Thursday, April 12, 2012

Kindle Fire Costs More to Produce Than Retail Price

With the caveat that this is one particular teardown analysis, and not necessarily utterly definitive, here's an analysis -- which I missed the first time around, last fall -- that makes the case that Amazon's shiny new $199 e-reader costs them $201.70 to build.

This does fit with my own thinking, so I tend to believe it, but it also fits with Amazon's actual behavior over the past fifteen years: they've always been willing to pay a lot to buy marketshare.

Note that, if this is true, Amazon not only sells Kindle devices at a loss but also demonstrably sells a lot of Kindle content at a loss.There are terms of art used to describe such things....


Mike Kozlowski said...

And they're terms of art for a reason, and don't automatically apply to every case when a company sells an item at a loss. (Microsoft lost billions on the Xbox, for instance, and yet it is utterly uncontentious.)

Weirdmage said...

What people forget is that Amazon sells lots of things, not just books. It's been said online that they can take a loss on their book related business because they recoupe that on the business it gets them. And since they srbitrarily hike their international Kindle prices by $2, they may subsidise their US book prices by overcharging their international customers. I know they earn at least £1 for each book they send to Norway from the UK when they set their "shipping" charges. I think they get the rest of the world to subsidise the prises Americans pay for books.

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