Amazon's Kindle Fire is sold at a loss At $199, Amazon may be selling its new Kindle Fire at a loss, emulating King Gillette's marketing brainstorm: sell razors dirt cheap and make money on the blades. According to a "preliminary virtual estimate" by the research group IHS, the Fire's bill of materials cost is $191.65, barely squeaking in below the $199 list price …
I'm betting they pay less than $8 for some Chinese work slave (or malaysian etc) to slap one of these things together in country with scant labor laws and few to no environmental restrictions.
Further I bet knowing how many millions they would sell, I am sure they can get better bulk rates than expected by these speculators. I would bet they have priced it so that Amazon can at least squeak a tiny bit of profit out on the front end, and still as article states, they only need to have each owner buy a few books or items on Amazon and the device starts to show an overall really healthy profit margin.
This analysis pretty much reinforces my hypothesis and also explains why Amazon can be cavalier about not locking down the Firmware on its Fire. Selling at a small loss can be seen as an investment into getting more customers. Furthermore, rooted Fires can still visit Amazon's store, since Amazon has an Android App already: both for its store and for the Kindle books.
What world do you people live in, is this really an IT website?
The iSuppli estimate - which is always low since they use it for marketing their supply services - is materials only, there's going to be many more added costs - not only shipping but development (it may be Android but it's a whole new thingup on top), support and licensing.
Even if they had slaves making it at no cost you can bet they will still be losing money on them.
I'm very curious to see what steps Amazon will take to protect this loss leader.
Amazon won't need to protect much. At a cost few could match, and making clear it'll be root friendly (thus welcoming hackers and developers of other systems looking to port), they can sit back with a smile on their face as punters roll in through the door. A fair few may look around too (and with free postage, Amazon is consistently a better price than my supermarket with like-for-like comparisons (barcode scans)), so...
...oh, and they can smile smugly at giving iWhatever a kick in the ass.
I must've missed the part of the press release or announcement of Kindle being "root friendly".
I am skeptical this is the case though, as Amazon are a content supply business and (apparently) selling this device at as a loss-leader for their content, why would they allow Rooting? Especially when the most common use of rooting is to pirate software and bypass DRM restrictions on content, yes I know us techie sorts want to fiddle and install stuff and run emulators etc and have more noble ambitions than the freetards, but mainstream rooting is primarily for getting around the kind of restrictions Amaon will have in place to protect their investment.
you missed this El Reg article then:
http://www.reghardware.com/2011/09/29/amazon_accepts_kindle_fire_android_tablet_will_be_rooted/
[quote]The retailer will apparently do nothing to prevent hardware hackers getting into the gadget's software innards, Jon Jenkins, director of Amazon's Silk browser project, suggested to PC Mag.
"It's going to get rooted, and what you do after you root it is up to you," he said.[/quote]
One word, confidence.
Which supplier has more confidence in the superiority of their product?
The one who lets those who wish to do what they like, expecting the vast majority of purchasers to prefer the ease of use of the vanilla product and even some of those who Root to come back, or the one who feels the need to play whack-a-mole with the hobbyists?
Most who live in the the "real world" and not Apple is God fantasy camp, look at these numbers and see them as higher then they probably need to be. All Amazons suppliers are also investing upfront with Amazon by lowering their costs. I don't think amazon needs to make a profit on these since their Prime Accounts cost $79 US a year... a pretty good annual residual if you ask me.
This certainly will put a dent into Apples iPad sales. Amazon is respected because it gives their customers great prices and value, whereas Apple is only known for just making huge profits off their fan boys moonbats by convincing them it's better.
Oh and I'm a iPhone and iPad owner.... I like them but they certainly aren't perfect. So why do i own them, well I can't control Apple's competition from making less then compelling products, but now Amazon has. I order my Fire with in minutes of the announcement, since it does everything my overprice iPad does that's important.
