This year the competition will be stiffer. Google announced the Nexus 7 tablet starting at $199, and the device has been selling very well. Samsung launched a new version of its Galaxy Note and a flurry of tablets with Microsoft's Windows 8 are due later this year, including one from Microsoft called Surface. Rumors also persist of a new, smaller version of the iPad coming later this year from Apple.

The hardware specifications in the Kindle Fires have improved, but Amazon also has strong content to offer its customers, said Bob O'Donnell, program vice president of clients and displays at IDC.

"Amazon has now improved the hardware specs to match the requirements of the market and the competitors as they continue to try to differentiate based on user interface and content services," O'Donnell said.

Amazon is banking on content to distinguish its product. It's becoming increasingly hard for vendors to differentiate on hardware as the advantages are short-lived, O'Donnell said. Hardware changes come very quickly, and Amazon is adding more content to its multimedia library to attract buyers.

The original Kindle Fire attracted members of Amazon Prime, which offers instant movie and TV show streaming as one of the benefits. At $79 a year, Amazon Prime members get access to 25,000 movies and TV episodes for instant streaming to the Kindle tablet at no additional cost.