As expected, Jeff Bezos announced new Kindle products yesterday in Santa Monica — and what an interesting range of products these turned out to be! While the updated Kindle eReaders offer better performance and a lower price point for those dedicated eBook lovers, it’s the Fire range that really impressed.

In place of the low-powered, fairly low-spec, North America-only original device, there are now three to four devices — running the gamut from version 2 of the original all the way up to the 4G-enabled 8.9-inch Kindle HD with its own data plan. The pricing of the devices is even more intriguing — at $159 for the lower-end 7-inch tablet, $199 for the 7-inch HD tablet, and $299 for the 8.9-inch HD tablet (Wi-Fi only), these represent a new challenge to other manufacturers’ Android devices and Microsoft’s upcoming Windows 8 tablets. Additionally, European markets (the UK, Germany France, Spain, Italy) will get to see the 7-inch Fire devices (both version 2 of the original and the HD device) at more or less the same time as the US – no sign of the larger device, but that’s probably reserved for the US market while supply ramps up.

What does this mean?

• Android tablets (aside from the Nexus) are dead in the water. With Google and Amazon both squeezing the price of Android tablets, its difficult to see how Samsung, HTC, etc. can compete in this space, especially given that they don’t have Amazon’s and Google’s alternate revenue streams to supplement loss-leader hardware. The Verge published a very good article on this prior to Amazon’s announcement.
• Microsoft finds itself at a crossroads. Microsoft now has two options for the Windows 8 RT tablets:

1. Stick to its “The Kindle Fire and the iPad are just for content consumption; Windows RT tablets will be for so much more” message that has been its mantra for several years and try to price high — a strategy that’s almost certainly doomed to failure if it relies on retail and mainstream consumers to understand the difference.
2. Price the Microsoft Surface (RT version) competitively to hit Google and Amazon head on and undercut Apple. The downside here is that it means alienating those already-alienated Android OEMs as well (on the ARM platform at least). Also, Microsoft has very little content or advertising revenue to make its money back on hardware subsidies. So as previously mentioned, the $199 Microsoft Surface RT seems unlikely.

• Apple needs to adjust its medium-term strategy. The iPad, iPhone 5, and (probable) iPad Mini will naturally continue Apple’s policy of premium pricing: Why would it slash margins when the competition hasn’t really made an impact? But it’s more important for Apple now to look at what price its tablets will be in 12 to 18 months’ time — a time frame that allows for Amazon Fire, Google Nexus, and even Microsoft tablets to establish a decent market share and application ecosystem. In a market of similarly designed — lawsuits allowing! — well-built devices with active developer support, Apple will need to adjust its pricing accordingly; consumer ties to the iTunes ecosystem can only be stretched so far.
• For consumers, it’s win/win (after six months of pain). The upshot of all of this for consumers is that there will be much more choice in the tablet space, more competitive pricing, and a wide variety of capabilities and ecosystems to choose from. This won’t happen overnight, though. To get to this tablet heaven, we’ll need to go through a glut of dismal Android tablets dumped on the market by those OEMs boxed in by Google/Amazon; Windows RT tablets arriving with their confusing “It’s a proper PC, but not really a proper PC” messaging; and endless discussions about poor battery life, built-in obsolescence, and app stores.

What’s next? Apple’s iPad Mini announcement will mix things up again in the next month, and we’re still waiting on pricing details for Windows tablets.