IDC analyst Tom Mainelli said that by pricing the Fire below $200, Amazon gives cash-strapped mainstream consumers permission to own a third device (PC, phone, and now tablet) without having to justify its cost by attempting to use it to replace their PC.

“At that price a tablet can just be a table: A device that’s quite good at consuming media, writing short emails, and Web browsing,” said Mainelli.

The analyst added: “We have long maintained that media tablets are additive devices, not replacements for PCs, and that’s why media tablet vendors — aside from Apple — have had trouble selling units at $500 and higher.”

The 7-inch LCD-based Kindle Fire has dual-core processor and is a Wi-fi only device with 8GB of storage. It runs a highly modified version of Android, and Amazon claims it will offer about 8 hours of battery life for reading and 7.5 hours for video playback.

It is the first Amazon-branded device to offer not only access to the company’s large selection of eBooks, but also its growing collection of digital music and movies, as well as applications and games.

The company also announced three new e-Ink only Kindle products. The Kindle Touch 3G ($149), the Kindle Touch WiFi ($99), and the Kindle ($79).

The new E-ink based Kindles are expected to shake up the eReader market, with new sub $100 products fuelling the market’s continued growth.

But it’s the company’s blazing entry into the media tablet market that should have Android-based competitors, and even Microsoft with its planned future Windows 8 tablets, taking notice, IDC said.

“That’s because the Kindle Fire both positions Amazon to be a leading digital media content seller, and dramatically resets expectations about what a media tablet can do and can cost,” it said.

According to Amazon, the Fire will offer Web-browsing experience through its own proprietary browser. Called Amazon Silk, it is a “split browser” technology that resides both on the device and within Amazon’s Elastic Computer Cloud (EC2).

“Silk combines EC2′s super-fast Internet connection with cached content from popular sites as well as logic that looks at traffic patterns to predict a person’s next page request. The end result, in theory, is a snappier browsing experience,” IDC said.

The analyst firm said that while technology snobs will disparage the fact that the Fire won’t lets users visit the regular Google Android Marketplace and download standard Android apps, regular consumers — the people Amazon is targeting with the product — won’t care.

“In fact, they’ll likely be delighted by the fact that the number of apps available for the Fire will be limited, and vetted, by Amazon,” it said.

IDC noted that the Fire is due to ship in November, and so its direct impact on the media tablet market won’t be known for some time.

“What is clear, however, is that by setting the price of its 7-inch product at $199, Amazon has made life very complicated for the long-list of media tablet vendors who have been trying, and mostly failing, to gain traction against Apple’s dominant iPad 2, which starts at $500,” it noted.

“One after another we’ve watched these vendors introduced products at the same price point (or higher). And one after another, with the possible exception of Sony’s recently launched Sony Tablet S, we’ve seen the market respond with indifference.”

It added: “Realistically, even top-tier vendors like Sony, Samsung, and Toshiba must realize that to gain any real traction their 9- and 10-inch products must be priced closer to $300 than to $500.

“Meanwhile, Research in Motion continues to price its 7-inch PlayBook (by all accounts, the Kindle Fire’s hardware antecedent) at $499, a clear recipe for continued irrelevance.

“Neither Microsoft nor its partners have announced future pricing for Windows 8 based tablets, but chances are they didn’t expect to be competing with a $200 device. And that’s today’s price. A year from now when Windows 8 devices ship, it’s possible Amazon may well be selling the Kindle Fire 2 at an even lower price,” it said.

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