Look at the latest quarterly reports from Amazon and Apple. Amazon had gross margins of around 14%, Apple 41%. Amazon is built to run on low margins because it competes in retail. Amazon is going to try to change the prevailing model because it knows that Apple can't compete there.
At these prices, it will screw over quite a lot of the competition so although in the short term they may make a small loss, they'll claim a large section of the tablet market from their rivals. After all, the savings they make can be used to buy ebooks and programs from Amazons TotallyNotAnAppStore.
Add aps, ebooks and a device with "only" 8GB of memory in a device that plays movies I can't help but think that the market that amazon is aiming for is is streaming, why ask peeps to buy something, and nearly own it, when you can get them to pay for it again and again and again and again and again.............
I think the Kindle release is a brave move considering the recent HP fondle slab experience.
I have tinkered with moving to Andriod myself, but the Apple phone and fondle slab being from the same stable just makes life easier.
My problem is I don't know enough about cross hardware integration with the various Andriod device manufactures and app stores?
Will I be able to have unto 5 devices use the same game license (per apple) or will each hardware device have to buy a fresh game license?
I don't think I am alone.
Though the price is unbelievable, I think this device will be the one device to entice me over to try Andriod, with Amazon's cloud I expect good content and reliability. If Amazon ever brought a decent phone out too, then Apple has a competitor.
As memory serves, your Android apps are purchased by an account and may be installed and run on any device linked to that account. There may be a limit on the number of concurrent devices that can be linked to an account, but I don't know what it is without looking as it exceeds the number of devices I would ever own.
Kindle sold well; so an Android tablet disguised as Kindle will sell. Do Apple have anything to fear? I think not. I'm planning on buying an iPad for the house (for everyone in the house, and the fire looks like a good option for travel (I already use Kindle extensively on my iPhone and appreciate something a bit bigger).
Android competitor killer is how I read his post, considering the context of the article. Who would be able to match Amazon's price when they don't have the sales from content Eco-system to offset the low price (loss-leader) hardware sales.
Alternatively, one of the tech rumours yesterday was that Amazon are considering buying webOS from HP to power the next generation of Kindle -- one would assume to avoid issues such as the Microsoft tax on Android devices.
Hmmm, interesting, but would be more interesting if they are talking to them about combining their skills on the next version of the Kindle fire, with 10 inch screen to compete directly with iPad, i.e. the HP pad that was so successful at the very low price in the firesale. This owuld be a great and winning comob in my view.
US prices don't include sales tax whereas out include 20% VAT, which is a large chunk. Amazon will also have to pay import duty (more tax) before they even add cost of exchange (and hedging it) and then simple extras like cost of support in EU (multiple language instructions etc) and shipping.
Considering all of that, I doubt they would make much extra money from that UK price but they might well come in lower than £199.
Oh also, the cheapest US models also include advertising, you have to pay an extra £50 to get an advert free model. I wonder if these advertised-sponsor models will be available outside USA.
Sony and Microsoft do indeed sell their console hardware at a loss for six months (or a year) or more.
Nintendo do not, they make margin on their hardware from day one.
Nintendo have sold "most" games console hardware (if you include handhelds), so most consoles are sold making profits on the hardware.
There's no way Amazon is paying these prices for their components. As someone that builds electronics, I always laugh at these "estimates" of what XYZ corporation is spending to build something.
Maybe if Amazon is building the Fire in ten piece production runs, they pay these prices. But if they are building them in the million piece per run range, they aren't paying even half of what is shown in this article.
It's amazing how low the cost of components can be in large quantities. A processor chip I use is $7.60 at quantity 10, but is under $1 in 100,000 quantity.
So you're saying that if I buy 10.000.000 of those CPUs the price becomes almost free? I'm sorry to tell you but that's not how it works, your small scale preconceptions don't apply.
iSuppli is in the business of telling their large customers where to get the best prices, these free bill of materials reports are just marketing for those services. If anything their estimates are lower than what's really out there.
