This year the competition will be stiffer. Google announced the Nexus 7 tablet starting at $199, and the device has been selling very well. Samsung launched a new version of its Galaxy Note and a flurry of tablets with Microsoft's Windows 8 are due later this year, including one from Microsoft called Surface. Rumors also persist of a new, smaller version of the iPad coming later this year from Apple.
The hardware specifications in the Kindle Fires have improved, but Amazon also has strong content to offer its customers, said Bob O'Donnell, program vice president of clients and displays at IDC.
"Amazon has now improved the hardware specs to match the requirements of the market and the competitors as they continue to try to differentiate based on user interface and content services," O'Donnell said.
Amazon is banking on content to distinguish its product. It's becoming increasingly hard for vendors to differentiate on hardware as the advantages are short-lived, O'Donnell said. Hardware changes come very quickly, and Amazon is adding more content to its multimedia library to attract buyers.
The original Kindle Fire attracted members of Amazon Prime, which offers instant movie and TV show streaming as one of the benefits. At $79 a year, Amazon Prime members get access to 25,000 movies and TV episodes for instant streaming to the Kindle tablet at no additional cost.
Amazon earlier this week struck a major deal with movie studio Epix, which adds thousands of movies to Amazon's movie library, including popular titles such as "The Avengers," "Iron Man 2" and "The Hunger Games." The Amazon Prime Instant Video service in total offers 120,000 movies and TV episodes. The company also added video content from ESPN and Warner Bros. Domestic Television Distribution over the past few months, and opened a new Appstore in the U.K., Germany, France, Italy and Spain, providing access to Android apps.
Amazon at the event also introduced the Kindle Paperwhite e-reader, which can light up and is aimed at people who want to read in bed before they fall asleep. The e-reader has a backlight that lights up the screen as well as GlowLight, which is similar to a feature on Barnes & Noble's Nook Simple Touch.
The Paperwhite gets eight weeks of battery life even with the light on, and has capacitive touch. It is 212 grams and is thinner than a magazine. It has a sharper screen than previous Kindle e-readers.
The Paperwhite with Wi-Fi will sell for $119. A 3G version will work in more than 100 countries and will be priced at $179 and ship on Oct. 1.