Who's afraid of Kindle Fire?

Amazon's launch of the Kindle Fire was the most impressive unveiling of a new gadget since, well, the iPad 2. And Jeff Bezos seemed to be channelling Steve Jobs as he held the device aloft before going on to extol its amazing properties. But will Apple be worried about the Fire?

At first sight it looks like the most convincing challenger yet to the iPad. The 7" device - looking remarkably similar to the Blackberry Playbook - offers most things you would expect from a tablet. You can watch videos, surf the web, update your Facebook status, with everything nicely synced to Amazon's Cloud - which makes the relatively sparse 8GB storage not such an issue.

But the really amazing thing about it is the price. At $199 it looks an amazing bargain compared with the iPad, which starts at $499 in the United States. True, it's smaller, lacks a camera or microphone, and there's no 3G option - but surely Apple executives are going to be panicking about this massive threat to their extraordinarily lucrative tablet business?

Or maybe not. In an expanding market, there will still be plenty of customers for the high-end - and high-priced - experience that the iPad offers. Both Apple and Amazon will now offer an integrated service, where users hand over their credit card details and then get easy access to a huge library of movies, music, books and other content.

It is hard to see how Amazon can make a profit on the hardware - unless it's discovered some low-cost manufacturing techniques not available to its tablet rivals. But the online retailer will be happy to support a loss-making device if it persuades millions more customers to spend money on its digital content.

Apple may be relaxed about losing some of its more economically minded customers and is unlikely to respond with big price cuts - after all, it makes most of its profits from hardware, not those iTunes sales.

The real panic should be in the boardrooms of the other tablet makers. We've already seen HP withdraw from the fray, unable to make an impact with a tablet priced at the iPad level - although once slashed to below the price of a Kindle Fire, the Touchpads have flown off the shelves.

But the likes of Sony, Samsung and HTC, all making Android tablets that start at around the £400 mark, and RIM with its Blackberry Playbook, retailing at around £290, may struggle to get anyone interested in their devices.

None of them, with the possible exception of Sony, can offer the kind of integrated service which Apple and Amazon now offer to users. And all of their desktops look rather cluttered and confusing compared with the clean bookcase look of the Kindle Fire.

So in a few months time, the tablet market may be dominated by two giant technology firms based on the West Coast of the United States, with the rest of the world scrapping over the leftovers.

At least there will be some proper competition for Apple - but there is a hint today that the two giants may still be able to play nicely together. Lovefilm, the British movie rental business recently acquired by Amazon, launched an app for the iPad which allowed its members to stream movies on Apple's tablet.

So Amazon appears happy to allow its customers to get access to its content on Apple's territory, and Apple seems to have decided not to shut them out. The shape of the digital media landscape keeps changing, but from Apple to Amazon, from Google to Facebook, all of the superpowers of this new world come from the same timezone.