Having worked for an actual supplier, I can say that the true price for big buyers is usually a) secret, and b) much lower than any advertised price.
iSuppli isn't going to get the true price given to manufacturers because they would end up giving out stuff for even less! The jacking up prices bait-and-switch game is mostly a consumer market thing; the supply chain has many sellers and few buyers. Piss off a buyer, you'll probably get shitlisted from all of them.
As the old joke goes, "Yeah, we may be losing money on each sale, but we'll make it up in volume."
I've heard this proposed in seriousness by the CIS sales and marketing team at the Japanese electronics company that I used to work at. The kind proposal was declined you would be glad to know.
There might have been something misunderstood in the description of the negative margin but they did persist for a while.
So let's see what happens when the other retailers try to slip in their own apps into Amazon's ecosystem. Can Amazon even afford to let them do that?
Zinio, Netflix, Spotify, news media and the myriad of other apps that involve payments. Apple's subscription policies might actually look very friendly to them after this.
this is going to be the crucial matter. Amazon surely can't let anyone buy their content from anywhere else, otherwise there's no high-margin sales to offset the loss (or zero-margin) sale of the fire.
then again, i know such a concept seems blasphemy to most El Reg readers, but a closed eco-system seems to have worked, and continues working, for Apple. So why not Amazon?
it's the other tablet manufacturers that are going to get screwed. They blatantly can't produce a decent tablet for retail $200, otherwise they would have done so by now. And they can't make one and sell it at a loss either, because they don't have the means to provide the content that users will purchase, so won't get any profit there either.
Please understand that the numbers are estimates as to what the hardware costs are.
You have to add in shipping, marketing, etc... which means that if you sell the device at what it costs to manufacture, you'll end up selling it for a loss.
To the author's point, Amazon can sell the devices for a small loss because of their margins on the content which they sell and they are the only source for the content. In addition, El Reg pointed out an argument that Amazon also ,ntends to use this device to also get an additional revenue stream by spying on their users and their reading/viewing habits. ala Phorm.
Unlike Phorm, this system is a closed system where purchasing a device would constitute as an opt-in. You don't like, don't buy.
This is why I like my iPad since I can put any docs I want on it for later reading.... And no, I'm not a fanboi...
A single game sale will push a PS3 into profit, and subsequent sales will generate lively income, whereas the stuff Amazon is shifting carries razor thin margins, App Store revenue is a rounding error for Apple, and as far as tablet content sales goes (books, films, music & apps), Amazon will be hard pushed to match that.
Now Amazon may well be happy with those slim profits from content as a long term income stream but Samsung, Motorola and the rest of the Android tablet Manufacturers can't replicate the strategy with no content and are likely to be squeezed out between Apple and Amazon, Google can't be best pleased about degoogled Amazon Tablets derailing their tablet efforts either.
The 30% may be the commission in some, but it certainly doesn't apply to everything.
Outside of sales to 8 select countries Amazon will still take a 65% commission (yes, you only get 35%) on books you publish through their kindle store. https://kdp.amazon.com/self-publishing/help?topicId=A29FL26OKE7R7B
Also licensing fees to sell eg games on the PS3 are much more than simply 30%.
"Cupertino may continue to charge a premium for its iPad hardware – ever hear that said of Apple before? – but other fondleslab punters are now in a whole new world: one that starts at $199."
It's not like for like though is it. You need to add 3" to the screen, a front and rear camera, another 8GB of storage, Bluetooth, Gyroscope, microphone? etc. If you look at it like that, these are very different products.
I think Amazon will sell millions of these, but not at the expense of millions of iPad sales. There will be some crossover sure, but it will appeal to a lot of people who have no intention of buying an iPad anyway.
