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Amazon To Lose $10 Per Kindle Fire

Soulskill posted more than 2 years ago | from the on-hardware-anyway dept.

Businesses 181

An anonymous reader writes "According to a manufacturing cost breakdown, it turns out Amazon is willing to sell its new Kindle Fire at a $10 loss. An analyst estimates that the Kindle Fire, priced at $199, actually costs $209.63 to produce. That said, the device is likely to be much more valuable to Amazon through content sales and the ability to drive more purchases through its website."

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no wonder they're buying palm (2)

SanguineTeddy (1896718) | more than 2 years ago | (#37577748)

they really need to lock down those tablets if they want to make money off them

Re:no wonder they're buying palm (1)

Anonymous Coward | more than 2 years ago | (#37577956)

If this price estimate is mostly accurate, the Amazon will have a strong incentive to prevent loading of Android applications from sources other than the Amazon App Store. That would be a downer. A small and light $200 tablet that can be repurposed for anything you can write in Java (or whatever using the NDK) is an amazing thing to have on the market. (Honestly, my favorite Android feature is the checkbox that allows loading apps from "untrusted" sources. Most everything else is inferior to iOS, except notifications and home screen customization.)

Re:no wonder they're buying palm (1)

NoNonAlphaCharsHere (2201864) | more than 2 years ago | (#37578116)

If you want to do that (at that price), just buy a NookColor and be done with it. At least BN isn't being obstructionist about it the way Amazon will be.

Re:no wonder they're buying palm (1)

shutdown -p now (807394) | more than 2 years ago | (#37579048)

NookColor is $50 more expensive for hardware that's significantly slower.

Re:no wonder they're buying palm (4, Interesting)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#37578200)

It will be interesting, once these units get into hacker hands, to see whether that strong incentive (which definitely exists, for the reasons you state), is pursued by technological means, or whether they'll skip the cat-and-mouse with the hypothetical 'fire dev team' and work on the assumption that the pool of users who want intuitive point-and-poke access to Amazon sold stuff is much larger than the pool of tablet hackers and ignore the problem...

Given that a fair number of nook colors have already been sold to the tablet tinkering crowd, and the HP touches during the blowout, and some of the Viewsonic and other cheap-but-not-bottom-of-barrel stuff, have all been out for a while, it won't necessarily be the case that the techie crowd will be all that dangerous in terms of numbers(especially if they do want to sideload some stuff; but also end up buying Amazon MP3s, kindle books, etc.)

It would certainly be no surprise to see some sort of lockdown; but it also might prove to not be worth the effort.

Re:no wonder they're buying palm (0)

hairyfeet (841228) | more than 2 years ago | (#37578350)

That is why I never understood wasting resources dealing with the hackers. As a percentage of the population they are....what? Maybe 6%? All you have to do is place a "This could destroy your device and void your warranty ZOMG!" screen and you've just made sure a good 85%+ of the population will be too spooked to try it.

So while I support having more goodies to play with I honestly don't get the whole cat and mouse with the hackers bit. What is the point? if they were trying to hack the network or fill it with malware? yes i could see it. but the vast majority simply aren't gonna bother as long as you aren't bumraping them on app prices and Amazon has always been about low prices so I doubt that would be a problem. As long as they have Angry Birds cheap I doubt they'll even see 5% hack the things, most just won't bother, so any resources wasted besides the "ZOMG!" screen is just stupid.

Re:no wonder they're buying palm (1)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#37578534)

I can only really think of two possibilities that might motivate something besides the 'just make it non-obvious and ignore the geeks' strategy:

1. If somebody were to produce a dead-easy piracy tool, like Napster in the good old days, Click->plug in kindle->select applications/books/etc you want->P2P download, root, install; that would probably make Amazon a sad panda. However, that seems comparatively unlikely in today's legal climate, and considering the 'rough-but-servicable, if you don't mind forum crawling and RTFMing' state of the 3rd-party scene for the utterly unlocked Nook Color.

2. If Amazon is actually losing money on these things, and some 3rd party starts buying them by the truckload, flashing cyanogenmod, and selling them as the best $250 tablet available in some other market. That one, though, seems unlikely because Amazon controls the distribution channel, and shouldn't have a hard time making it inconvenient enough to not be worth trying to obtain the things by the palletload.

Outside of those, though, the toothiest lockdown that would seem to make any economic sense would be some sort of "Well, the SoC vendor will throw in a bootloader that verifies the crypto signature of the firmware before loading at no additional charge, so why not?" more or less apathetic activation of a lockdown feature just because it is available.

Re:no wonder they're buying palm (2)

SomePgmr (2021234) | more than 2 years ago | (#37578902)

2. If Amazon is actually losing money on these things...

I think this is an important point in itself... it seems like there could definitely be a $10 margin for error on an outside, tear-down estimate. If so, it's entirely possible they're just selling them at cost. Then everything they sell through the device is gravy and a small percentage of device hacks doesn't really hurt them.

Amazon hasn't been particularly hacker-friendly on the regular kindle front, but I suspect that had much to do with their ad-subsidized models being in the pipe. This device could go either way... we'll have to wait and see.

Re:no wonder they're buying palm (3, Interesting)

Alex Belits (437) | more than 2 years ago | (#37579072)

Amazon is in a slightly better position than other companies that produce devices at loss.

A company that sells game console, cable box or phone to the consumer at loss intends to make profit on LICENSING access to things over it -- someone has to pay them to sell content to consumers (games) or consumers have to pay for access to something (TV, movies, wireless phone network). Now, rooted device allows to bypass those things -- everyone can write games, or switch to providers that have no relationship with manufacturers. The device is no longer a gatekeeper, so revenue is down.

