Amazon: No Profit On Hardware, Aims For Software Monies
In stark contrast to Apple’s business model, Amazon admitted this week that it makes no profit off its Kindle Paperwhite and Kindle Fire HD devices.
“We sell the hardware at our cost, so it is break-even on the hardware,” Amazon head Jeff Bezos told BBC News.
“A lot of technology products and gadgets are sold at break-even and at times even at a slight loss in order to make money off accessories or services the go along with the products,” DailyTech notes.
“That selling hardware for no profit is certainly much different from Apple's strategy … but not so different from videogame companies that have traditionally sold their consoles … at a loss,” notes Gizmodo. “The thinking there is to make up the profit lost in the console with the cost of games and peripherals.”
Similarly, said Bezos: "We want to make money when people use our devices, not when they buy our devices. The continuing relationship with the customer is where we hope to make money over time."
“Amazon clearly just wants to provide a medium to consumers that can help deliver Amazon’s online content -- such as books and video -- which have much higher profit margins,” according to Forbes.
“This doesn't exactly come as a surprise, but we're glad that Jeff's confirmed our suspicions,” Engadget remarks.
By contrast, “Apple reportedly makes around a 40% margin on its WiFi-based iPad, which is priced higher than a similarly configured and less feature-rich Amazon Kindle,” CNet writes.