I read another article that highlighted the differences perfectly. Look at the software Amazon are providing on the Kindle and what you can do with it. The Kindle Fire is for consuming, on the iPad you can create. Big difference in usage and market. I think Amazon know exactly what they are after and will do brilliantly without ever having to go completely head to head with Apple.
but most people I have noticed use it to consume.
The only creating, is small note taking in meetings and thats about it, emails aside.
As this tablet will have quite a wide selection of apps available, you will be able to do the same sort of creation.
Maybe not creating new albums, like The Gorillaz, but hey its cheap!
No tablet can ever be for real creation, because it lacks a UI suited to use for long periods.
Many people can use a keyboard and mouse for a full working day, only requiring occasional teabreaks.
You can't do that on a touchscreen interface because touchtyping is impossible - you can't rest your hand, and tablet computer form factors are even worse because you have to hold the tablet.
Anyone thinking they can create with a tablet is deluding themselves, because you simply can't use the device for long enough periods.
Sure, you can write a trivial* document like a PowerPoint-style presentation on a tablet.
However, I'd be pretty confident in saying that the main thing you did was select slides from various other presentations you and your colleagues have made and maybe adjust a couple of words on some of them.
That's not creation, that's roughly equivalent to editing a playlist. Certainly very useful and doubt skilled - it got you the contract after all - but not creation.
Even if you did write the slides from scratch, that's probably 200 words tops. Nothing.
You are not going to write a significant text document on something with no physical keyboard. An email? Sure. Hamlet? No way!
You are not going to draw or edit a significant image without a mouse or (better) brush/pen interface. Try drawing the Mona Lisa on your iPod Touch.
Yes, given enough time you probably could write out the likes of Hamlet on your iPod Touch. However, you're not going to try, are you?
Equally, would you be happy if you had to do your entire job on a iPod Touch? I mean all of it - no physical access to a PC/Mac at all, only WiFi? Do you think you could follow through on the contract using nothing but the iPod Touch?
I doubt it, you'll use something else that is more suited to creating the widget that you just sold.
That is what I mean by "It's for consumption, not creation".
Oh, and incidentally the Kindle Fire is an Android tablet and will almost certainly support the Android equivalent of whatever it was you were using to edit that presentation of yours, so your concept that "it's only iOS that are useful" is foolishness. Maybe when you bought your iOS device it was true, but it's not now.
*A good presentations is always trivial in terms of the actual quantity of written and drawn content. Put too much on a slide and nobody can read it, put in too many slides and everyone gets bored.
Then phone Apple and tell them to get rid of the button that says "Create Document" in pages, because according to you it's not creating anything. Then I guess I'd better take down the two client websites whose backgrounds I "created" in Artpad (because it was the best tool to use for what I wanted), as obviously you can't create anything on a tablet. [Face Palm].
Oh you had better tell Apple to get rid of Garage band as well, clearly it's good for nothing.
What's your point?
No you are not going to write Hamlet on an iPad. I did not say anything like that.
"...so your concept that "it's only iOS that are useful"..."
I did not say that at all.
"Do you think you could follow through on the contract using nothing but the iPod Touch?"
Did I say that? No. What is your point? Anyone?
All I said is that the Kindle Fire is all about consumption. On an iPad a large part of the focus is on content creation as well as consumption. Apple have pushed the productivity aspect of this a lot.
Now look at the Kindle Fire. Smaller format, focus on consuming from the Amazon ecosystem. Jeff Bezos' introduction didn't even demo the Gmail app! but did demo games. That tells you everything about where they are going with it and what it's designed for. Several popular news sites have jumped on this aspect as well, not just me. Amazon has a different focus.
You aren't even talking about the subject of the article. You've just got a bee in your bonnet for some bizarre reason, about anyone who dares to use a mobile device for anything productive.
Pfft.
Yup, nailed this one.
Amazon has a good chance here to really do well here against apple if they continue making shiny things that people want. OEM's are probably a bit pissed mind.
