Amazon Confirms They Make No Direct Profit From Kindle Device Sales

[dgstorm]

On Thursday, Amazon did something it doesn't do very often. It shared some details about its profits and business model regarding Kindle devices. Apparently, all the rumors we have heard about the company only breaking-even on the direct sale of the Kindle devices were true. Of course, the company's true strategy is to get the device into the hands of consumers who will gobble up the content it provides, and that is where they are raking in their profits. Amazon CEO, Jeff Bezos revealed the following,

“Basically, we sell the hardware at our cost, so it is break even on the hardware. We’re not trying to make money on the hardware. We want to make money when people use our devices, not when people buy our devices.”

Of course the added brilliance of this strategy is that over time, the costs for building and marketing those devices will come down, so even after they profit from the sales of digital content, later on they also will start to make money on the devices as well. Or, at the very least they can bring out new replacement devices that continue to break even, and then drop the prices of their older devices even further, thus driving their brand loyalty higher. That's a brilliant business strategy no matter how you slice it.

Source: Kindle-FireForum via AndroidAuthority

 

[WhiteLeo]

Only big companies with deep pockets can afford this kind of business model.

 

[yann2]

dgstorm, good article, thank you.

Google is doing a similar thing with the Nexus 7 tablets their production cost is said to be very close to the retail price as well. I imagine their reasons are similar to Amazon's (bring people to their own ecosystem), plus they get the advantage of setting the bar on quality and design on an Android 7"tablet device.

Cheers to Amazon for taking the lead on the market, their pricing when the Kindle Fire first came out did set a new pricing level for all other competing/similar devices.

 

[Natey2]

Google is doing a similar thing with the Nexus 7 tablets their production cost is said to be very close to the retail price as well. I imagine their reasons are similar to Amazon's (bring people to their own ecosystem), plus they get the advantage of setting the bar on quality and design on an Android 7"tablet device.

Yeah! They need to raise the bar, and occasionally take that bar and whack manufacturers who have lower standards. Heh heh heh.

 

[WVUTampaAlum]

Right. We hear this all the time about google and amazon. Does any idiot actually believe it? I mean amazon was selling that original kindle everyone said they were loosing money on for a year. Now they are selling a MUCH better device at same price and oh another better device at 149. ....and of course we hear they make no profit. Right.

 

[yann2]

Yeah! They need to raise the bar, and occasionally take that bar and whack manufacturers who have lower standards. Heh heh heh.

That's pretty much what Microsoft is doing with their new Touch tablets.