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

 

[52brandon]

give it time. It will continue that direction. When PS3 first launched, Sony was losing HUNDREDS per system. A regular, "bargain" blu-ray player was like a grand. And the PS3 was not only a much better blu-ray player (and STILL is one of the best blu-ray players), but it also had the obvious benefit of being able to play games. Licensing is where they made all their money. The Wii was the only system in the last class to actually profit on sales at launch

 

[swc2001]

Yeah well they would make even MORE money if they would allow their software on other Tablets. As is you have to go through Back doors to get their software to work with other Tables.

 

[mountainbikermark]

Except for videos I've got all my Amazon content apps on all my devices and have the working video app on my Incredible.

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[bazar6]

This is a great strategy, and the consumer definitely wins when they purchase the hardware... I don't know how most books or videos compare to other digital outlets, but apps are competitively priced with iTunes and Google... but the consumers who benefit from this strategy even more are those who root it... They get an inexpensive high quality device with the openness of custom roms, including the choice to download apps, books, music, magazines and videos from either Google Play Store or the Amazon App Store... that's how I view it at least...