Amazon has shown itself as the first true competitor to Apple in the tablet war. The launch of the Kindle Fire this week is an audacious move to out-price the iPad with a dumbed-down system costing just $199.

Tablets are a future cornerstone for the world’s data consumption. As ever, Jobs lifted the curtain on that future and then he charged us a fortune to let us walk behind it. Amazon’s Jeff Bezos has had the hindsight of not being the first mover – he’s seen others throw pebbles at the armour of Apple with their tablet efforts (HP’s TouchPad was surely the most ham-fisted go at it).

I agree with Jason Calacanis that price is the key here, as you need to flood the market to gain traction and lock out competitors. Of course the product needs to be sellable in the first instance. Free may convert latent demand but it doesn’t create demand. No price reduction is enough if the product is tat – you could stand on every street corner in the country selling Betamax recorders for 1p. If you’d raised a whole £1 after a year I’d be stunned.

Amazon also had the gumption to go big. To double down as the yanks would say. And it needs to be so audacious because the scale of winning in this tech war is simply stratospheric. It’s not just about a few million bucks on the hardware, that’s just the entry fee to the club. The real win is at the bar. Consumers are paying for data that the world thought would be free for all time until the App Store showed us otherwise.

And nowhere is content more available than Amazon. Books, music, movies and TV shows are there. And of course, physical products from the deepest marketplace imaginable. Regardless of whether Amazon want to outgun the iPad, they are undoubtedly set to sell a whole tonne of content.

This is a killer strategy that doesn’t work in a cash strapped start-up with very little runway money and time. It’s the epitome of a loss leader, but it comes with the double whammy of providing a huge content channel as well as seeing off hardware competitors. Advantage Amazon.

This is a great move and a business test case for millions of students in years to come. What can Microsoft come back with?