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Apple (AAPL) officially created the tablet market in 2010. For almost one year, Apple lived free and without competition in that market.

But in 2011, a fiercer competition started. To make a long story short, RIM's (RIMM) Playbook, Samsung's Galaxy Tab, Motorola's (MMI) Xoom and many others were announced with fanfare as potential iPad killers - and none of them was very successful from a commercial standpoint.

When Amazon (AMZN) created the Kindle Fire and started selling it for $200, quite a few people thought it was the end of the iPad. Indeed, those who wanted a tablet but couldn't spend 600 bucks for an iPad started buying Kindle Fires.

The competition, outside the iOS, is all about price. Amazon won this war, because they thought that even if they lost money in the device itself, they would sell products (music, books, movies, etc…) through its Kindle Fire and make profits then. Other manufacturers, like HP (HPQ), Dell (DELL) and Samsung couldn't follow this strategy, because they had no content to sell. So everyone else (besides Apple) started to revise their tablet strategy and eventually discontinued those products. Kindle Fire killed every competitor in the room.

But after announcing the new iPad (or iPad 3), Apple slashed the price of the iPad 2 to $399. Now every customer that had between $400 and $600 to spend in a tablet is most likely fleeing Kindle Fire and buying iPad 2 ("the Fire falls far short of providing a full and satisfying tablet experience"). They're as rational as you and I: who would buy a Lada for the price of a BMW? Unless you're nostalgic Russian, you would take the BMW and sync it with your iPad.

Let's be honest. Most people would rather have an iPad instead of a Kindle Fire, if both cost the same price (they don't, but now the price gap is smaller). So, now, Kindle Fire targets only a public that is wishing to spend less than $400 on a tablet.

Now, Amazon is subsidizing people with less financial resources than before. And those people have a trend to consume less content. There are exceptions, of course, but as a general rule people with fewer resources spend less on content than people with more financial resources. That way, Amazon is subsidizing people that, on average, will consume less of its products than before. How long will Amazon keep the strategy of losing money on non-content buyers?

That's why I believe Kindle Fire killed everybody in the room. Amazon thought it could sell tablets with a loss and sell content in the future. No competitor from Taiwan, Korea or Japan could do this, and they were killed by Amazon's move.

Now Apple is taking away Kindle Fire's best customers (people willing to spend more than $400 -- not $600 -- on a tablet and pay for content). Apple is taking the filet mignon for itself and leaving the bones for Amazon to chew.

Disclosure: I am long AAPL.

Source: How Kindle Fire Killed Every iPad Competitor In The Room - And Now It Will 'Kill' Itself