I see a very well specified tablet on the horizon, price dependent on your annual spend. Amazon also have the advantage of letting their kit be user definable & provided they can avoid the desire to play god in the future, there are very few hurdles in their way.
Thinking back, how many people trusted their first web purchase to Amazon? sticks in the mind that.
"I see a very well specified tablet on the horizon, price dependent on your annual spend"
"provided they can avoid the desire to play god in the future"
The only way they will be able to afford to produce that future tablet is if they do play god and ensure that your annual spend is all from amazon's own stores. If the majority of fire owners are the type to root their device and source their content from alternative, torrent-supplied locations, then amazon's strategy will fail
I'm sure my kindle was sold for under cost too, however the $100+ I have subsequently spent on Amazon for books helps to heal their profit margin, and I don't mind one bit as I'm still several hundred dollars better off than buying the books locally.
Funny I never really rated Amazon until I started using a kindle, if anyone can get the balance right, I think they can.
+1
Can't beat the "buy one minute, it's there the next"; especially when you're on the road and want something new to read. This is wat digital media should be all about.
OK - I know that I'm effectively paying a rental on the 'book' rather than actually owning it in the way I would a hard copy, but that's a risk I'm prepared to take when balanced against the convenience. (And removing the DRM isn't exactly difficult anyway!)
There's always a financial cost associated with acquiring new customers factored into every business plan. The Kindle also locks new customers into the Amazon content eco-system so such a customer would be of high value. Factor that in with Amazon's cost of acquiring standard website customers and the value is probably pretty high, possibly higher than the loss on the device. Basically the loss making Kindle can be seen as a cheap customer acquisition tool.
"add 2 camera's >>>>" the fondleslab 1 had no camera's and was still £600 and still sold, so that argument doesnt work.
I have most tablets to play with at work, and each has uses. My kids prefer the kindle for books as it's much easie to read in dim light than the ipad.
Rooting...some people (me for one) still buy i-apps for my jailbroke phone, only jailbroke so I can do what i want with it, not have to bow to the i-god's given boundaries.
Amazon will sell them, plenty of UK families dont have £600 floating about, even less of working ones have that spare income for a toy/work item.
I'd rather my daughter lost her kindle on the bus than an i-pad, just for the lower amount of information needed to activate it
But nor did it cost £600, a least not in any version that was comparable to the Fire. The base model was £429, and that included an extra 8GB of memory, a screen twice the size and a microphone. Where the Fire is lacking is in 3G (limiting it to WiFi limits it's usefulness as a mobile device as far as I'm concerned, especially with only 8GB of memory - I use more than that just for the cut-down mobile part of my audio library).
As for the Kindle being easier to read in poor light, you must be joking. I've used both eInk and LCD screens and low light reading is not eInk's forte. You can turn LCD's brightness down, but not eInk's brightness up. I always found myself looking for a reading light. In bright light you may have a point, but that's not where most people, myself included, read most of the time.
Honestly, I see the biggest purchasers of the fire being people who only want to consume media and surf the net, which I would estimate to be about 40% of potential ipad purchasers and about 20% of brand name android tablets and about 70% of low cost android tablets. Is this an ipad or similar android killer? no, not in its current form, it is simply too limited for tech savy folk like us, but it will certainly vacuum up a substantial portion of the casual purchasers out there, which currently are a major chunk of the ipad audience and the budget tablet market. Once they release a 3G version of it they will have the Telcos on their side too, as they will be able to bundle it at a lower cost and thanks to silk the impact on their data network will be reduced compared to other tablets. e.
Why on earth do you think 60% of iPad purchasers are doing anything more than surfing the net and consuming media?
The target audience for the iPad is people who consume, not create - and I reckon that 90% of iPad purchasers (in fact, ALL tablet purchaser) are just consuming media and surfing the net.
BTW - I'm including "playing games" under "consuming media". I'm NOT including "posting to Facebook" or "sending the odd email" as creating. I'm assuming you are too.
