$79 Kindle Costs $84 To Make

[Snipeye]

The $79 Kindle Costs Amazon $84 to Make
3:00 PM - November 12, 2011 by Jane McEntegart -
source: MainStreet

Amazon's $79 Kindle ereader is probably as cheap and cheerful as they get, but the device is actually more expensive for Amazon to build than it is for us to buy.

When Amazon announced the exciting Kindle Fire tablet and the new touchscreen Kindle, the company also announced that the ad-supported basic Kindle ereader was dropping down to just $79. The ad-supported Kindle was first launched in April of this year and cost $114, which was seen as extremely cheap for an ereader at the time. When the price dropped to $79, well, we couldn't believe our eyes. However, it seems that selling the device so cheap means Amazon is actually taking a hit when it comes to production costs.

MainStreet reports it has received confirmation from iSupply with regard to the production cost of the Kindle. iSupply said it did a teardown of the new Kindle and found that the total cost of materials used in each device, including the e-ink display screen and printed chip board, is $78.59, while the total cost of putting it together is $5.66. This brings the production cost of each $79 Kindle to $84.25 and would mean Amazon is taking a loss of $5.25 with each unit sold.

Of course, while Amazon is taking a loss of $5 for each Kindle sold, you have to remember that this is the ad-supported model. Amazon can offer it to us for a low price because it's receiving advertising revenue from the companies using the device to promote their products or services. What's more, each person with a Kindle also logs into their Amazon account during device set-up, which means they have a handy direct line to Amazon's book store, where they can spend more money on books.

http://www.tomshardware.com/news/Amazon-Kindle-Cost-Production-Supplies-Parts,13953.html

 

[a pet rock]

Of course, while Amazon is taking a loss of $5 for each Kindle sold, you have to remember that this is the ad-supported model. Amazon can offer it to us for a low price because it's receiving advertising revenue from the companies using the device to promote their products or services. What's more, each person with a Kindle also logs into their Amazon account during device set-up, which means they have a handy direct line to Amazon's book store, where they can spend more money on books.

No surprise. It's basically the entire business model for the Kindle. Give it away so they buy tons of other stuff.

 

[Rogue Sniper]

Look at the Xbox 360... its the same way, Microsoft sells it under costs, but makes it up in royalties, Live, all the junk on Live, etc...

Hook the customers on your product by baiting them to buy a cheap product and sink'em by selling them the goods and services that run on your product... It works...

 

[Snipeye]

@Rogue

Not exactly.

http://www.xbitlabs.com/news/multimedia/display/20061120132150.html

This is an old article dated back in 2006, in regards to the PS3 and Xbox 360 systems. The initial 360 Premium systems were sold at a loss, but around 2006, it was estimated with efficiencies in manufacturing, and other factors, reduce the cost of production and allowed MS to make an estimated profit of $75/unit, less indirect costs (shipping, sales, etc.). I'm also hearing that MS again slashed its costs an additional 40% now in 2011 since then, so it goes to reason that each unit sold is making a profit for MS, not the loss you said, Rogue.

 

[a pet rock]

Well, yeah. Up until now with the HDD price rise. I bet they're freaking out about deciding to put a 320GB hard drive into those things as that alone now makes up half the price of the Xbox.

 

[kYuKi]

They should do upgrades on those hard drives.

 

[Rogue Sniper]

@Rogue

Not exactly.

http://www.xbitlabs.com/news/multimedia/display/20061120132150.html

This is an old article dated back in 2006, in regards to the PS3 and Xbox 360 systems. The initial 360 Premium systems were sold at a loss, but around 2006, it was estimated with efficiencies in manufacturing, and other factors, reduce the cost of production and allowed MS to make an estimated profit of $75/unit, less indirect costs (shipping, sales, etc.). I'm also hearing that MS again slashed its costs an additional 40% now in 2011 since then, so it goes to reason that each unit sold is making a profit for MS, not the loss you said, Rogue.

Well that's when I read about it when they were taking a loss by selling them under cost. Worked to help move more units in 2005 and 2006 even with the RRoD issues.