Just as a hectic day in technology reporting ends with Samsung signing a patent licensing deal with Microsoft followed by the huge Kindle announcements from Amazon, we hear this little bit on our twitter “Amazon Losing $50 Per Kindle Fire?” John Paczkowski over at AllthingsD is quoting an analyst with these figures. If you believe it, Amazon is making a loss of up to $50 per tablet sold. Amazon could have easily priced this at $250 and still be the cheapest Android tablet worth picking up out there.
In fact, anyone looking to get a refreshing Android version running on a tablet, would look at the Kindle Fire. The light weight design, IPS display, dual-core processor, Amazon Silk browser technology, a free app each day via Amazon App Store and all the goodness of Amazon content ranging from Books to Videos. The Kindle Fire can easily command a $50 more. But, if Amazon is losing $50 per Kindle Fire, we are not surprised! Not surprised at all!
What Is Amazon’s Business?
Amazon is not a hardware company selling content along with its tablets and ebook readers. It is a content company that is making hardware sell its offerings. Amazon already sells more digital books than physical, and that it shows how valuable this segment is for them. A Kindle app for almost every mobile platform, an ebook reader & a tablet is a significant commitment. And Amazon puts in all this effort to sell its content and nothing else. Kindle hardware sold at $79, or $199 is a onetime sale for Amazon. The prospect of selling movies, magazines, books, music and apps on an ongoing basis is much bigger. Amazon is eyeing that.
The entire calculation of Amazon losing $50 every Kindle Fire sold may be wrong, but we know that Amazon is willing to take a loss on Kindles. We have heard many stories suggesting this and a recent one are where one of our friends ended up damaging the e-ink display on his Kindle called up Amazon for help. He got a replacement at No cost to him. And this wasn’t in US, but down here in Pune, Maharashtra, India! Amazon not only sent a new Kindle for him, they even paid the cost of getting the broken Kindle being sent back to them. Now, why would a hardware company every do that? Amazon does it, and the logic is clear, they sell content, not Kindles!
