Around the Net
Report: $79 Kindle Costs Amazon $84 To Make
- MainStreet.com, Thursday, November 10, 2011 12:42 PM
Could Amazon price itself out of the gadget business? The company’s new soon-to-debut Kindle e-reader will retail for $79, but -- according to a new report from market research firm IHS iSuppli -- costs $84.25 to make. “Amazon’s new $79 Kindle e-reader isn’t just undercutting all competitors on price, it's also undercutting Amazon,” jokes MainStreet.com. “That means Amazon will effectively lose just more than $5 for every e-reader it sells.”
However, Amazon still plans to make money on its e-reader strategy. "This is a subsidized device that comes with advertisements that make money for the company and offsets that manufacturing price, giving Amazon its profit margins,” says Rob Enderle, principal analyst at The Enderle Group. Amazon debuted its ad-sponsored model with the third-generation Kindle in April of this year.
What’s more, “placing advertising on the Kindle isn’t the only reason though that Amazon can afford to underprice the product,” MainStreet writes. “Even without the ads, the Kindle is still being used to consume Amazon goods,” Enderle says, pointing to the many e-books and magazines sold on the device. Adds MainStreet: “This makes the Kindle more of an investment in future sales.”
