Amazon selling Kindle Fire at a loss for content driven profit

Amazon is reportedly selling its Kindle Fire 7″ multi-touch tablet device for a small loss. The numbers aren’t going to bankrupt Amazon but they do show that a manufacturing cost of $191 plus add shipping, marketing, testing and other costs and the price rises to $209. Amazon retails the unit at $199 so a $10 loss is incurred for Amazon. However, Amazon expects that this is not a problem since the whole purpose of the device is to view films, TV, magazines and books as well as listen to music. So Amazon expects to recoup all of the losses and start to make long term profits from the content sales associated with the Kindle Fire devices.

It is unlikely it will make a loss for very long if demand is high enough, if Amazon can ramp up production to a high enough level it should be able to break even but it is yet to be seen whether demand will be strong enough for that. It is worth noting that Apple does not run a similar policy, it makes a profit on both the device and the content so Amazon is definitely looking to set their product apart from the rest by offering consumers fantastic value for money.

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