“Amazon has confirmed it will not make a profit from sales of its latest Kindle tablet and e-reader devices,” Rory Cellan-Jones reports for The Beeb.
“‘We sell the hardware at our cost, so it is break-even on the hardware,’ chief executive Jeff Bezos told the BBC,” Cellan-Jones reports. “Mr Bezos made clear that the devices’ success would depend on how many books and other media files were subsequently bought by their owners. ‘We want to make money when people use our devices, not when people buy our devices,’ he told the BBC.”
Cellan-Jones reports, “By contrast Apple has indicated in the past that it makes much of its profits from device sales while running its iTunes store ‘slightly above” break-even.’ … Amazon is also attempting to use its hardware to stimulate sales of other physical products sold via its store. Access to its Lending Library facility will be tied to a £49 annual subscription to its Amazon Prime service. The offer includes rapid delivery, at no additional cost, of products from its warehouses.”
Read more in the full article here.
MacDailyNews Take: Nothing new here. Bezos is giving away the razors in order to sell blades. We’re very interested to see how Apple prices “iPad mini” if and when it finally debuts.
[Thanks to MacDailyNews Reader “David E.” for the heads up.]
Related articles:
Amazon’s Kindle Fire HD: So what’s the point? – September 11, 2012
Amazon takes aim at Apple iPad with larger 8.9-inch Kindle Fire HD – September 6, 2012
Amazon announces slew of new Kindle tablets – September 6, 2012
It is funny that the analyst attempts to convey that while that amazon makes money on sales done thru the device. Really hilarious since amazon is not making any money unless you call 2 cents profit thru sheer creative accounting a profit.
Reasoning that the build out of warehouses is what is inflating expenses is again hilarious, since this is capital expenditures that will be depreciated. Baloney is as baloney does.
Apple should start selling the content at break even. Amazon will have to match. Then Amozon is dead. Is it that simple. What am I missing?
What? Amazon is selling everything on earth through their online store. They just use the Kindle to make it easy for you to access their online store. Yes, it is the razor and razor blade model. Nothing new but works very well. It has really nothing to do with Apple as Apple’s model is completely different. Both are doing quite well thank you. Amazon.com owns the space. It has no real competitor. Apple is selling the device and using it as a means to sell the ecosystem to customers. Apple makes money on both. Both companies have a system that works for them. Both should do well going forward.
last quarter amazon made 7 million in net profit (from everything books, appliances, electronics etc)
apple made 8800 million. (more than half from iOS)
7 vs 8800 million and referring them as ‘both’ like the same is a stretch…
apple in one quarter had made more money than 1000 amazon quarters…
And 1000 quarters is 250 years…
It’s not the razor blade model–Amazon doesn’t make any money on the razors nor on the blades. Their business model is very precarious with 1% margins.
I don’t think Amazon will have long before they start pulling a profit on the devices too. Component prices will follow their pricing pattern and amazon may well start to pull a few bucks on the devices.
The problem is either the devices will stop working or their buyers will stop using them before Amazon starts to see a profit.
Interesting and disruptive. Two very different business models. Amazon is more like a grocery chain with extremely low margins, while Apple commands high margins based on innovation and the value of the company’s design and services. Of the two stocks, Apple is a much better buy, with its low P/E and PEG ratios, while Amazon’s stock price multiple is in the ionosphere.
I still view Amazon as more of a threat to other Android device makers, as the pricing undercuts what even Samsung could do.
Note to Mr Bezos:
I bought an original Kindle and currently own a real (eInk) Kindle with 3G and WiFi and a keyboard. For reading books while camping or out in the yard it is without equal.
I also own an Apple iPad in the current generation and it has the Kindle app installed. The fact that Kindle content can be read on a Desktop, Laptop, Tablet, iPhone or Kindle makes it a compelling choice for digital reading media.
I don’t do Fandroid, don’t do ads on my devices and do not need an iPad wannabe masquerading as a Kindle. The touchscreen, ad-laced newer Kindles are bullshit. As Fandroid is an OS based upon stolen code I refuse to buy any “Kindle” that uses the Fandroid OS no matter how disguised you make it.
Real Kindles are dedicated readers with low gloss e-ink screens and are NOT built on Fandroid. And they do not contain advertising. EVER.
Keep pissing in the punchbowl and drive your customers away.
The flaw in his plan is that those who prefer to cheap out on a tablet are the least likely to spend on digital products as well. Oops.
iHaters will tell friends and family to buy the Kindle based on BS and lies. Fandroids will tell friends and family to buy Kindle because its powered by Android which is based on ripping off Apple. Good thing most of their friends and relatives are not as stupid as iHaters/Fandroids/Google/Samsung (insert cloners here) users.
Actually, most true fandroids dislike the Kindle Fire tablets because Amazon forked their own development of Android and by default tries to restrict users to stay in their ecosystem (which is actually smart, well, with the exception of choosing Android in the first place).
They don’t dislike the Amazon tablets as much as they hate iOS devices, but they certainly aren’t fans of is.
What’s really funny is that at least Amazon is going to be shipping their forked version of Ice Cream Sandwich on the Fire HDs, which even at a year old is still not running on most of the other vendors tablets that the fandroids love so much.
Makes no profit, just like the rest of Amazon.
Android fans are always talking about how open it is, and that is why it will kill Apple like MS did. The best selling Android tablet is not open, it would kill it if it was. Of course there is no way to be sure that Kindle is the best selling because no Android maker releases their sales. The one that was forced to, Samsung, was selling a fraction of what the analyst believed. Oh yes MS’s new ARM tablets will be closed also.
That paperwhite one is a fantastic bit of kit IMO. The only reason I haven’t bought one is that my Kindle Touch is less than a year old as it is.
I like that Amazon is doing this. More competition is good for content producers and consumers alike.
Good for content producers? Really? Your rather out of touch on that subject. You need to do some reading on the matter and then come back and comment.
Not at all. Amazon allows authors to self publish. Try going back 10 years and getting your work into print.
We sell the hardware at our cost, so it is break-even on the hardware
Yeah. We knew that last DECEMBER. No change with the Fire HD.
What he didn’t add was the fact that these devices are SUBSIDIZED by Amazon. Each sale actually COSTS Amazon money. The name of that game is:
BUYING MARKET SHARE
Hello!
Was gifted an e-ink Kindle with keyboard by someone who got a K-Fire.
Enjoyed it for about six months until the screen went gooey-kerblooie.
Junk.
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