When you've already decided the story

I don't know about you, but if you have any interest in the markets, then the news around a month ago became very surreal. The S&P, a ratings agency, "downgraded" the US debt on a Sunday. The media saw this as a major story (which, I guess it was), and automatically assumed that the markets would panic the following day because government bonds were no longer considered as solid an investment, at least by one major ratings agency, as they were.

The following day, there was a sell off - but not of government bonds. In fact, government bonds rose in value. The market was getting rid of stocks and buying government bonds. Why? Well, actually this had been going on for a week. In the previous week, the market had collapsed almost every day, but government bonds had rose in value, as panicked investors sold what they saw as unreliable stocks, and bought into what they saw as safe bonds. And these investors were panicked because... well, I assume because the economy isn't very good right now. Governments across the world are implementing so-called "austerity" measures in order to reduce their own debts, which is sucking money out of the economy, increasing unemployment, and making it much harder for those self same governments to run stimulus programs to revive their flagging economies.

In that climate, nobody really cared what the S&P had to say, especially as the S&P wasn't saying "The US government is going to default", just "The US government has a fractionally higher chance of not paying its bonds in time as it did previously."

So what did the media do? Well, having decided to write a "Markets collapse due to S&P rating change" story on Sunday, they wrote it on Monday anyway! And they've continued to push this line since, as have the politicians, the pundits, and pretty much everyone except investors and economists - you know, the people who actually know what they're talking about but who rarely get any air time.

The Amazon "tablet"

So with that in mind, I invite you to take yesterday's coverage of Amazon's new color Kindle with a pinch of salt.

For the last few months, a number of publications have heard rumors (and sometimes seen evidence) that Amazon was going to release an "Android tablet". With the words "Android" and "tablet" generally associated with "Competition with Apple" and "iPad", the media wrote the story: Amazon was going to take on Apple when everyone else had failed. It would be a mega tablet, low cost, but capable, and would beat the iPad because it would be so cheap. iPad iPad iPad.

And yesterday Amazon finally released its new range of Kindles. There's a low cost model, plus a slightly more expensive model called the Kindle Touch, and then there's the color Kindle, the Kindle Fire. The latter is the iPad competitor.

Or so the media said.

But, hang on. Is anyone else producing the same thing? Why yes, one obscure company nobody has ever heard of is producing a similar line of devices. They don't have a "cheap" version, but they do have a low cost touch-based reader, and a slightly more expensive, Android based, thing, that can run apps, etc, with a color LCD.

The company? Barnes and Noble. Which is arguably Amazon's primary competitor.

So if Amazon is producing a range of devices that happen to be extremely similar to its largest competitor, then how does the "Competing with Apple" thing come about?

Part of this is a misunderstanding of the market. The iPad is not simply a color eReader, it's a more sophisticated device that's designed for basic computing tasks. The iPad can be used as an eReader, but few people buy it as one because it's suboptimal for the task. You can't read the screen in certain lighting conditions, you have to keep the thing on a charger when you're not using it, it's expensive, and, well, it's big. Really big. The Kindle might not fit in your pocket (although the Kindle Touch may do) but it's small enough to go anywhere where you'd take a book.

B&N initially produced an eInk Nook before releasing the Nook Color, which seemed to be in response to demands from people who felt that actually the iPad was a superior eReader because, well, it was in color. And it's sold moderately well, but largely to people who saw it not as an eReader, but as a neat portable media and web widget. It's a poor eReader, and a poor tablet, but it's not really intended to be either. And it's given B&N the opportunity to sell certain services they wouldn't be able to otherwise.

Meanwhile, seeing eInk as the best technology for reading, B&N released a Nook Touch recently, that uses touch screen technology to produce a nicer, easier to use, eInk eReader. B&N obviously see the Nook Color as worthwhile, but not as the "future" of eReading.

Amazon's Kindle, in the mean time, has continued to sell like hot cakes. But that said, as a Kindle user myself, I can tell you it's far from perfect. The user interface is klunky, there are some nice features like web browsing that are hidden in the device and are difficult to use because the device was never designed with that in mind, it's capable of playing music but, again, doesn't do it well, and it really needs a revamp. Quite honestly, until yesterday's announcement, I too was considering a Nook. A Nook Touch.

Meanwhile, Amazon themselves have a number of services that they want to sell that would benefit from being less dependent upon third parties. For example, you can use a Roku box to watch a movie with Amazon Video-on-demand, but the Roku box isn't well marketed and you need to know it can do that.

So Amazon has revamped its Kindle range. The eInk Kindles are designed for reading. The new Kindle Fire is designed as, essentially, a network connected media player for Amazon's content. You'd use the Kindle Fire where you currently use an MP3 player AND a DVD player. And that's it. It has some other nice features, like a web browser, and Amazon intends to make it easy to buy apps for it so you can extend its functionality. But it's not positioned as a next generation portable computer. If you want an iPad, the chances are you're not going to be satisfied by the Kindle Fire.

Why? Well:

• The Kindle Fire has a smaller screen. This limits the capabilities of the apps you'll want to use with it.
• You can't connect the Kindle Fire to the Internet unless you have an existing Internet connection. (Interestingly, 3G versions of the other Kindles save for the cheap one are available.)
• You can't use the Kindle Fire for any communication beyond email and IM. There's no microphone, for example.
• You can't use the Kindle Fire to create anything - you can't take pictures for example.

I don't think anyone at Apple is particularly concerned by the Kindle Fire. I'm not suggesting there's no overlap, and Apple does make some money (not a lot, but enough to be concerned about) selling the same kinds of content that Amazon does, but that's not Apple's core business, and people who are buying iPads are, at least, expecting better capabilities. The iPad is primarily a communications and media device. The Kindle Fire is primarily a media device.

The media had already written the story, and so what happened yesterday was somewhat confusing. But if you look at the products in the narrow way defined by yesterday's spinning, then nothing makes sense and you'd be forgiven for not really being able to make an informed decision about what to buy, or whether to buy anything at all.

Here's what you need to know:

• If you really are limited for cash, need to read eBooks, and have access to the Internet the $80 Kindle is designed for you. 
• Regular eBook readers will almost certainly find the $100 & $150 (Wifi and 3G respectively) Kindle Touchs exactly what they want to use.
• If you're looking to replace your MP3 with something more advanced, something with a big enough screen for occasional web browsing, something you can watch movies on (or plug into a TV to watch movies on), and something that allows you to play games, then if your phone doesn't do this already, or the phone does but has too small a screen, then the Kindle Fire is intended for you.

If you're considering an iPad, then you probably want more than the Kindle Fire, because, to be quite honest, there are already low cost Android devices that have a spec somewhere between the Kindle Fire and the iPad anyway, and for some reason you've ruled them out! Moreover, choosing between the two is a little like choosing between a computer or a games console, or between a raincoat and a T-shirt. The devices might have overlap, but they are optimal for their intended purposes, which are slightly different.