Ads on Kindle Fire HD tablets: Bad news or just business?

UpdatedAmazon impressed with its new Kindle Fire HD tablets this week, offering what it calls “high end” devices at low prices. Case in point: The 8.9-inch Kindle Fire HD(s amzn) has 1920 x 1200 display, dual-antenna Wi-Fi, Dolby audio sound and fast dual-core processor. Twenty minutes before the pricing details, I correctly guessed that Amazon would be aggressive with a $299 price point for the device.

Kindle Fire HD angleThere’s a catch in the price, however, and it’s causing quite a debate. All of the new Amazon Fire HD tablets include “special offers” which are essentially advertisements for Amazon goods and services.

This isn’t new. Kindle readers with special offers have been available since May of 2011: Instead of paying full price, a customer gets a discount on the device, which has ads. In my opinion — as the owner of a Kindle Touch with special offers — these are unobtrusive as they appear on the Kindle lock screen and at the bottom of the menu screen. I’ve never seen an ad in my content.

Others disagree and don’t want ads on their Kindles at all, so they pay extra. To each, his or her own. But here’s part of the ire I’m hearing about the new Kindle Fire HD tablets: Amazon isn’t offering a buy-out price to remove the special offers. Instead — at least for now — ads will appear on the lockscreens and home screens of the tablets. I hope Amazon reconsiders and offers the option of removing the ads.

Regardless, the situation is an example of how the digital economy is changing and challenging traditional business models. We’ve seen a similar approach with phones in the U.S. for years: Carriers subsidize the hardware in return for a lock-in of service. These carriers also add their own software and services — often not removable –on the phones. And consumers are totally reliant upon carriers to get software updates as well. In other words: You don’t have control over your phone and the subsidy is financial in nature.

Subsidies don’t always mean money, however. Information is currency in the digital age and that’s exactly what Amazon is using to subsidize the Kindle Fire HD hardware costs in order to make the price more attractive. I noted this potential change back in 2010 when I suggested that Google subsidize smartphones or mobile broadband service in return for similar information and ads.

It’s a shame that Amazon isn’t giving consumers a choice to remove the special offers with a small buyout. But as a consumer, you do retain some choice. If you feel the ads will be intrusive, you can choose to buy a different tablet. Again, I hope Amazon reconsiders; perhaps after it gets a feel for sales as compared to the unit costs to build the devices it will do so.

For now though, you take the good with the bad if you want a new Kindle Fire HD. And I doubt this is the last product we see use an information subsidy or ad-supported hardware approach. The Internet has changed the world and business models are changing with it.

Update: My hope was rewarded! Amazon changed its policy roughly 12 hours after this publication and you can now opt out of the ads with this addition to the product notes on its site: “If you would like to opt out of these special offers, you can do so through Manage Your Kindle for $15 after you have registered your device.”