Amazon Hoping Software Lights a Fire Under Tablet

By JESSICA E. VASCELLARO And STU WOO

In the year-and-a-half since Apple Inc. released the market-leading iPad, other companies have tried to one-up the technology giant by going smaller, lighter and cheaper. Now, as the number of tablet entrants picks up, the competition is expanding to what the device can do and not just what it looks like.
On Monday, Amazon.com Inc. began shipping its new Kindle Fire, a $199 tablet packed with custom software that the Seattle company hopes will distinguish its device. The apps include a tailored version of the Pulse news-reader, versions of its Audible audio-book app and IMDb movie database, and its own Amazon shopping store, according to the company.
Akshay Kothari, co-founder of Pulse, said Amazon approached the Silicon Valley start-up about six months ago to build something that couldn't be easily replicated on other devices. Pulse is also available on Barnes & Noble Inc.'s Nook as well as the iPad.


But the version for the Kindle Fire will have features not available for other devices. For example, stories breaking in Pulse will appear in an area of the Fire home screen where users scroll through books and other content, without requiring people to launch the app. Consumers will also be able to send stories they read on Pulse to other Kindle apps, such as apps for saving content, he said.
As their hardware starts to resemble each other's, "software is the most defensible position" tablet makers like Amazon have, Mr. Kothari said. He declined to comment on any financial terms with Amazon.
The same approach is being used by a variety of tablet makers trying to attack and expand the market beyond the iPad, which has unique software features tied to the device. The iPad currently commands a 70% share of the tablet market, according to Forrester Research and Piper Jaffray & Co. analysts, and has an ecosystem of some 140,000 apps for the iPad specifically.
Others are now racing to match the selection and showing off when they do. Last week, Amazon issued two statements within two days about its software offerings, saying it secured "several thousand" apps including ones from online-video service Netflix Inc., game-maker Zynga Inc., and Walt Disney Co.'s ESPN.


Tablet makers are still challenging each other on hardware too, though a more head-to-head battle likely won't come until next year. That's when Amazon will release another tablet computer with a touchscreen that is about 9.7 inches, according to a person familiar with the matter, instead of the 7-inch-size that began shipping this week. The iPad has a 9.7-inch screen.
The person familiar with the matter also said Amazon has five million Kindle Fire tablets on hand to sell during the holiday season.
It is unclear when the new 9.7-inch Amazon gadget would be sold. The Wall Street Journal earlier reported the company was working on another model it could release next year.
Amazon declined to comment on a new device.
Barnes & Noble is also trying to differentiate its $249 Nook tablet by creating special experiences with popular apps unique to its device. The gadget's customized software lets customers access Netflix movie recommendations from the home screen. It also allows them to record their own voices while reading children's books.
Barnes & Noble's chief technology officer for digital products, Ravi Gopalakrishnan, said the software on the device is "one of the big things" that sets the Nook tablet, which will start shipping this week, apart from other tablets.
Tablet makers are also competing over the stores where users find and buy apps, not just the apps themselves.
"Some [app stores] are better than others," said Bing Gordon, an Amazon board member and partner at venture-capital firm Kleiner Perkins Caufield & Byers, citing speed and ease of use as examples. Mr. Gordon said he thinks there is room for the Fire, which uses Google Inc.'s Android operating system and has built its own store for Android applications, to differentiate itself through features such as social video and apps.
As it tries to shift from selling physical to digital goods, Amazon has particular reason to focus on software that helps it sell more digital books, movies and other content, analysts note. Piper Jaffray's Gene Munster estimates Amazon loses $10 to $15 on each Kindle device sold, including the Fire. So the company needs to plug the shortfall in other ways.
Apple, which makes the vast majority of its revenue from hardware, is also talking more about software these days.
In October, the company released iCloud, software for syncing content between Apple devices, its iMessage messaging service for tablets and some two hundred other software tweaks.
For its iPhone 4S that went on sale the same month, Apple didn't upgrade the hardware significantly and focused on the software, introducing new features like its Siri digital assistant.
Write to Jessica E. Vascellaro at jessica.vascellaro@wsj.com and Stu Woo at Stu.Woo@wsj.com