Amazon Firehd

Amazon's Fire HD Kid's Edition is a clear shot at LeapFrog's LeapPad tablet line. Credit: Amazon.com

Look out LeapFrog (NYSE:LF), because Amazon.com (NASDAQ:AMZN) has its eyes on one of your most lucrative revenue streams.

Amazon just unveiled its new Fire HD Kids Edition tablet, which will set parents back $149 for the 6-inch display version, or $189 for the 7-inch model. That's certainly not a bad price, but at first glance it seems LeapFrog might even have the advantage given the $100 price tag on its 5-inch LeapPad3, and the $130 cost of the 7-inch LeapPad Ultra XDi.

Leapfrog Leappad

LeapFrog's LeapPad Ultra XDi Learning Tablet could face huge competition from Amazon. Credit: LeapFrog

That's also not to mention LeapFrog has gone to great lengths to cater both to kids and parents alike by developing easy-to-use parental controls, an educator-approved library of more than 1,000 apps, LeapPad's own drop-tested design, and a one-year "kid-proof warranty" that covers up to one replacement of the device -- as long as it was purchased from LeapFrog.com, anyway -- even in the case of accidental damage. .

But that still doesn't explain why Amazon described the Fire HD Kids Edition both as "a real tablet, not a toy," and "the first tablet built from the ground up for kids (and their parents)" -- something to which the folks over at LeapFrog will surely take offense considering the company unveiled the first LeapPad Explorer tablet way back in mid-2011.

Advantage: Fire HD Kids Edition
In this case, however, Amazon might have a point.

First, Amazon points out its device not only has a quad-core processor -- which both the latest LeapPads have as well -- but also Dolby Digital Audio and an HD display protected by Gorilla Glass. In short, Amazon knows kids are aware of the difference between a "toy" and a "real tablet," and this should appear much closer to the latter. 

In addition, Amazon literally one-ups LeapFrog by offering a two-year worry-free guarantee, saying "If they break it, we'll replace it. No questions asked." 

Amazon also incorporates its own slick parental controls and educational goals through Kindle FreeTime -- which, for the record, is technically downloadable on Amazon's other Kindle Fire Tablets as well. But the Fire HD Kids Edition also comes with a year of "FreeTime Unlimited," which Amazon describes as "a hand-curated subscription of over 5,000 kid-friendly books, movies, TV shows, educational apps, and games."

And Amazon isn't talking about little-known names here; FreeTime Unlimited includes apps, shows, and games from the likes of Disney, Nickelodeon, Sesame Street, and PBS -- all at no extra charge for the first year. After that, you can either revert to the regular FreeTime and buy apps individually, or renew the service at $4.99 per month for one child, $9.99 per month for up to four kids, or discounted rates for existing Prime Members of $2.99 and $6.99, respectively.

LeapPad is cheaper upfront, but ...
By contrast, while LeapPad users do have access to that 1,000-plus app library for their devices, the cost of those apps ranges from $2.50 to $10 each for simple games and eBooks. Worse yet, for many of the most popular titles from publishers like Disney, the cost of LeapPad's apps and games can run as high as $25 apiece. With this in mind, suddenly the slightly higher upfront cost for Amazon's tablets seems a whole lot more attractive.

And make no mistake: That's a bad thing for LeapFrog, which already made it painfully clear last month that weakness in its older tablet lineup helped fuel a 43% plunge in consolidated net sales last quarter. What's more, though LeapFrog management told investors it expected stubbornly high retail inventories to hold back the company's financial results in the current quarter, but predicted "solid net sales growth" in the subsequent quarters. For that, the company was counting primarily on sales of new products, including LeapTV, LeapBand, and -- you guessed it -- LeapPad 3, LeapPad Ultra XDi, and related software content.

As if LeapPad didn't already have enough competition from the vast number of affordable apps on traditional tablets, the new efforts from Amazon to take market share in the kid's segment could be the straw that breaks this frog's back.

Steve Symington owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, LeapFrog Enterprises, and Walt Disney. The Motley Fool owns shares of Amazon.com, Apple, LeapFrog Enterprises, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.