The Kindle Fire has just begun shipping and yet already seems like a run-away hit that finally gives Apple some real competition.

I will admit that the Fire and the iPad cater to somewhat different crowds, but this is only partially true. The iPad is the best choice for content-creation but its iTunes environment had previously made it the best place for content consumption.

Many trendy users had certainly flocked to the iPad simply because of its heavy integration with iTunes. This type of content-consumption user really will never use the iPad for it’s more advanced features and so the Kindle Fire offers serious lure. Why spend over $500 when you can spend $200 for a device that also provides heavy content-consumption integration?

The Kindle Fire will not lure Apple fans or power user types, but its appeal lies in its low-price and its competitive content delivery service. Apple finally has a major competitor but where does this leave Microsoft?

If Microsoft is going to forge success into the tablet market, it needs to start planning now. The Courier was an interesting device but it wouldn’t have offered anything that would have made it a runaway success and is now dead, so let’s focus on what Windows 8 can bring.

If Microsoft is going to succeed they need a device that can offer the best of both worlds. A possibly good idea for Microsoft is to have a ‘flagship’ device. This concept is similar to Google in that Microsoft would choose a vendor to build a tablet that makes it to the market first and offers a set of features to showcase what the OS can do.

A flagship device would balance consumption with creation while offering a price somewhere in the middle, perhaps around $350. Such a flagship tablet would have Zune integration, perhaps a version of Office optimized for Metro, Xbox live, and improvements to the rental system in Zune marketplace.

Microsoft has the services to compete against Amazon and iTunes, even if they aren’t quite as popular. This makes Windows 8 tablets perfect for content consumption if the cards are played right. With Windows 8 having the power of Metro apps that will run on desktop/laptop and tablets, they could also garner the support of productivity companies and bringing their own offering like Office could certainly tip the scale in their favor.

Will Microsoft offer a flagship device that could really give Windows 8 the attention it needs? Honestly, this doesn’t seem like a Microsoft strategy. For Microsoft the next best thing is to work with vendors to create a specification of tablets that target this mid-level balance of creativity and consumption at a reasonable price.

There of course will also be low-end consumption only devices and even x86 power devices for Windows 8, which is the beauty of its design.

Kindle Fire has shown Microsoft it is not too late to still make a big splash in the tablet market, but they need to play their cards right and deliver the best of both worlds. I sincerely hope they take social integration and Zune integration seriously with Metro in the Beta and final release, because having strong social/multimedia services will likely either make or break its success as a tablet system.

Do you think Microsoft should consider a flagship program similar to Google? Does the idea of a targeted specification that is a mix of productivity and consumption at a low price sound like a good plan? Share your thoughts below.

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