Kindle Fire Sells as Loss-Leader Afterall; Cost Breakdown Reveals $201.70 to Build

[dgstorm]

Earlier in the year, we shared rumors that the Amazon Kindle Fire would sell as a "Loss-Leader." That means that it would cost more to build than Amazon intended to sell it for, and instead would make profit off app and store purchases, subscriptions and service sign-ups. Then, later this rumor was dispelled and the estimated cost of the device would be around $150-160.

Now things have turned around again, and from a recent price breakdown analysis that market research and intelligence firm IHS iSuppli performed, it turns out that the previous rumors were true. The new Amazon Kindle Fire actually cost $201.70 to manufacturer, which is a tad bit higher than the $199.99 that it sells for. Here's a quote from the BGR article with details from IHS iSuppli,

“The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point,” Andrew Rassweiler, senior director of teardown services for IHS, said in a statement. “Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle. This is a similar business model to wireless companies such as AT&T or Verizon. They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.”

In fact, it's also important to note that these are only the manufacturing costs associated with the device and does not account for marketing, advertising, royalties and licensing, so the actual cost of the device is quite a bit higher.

Source: Kindle-FireForum via BGR