Why Amazon Prime is the Most Important Weapon Amazon Has Against Apple

For $80 a year, Amazon Prime subscribers receive free two-day shipping on everything they order (so long as it is eligible/fulfilled by Amazon), unlimited streaming access to 5,000 movies and TV shows on Amazon Instant Video, and possibly in the future increased CloudDrive storage, and even a discounted or free Kindle or Amazon Tablet. Yes, Amazon Tablet

What exactly would an Amazon tablet be? Something to compete directly with both Barnes and Noble's Nook Color, and Apple's iPad. Perhaps a tablet that runs a custom version of Android (similar to B&N's Nook variation) and not Honeycomb, since Google is restricting access to the source code. Why Android? Amazon just launched their Appstore for Android, in a move to get in on the developing market for mobile apps. Interestingly enough, the store is also called "Appstore for Android", implying that Amazon seeks to provide an Appstore for other platforms (perhaps WebOS or RIM's PlayBook?) in the future.

Despite what you may read in other media, Amazon is Apple's direct competitor. Recently Apple released that they have 200 million credit cards on file, claiming that this is the most accounts anyone has today. Of course, Amazon historically doesn't release numbers for anything (credit cards, or much less, Kindle sales), but it's a safe bet to say Amazon has somewhere around 200 million credit cards, if not more on file. Both Amazon and Apple sell content. Apple sells hardware to sell content and makes money on both of these. Amazon wants to do the same.

The key to Amazon's success is their Prime membership. Their Prime customers spend more money than regular customers, and if Amazon was to give them all a free or highly discounted Kindle or Amazon Tablet they would undoubtedly buy more books and apps. Android's biggest problem in drawing developers today is the lack of overall sales on the Android side; Quite simply, iOS users are more likely to purchase apps, whereas Android users expect them to be free or ad-supported.

With Amazon's foray into selling apps, it only logically follows that they would push into hardware. A phone doesn't make sense for Amazon, not yet at least. A tablet, however, makes perfect sense. A 7" color touch-screen tablet by Amazon, with custom Android and a beautiful Kindle interface would be the perfect complement to the future color e-ink Kindle. If you want a Kindle just for reading, you'll be able to get a color e-ink model for $99 or for free if you are a Prime member. If you want to do more with your Kindle, you buy the Kindle Tablet for $349. And if you're a Prime customer? Just $99.

Amazon is doing this soon. As soon as the next Kindle refresh soon. Before Summer's over, and before school starts in the fall. Any thoughts on an Amazon Tablet?