Come on Martin... don't be so cruel. The Apple Fan Boys can't stand it when people tell the truth about what iPads are used for. In their little world surfing for music is being productive and is a real business exercise. Even writing a small presentation to give to your teacher in Art History made up of copied photo's from the web is exhausting and can only be done while sitting on the beach to help their zen moments!
/s
And oh, I own both an iPhone and an iPad and enjoy what they are good for... that's it!
I recall from my breif spasm in retail, it was called a "loss-leader".
Nowadays, we simply call it a fuc*king stupid decision by someone (Canadian?) who should know by now that W7 isn't good, and car tyres are not square, unlike the South Park training video seems to teach.....
Amazon is tech savvy, they are very experienced at selling digital content, and they have been selling Kindle devices for quite a while. Although they probably aren't making money from selling Kindle hardware, they probably aren't losing much, if any, on the devices. It is a mild gamble, but it is not a major change from what they have been doing very well.
That guy is most certainly deluding himself.
Case proven, methinks!
More seriously:
In industry, the tablet form factor works pretty well for two situations:
A) Data consumption with a tiny aspect of note taking. Eg the massive stack of drawings that makes up the information needed to build a large building or large system. Carry one tablet or a 10kg stack of A2 printouts?
B) 'Tickybox' data collection tasks where the results of the data collection are needed instantly.
Tickybox data collection is of course almost always better achieved with a sheet of paper and a pen.
Seriously? You try to avoid buying products with a 9 at the end of the price? Why not just think about whether you would have spent $200 or $201 as you suggest?
Or you know, why not asses whether the product is worth the fucking money? Plenty of bargains to be had that end with a 9, but they'd still be as good if they were that extra 1 more expensive.
"You've said it before - people don't want tablets, they want iPads."
I may not be a typical user, but I don't want an iPad. A tablet is handy for consuming, but an iPad just doesn't quite cut it for me, I like to be able to tinker about with things (or at least to have the option), don't particularly want to have to jailbreak to do it either.
But like I say, not the typical user, but I might consider a fire at some point unless I decide I can afford something even better. I'd prefer to go Android as it means I can change hardware (as in move to a different type) and take my apps with me, what hardware options do I _really_ have in the Apple ecosystem at the moment?
YMMV though
The 9 bit is rather a tradition with a bit of psychology mixed in. Most people see $199, equate it to $200 and let it go at that. It's the fact that it's $200 tablet that's NOT a cheap knock-off from K-Mart--compared to the iPads which are SIGNIFICANTLY more expensive--that's turning heads. For most consumer electronics, US-wise, $200 tends to be the magic number that turns it from luxury to common item (then at $100 you drop further to basic necessity--BluRay players are reaching that point as more media starts going BluRay-only).
From past news items, RIM must have made supplier commitments for 5 million or so Playbooks, but have stopped at about one million. Amazon must have taken over the design and supplier commitments, at a hefty discount. The deal is only just finalised, and RIM are now dumping their remaining Playbooks. Amazon have simplified Fire further to reduce cost. They haven't even got it working well enough for real demos yet, despite a supposed November ship date.
Amazon can make a good profit on the first four million, and then decide what to do next.
Amazon have never said how many Kindles they have sold. You don't even need a Kindle to buy ebooks from Amazon. You can use an IOS device, for instance, and there are over 200 million of them.
That new Archos 8" was released last week at £200 in the UK (includes 20% sales tax).
It looks far more appealing than the Kindle Fire with its extra connectivity, functions and 1026x768 screen..
So have Archos decided to bankrupt themselves or is this idiotic mantra?
It may be £200 in the UK, but the same tablet in the US, Wi-Fi only, runs closer to $300. not including S&H nor tax if you're in the wrong state. That's a 50% premium over the ad-supported fire and still $50 more (IINM) over the ad-free version. $300 is still rather the "maybe" territory for most people.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
