to the bottom of the tablet market

While the bulk of attention for hot new tablets usually goes to high-end, fairly expensive side, at least one big competitor is interested in focusing on making a tablet that’s cost effective for nearly everyone.

Case in point, online retail giant Amazon is planning to launch a $50 tablet with a six-inch screen in time for the 2015 holiday season, according to a report by the Wall Street Journal Monday.  If true, this flies directly in the face of everything we’ve heard from other tablet-makers over the last several months, namely Apple.

For weeks, speculations has been swirling around a possible “iPad Pro” from Apple. Rumors of a larger screen, peripherals, and a spec bump for the new device suggest that Apple thinks it knows what the market wants: a bigger, faster, stronger iPad that edges closer to the blurring line between tablet and laptop.

Amazon, however, seems to be heading in the exact opposite direction, possibly in an attempt to recapture some of their lost tablet market share. IDC’s tablet market analyst Jean Philippe Bouchard says, “Amazon’s current place [in the tablet market] is very small at the moment. It’s nowhere near where it used to be.”

Back in 2011 when Amazon released its first Fire tablet, it was something of a hit. “The main attraction of the first tablet was the price point,” says Bouchard. “That’s likely what they’re trying to replicate now.”

For Amazon, the need to replicate its past efforts is very important because the company routinely sells its devices at cost, while generating revenue through its online store. It also seems likely that Amazon is attempting to continue building on the ever-expanding environment for its many services. Bouchard believes that Amazon could be trying to “create an ecosystem and create more ways to use Amazon services.”

On the surface, this sounds like a decent enough strategy for Amazon. If you can’t compete with the iPad on the top end of the market, maybe coming in at the bottom is the best way to get back into the game. In reality, though, the Surface is exactly the problem.

While Microsoft’s Surface doesn’t have the name recognition of iPad or Amazon’s Fire tablets, it represents something of a paradigm shift in the tablet market. With its detachable keyboard and stylus, it’s positioned as more of a laptop-alternative than a tablet. Though tablets were once exclusively of the “slate” variety (that’s your traditional single-device touch-screen tablet), the 2-in-1 or “detachable” segment of the tablet market is picking up speed where slate devices (and smaller tablets in particular) are faltering.

The tablet landscape is vastly changed from the one into which Amazon released its first tablet. In short, they’re no longer a novelty. People aren’t itching to get their hands on a tablet, and anyone who wants one already has one. It seems unlikely that they’re going to supplement or replace a current tablet with a lightly spec’d $50 model. Even if they did, $50 tablets already exist in the market, and while they aren’t robust or powerful in the performance department, Amazon may not be able to add much more than name recognition to the price point.

IDC’s most recent tablet market forecast points to an decline in slate tablets, but a boom in 2-in-1 devices as more companies jump into the detachable game and continue to drive down the average price. These 2-in-1 devices are more powerful, more versatile, and perhaps more viable in commercial markets. The fundamental meaning of “tablet” is shifting dramatically, and in favor of a device that’s makes power a priority.

“People want another device,” says Bouchard, “but they want a productive device.” That’s exactly where 2-in-1 devices (like the rumored “iPad Pro”) come in. “The market is ready,” says Brouchard of 2-in-1 devices. “There’s a market and there’s growth.”

While all info about this larger iPad is mere speculation for now, a major indicator that points towards Apple repositioning of iPad as a workhouse came in the iOS 9 announcement, which unveiled new multitasking features that’ll likely give iPad a serious productivity boost. With split screen capabilities, picture in picture and easy app-switching, it seems like Apple is ready to make iPad less like a super-charged e-reader and more like a formidable opponent for laptop replacements like the Surface and Surface Pro.

The tablet market is itself something of a 2-in-1, with a clear division between slate and detachable devices, and while IDC forecasts that the broad “tablet” category will continue its steady downward trend, it seems increasingly likely that productivity-centric detachable devices are poised for a major upward shift. If these trends and forecasts in the tablet market are anything to go by, Amazon’s tiny tablet might end up being another Fire phone-style misfire.