Amazon's $50 Tablet Could Be a Holiday Winner

Eric Risberg/APApple's new iPad Pro is displayed in three different finishes following an Apple event Wednesday.
This holiday shopping season is shaping up to be the tale of two tablets. Apple (AAPL) introduced the high-end iPad Pro on Wednesday, starting at a steep $799 that goes all the way up to $1,079. (AMZN) is reportedly going the other way, rolling out the cheapest Kindle Fire tablet that it has ever produced, at a mere $50.

Apple and Amazon aren't merely at opposite ends of the pricing spectrum. As Apple gets bigger -- the iPad Pro measures in at a beefy 12.9 inches -- The Wall Street Journal is reporting that Amazon's $50 tablet will be just 6 inches.

Now, to be fair, Apple did lower the price of its entry-level iPad mini 2. It will now be available at $269, and some will argue that this is the Apple device that will be competing with Amazon's new bargain-priced device. Either way, with Apple and reportedly Amazon pushing cheaper value-priced gadgetry to market, it's going to be a tempting holiday shopping season for someone in the market for a tablet.

Breaking the $50 Barrier

The cheapest Kindle Fire on the market right now will set you back $99. It's also 6 inches, but it's HD. The Wall Street Journal speculates that several aspects including the display, battery life and processor of the $50 tablet will all be inferior and rightfully so: Amazon's already working on razor-thin margins when it comes to hardware.

However, that $50 price could be the sweet spot for many shoppers. Parents won't have a problem handing a $50 tablet to a toddler when that's less than the price of a single console video game. The low price makes them less likely to be stolen at school for older children.

A $50 tablet would also open the door for newspaper subsidization that has yet to materialize. The original Kindle hit the market at $399 and no newspaper would dare eat some of that cost by bundling with a discounted subscription. At $50, the options change. It may not be long before your local paper offers you a free Kindle Fire if you commit to a digital subscription of the publication.

There are also plenty of commercial applications. More restaurants could switch to table-side tablets or even make them available on busy nights to folks waiting for a table. Schools that were set on going iPad next year may be pressed to consider the significantly cheaper Kindle Fire.

Take Two Tablets and Call Me in the Morning

The beauty of a $50 tablet is that the product itself will make its way deeper into the mainstream market. That's what Amazon wants. It's never been shy about professing that it would rather make a profit selling digital media than the hardware that plays it.

Folks stepping up for the cheap Kindle Fire will find themselves drawing closer to the Amazon ecosystem of digital delivery and discounted real-world merchandise. After the flop of its Fire Phone, Amazon needs a hit. It priced its smartphone too high relative to what Apple already had on the market. It won't make the same mistake this time around.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns and recommends and Apple. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.
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