Before a Google tablet hits the market, Mike Elgan from PCWorld explains why Google will beat Amazon in the tablet wars (Why Amazon Can’t Win a Tablet Price War Against Google):
Here’s the problem for Amazon. As prices come down, Google’s partners will be able to sell tablets — without losing money — at or below Amazon’s $199 price.
To stay ahead in the race to the bottom, Amazon will need to continue subsidizing tablets. So when, say, Asus and Google are selling a co-branded $149 tablet, Amazon might sell a comparable device for $99. When the Asus-Google tablet drops to $99, Amazon would need to sell a comparable one for $69 and so on.
It’s a losing proposition.
The lower prices go, the broader the audience. You get a lot more people who are unwilling or unable to spend a lot of money on things.
People who won’t buy a tablet until it’s really, really cheap aren’t going to spend freely on Amazon.com. But Amazon still has to lose money on the tablet in order to undercut Google’s dozens or hundreds of tablet-making partners.
Read much more at PCWorld.