But Amazon doesn't need gatekeepers -- they already sell everything over the Internet, with any computer and plenty of phones already perfectly capable of accessing most of their content. Even Kindle DRM for books can be stripped with a regular computer. Whatever losses Amazon can have due to "piracy", it already does have, so the only thing Amazon cares for is profit on sales. Rooted tablet does not compete with Amazon sales of anything -- it's still useful for buying things from Amazon and reading/watching them in a manner that is more convenient than other forms of purchase. It still makes downloads from Amazon more attractive than buying physical media, thus more purchases and less shipping costs.

Re:no wonder they're buying palm (2)

symbolset (646467) | more than 2 years ago | (#37578226)

They're not even trying to keep them from being flashed. It seems they know better than to waste time on that.

Re:no wonder they're buying palm (1)

shutdown -p now (807394) | more than 2 years ago | (#37579066)

Do you have any references for this information? I mean, it's only starting shipping in over a month, how does anyone know what kind of security is there?

If it's coming from one of those guys who did a preview, I wouldn't trust it that much - they were likely given pre-production units, and this is exactly the area where one such is likely to be different from the final version.

Re:no wonder they're buying palm (1)

Canazza (1428553) | more than 2 years ago | (#37578590)

this is the way it's worked in the Games Console market for decades. Sell the console cheap, make money off licensed games. No different here.

Re:no wonder they're buying palm (2)

reub2000 (705806) | more than 2 years ago | (#37579046)

Except, that it hasn't always worked out in the video game industry. After spending a significant amount of money on hardware, people aren't exactly enthusiastic about spending a lot more on content. With a lot of free content from places like youtube, project guttenberg, and even amazon itself, they are taking a huge gamble with this tablet.

More than $10 (0)

Anonymous Coward | more than 2 years ago | (#37577754)

Unless the Kindles just magically appear in the wearhouse and market themselves.

Re:More than $10 (1)

teg (97890) | more than 2 years ago | (#37577862)

Unless the Kindles just magically appear in the wearhouse and market themselves.

As well as developed themselves, and are so intuitive and bugfree that no support or maintenance is needed.

Re:More than $10 (2)

icebike (68054) | more than 2 years ago | (#37578320)

Look, they could GIVE these things away and still make money on them.

The only connect to Amazon's own market and book store and music store.
95% of them will be used by non-hackers, who will continue to buy from Amazon.

In case you missed it, that's spelled KA-CHING!

Re:More than $10 (1)

shutdown -p now (807394) | more than 2 years ago | (#37579080)

The only connect to Amazon's own market and book store and music store.

In truth, so long as they have a browser, they can connect to other markets as well - just not as conveniently.

Not that Amazon has a problem with that. Heck, I own a 3G Kindle, and I use its built-in web browser to buy and download books from a third-party book store - over Amazon's free 3G Whispernet. Very convenient. ~

Re:More than $10 (2)

Gamer_2k4 (1030634) | more than 2 years ago | (#37578870)

Unless the Kindles just magically appear in the wearhouse and market themselves.

This point has no substance. EVERYTHING requires marketing, not just the Kindles. When you hear that Nintendo is selling Wiis at a profit, you don't say, "Well except not, because they're spending millions on marketing!" You wouldn't say that for any product. Why should that enter the equation now?

Well if an anlyst says so it must be true (5, Insightful)

blahbooboo (839709) | more than 2 years ago | (#37577772)

Gosh, these analysts get such huge salaries and most of the time they are wrong. What a great job!

Re:Well if an anlyst says so it must be true (5, Insightful)

Xacid (560407) | more than 2 years ago | (#37577848)

I find it hard to believe an estimation like this could even consider a $10 dollar difference not within margin of error. Pretty much non-news here.

Re:Well if an anlyst says so it must be true (2)

obarel (670863) | more than 2 years ago | (#37578288)

What "margin of error"? The *estimate* is $209.63. Not a penny more, not a penny less. Not "around $210" and not "$200+", but exactly $209.63.

That's either a totally bogus number, or inside information direct from the manufacturer.

Re:Well if an anlyst says so it must be true (3, Informative)

icebike (68054) | more than 2 years ago | (#37578388)

That's either a totally bogus number, or inside information direct from the manufacturer.

Nah, Neither is my guess.

Fire up your telephone team and start polling parts manufacturers, who are often only too happy to brag about bagging a big order for wifi chip sets, touch screens, memory, processors, etc. Most of these places will even leak pricing info. The content of a tablet is well established these days. Crank in some custom plastic work (with 40 tablets on the market this cost is fairly well known too).

Put it in a spread sheet, Crank in assembly, shipping, divide by number of units, an out pops the Bill of Materials cost.

That's why you get things estimated to the penny.

Maybe that qualifies as BOGUS in your world, but the story clearly states " analyst estimates". I'm not sure the word "bogus" can rationally be applied to an estimate.

But it really doesn't matter. Amazon will make up any loss in the first month of ownership due to sales of apps, music, emagazines, and ebooks.

Re:Well if an anlyst says so it must be true (2)

Hognoxious (631665) | more than 2 years ago | (#37578642)

But quoting a figure like that (with so many significant figures) implies greater precision than is possible from the input data, even if you do describe it as an estimate.

If you were estimating the height of a person across the room you wouldn't say he was around five feet eleven and fifty-nine sixty-fourths inches, would you?

Re:Well if an anlyst says so it must be true (1)

icebike (68054) | more than 2 years ago | (#37578904)

But so what?
When dealing with money people set their spread sheet columns to currency and pay no attention to significant digits or degree of actual precision.

If anything, this lends more weight to my throw numbers into a spread sheet theory.

Re:Well if an anlyst says so it must be true (2)

fferreres (525414) | more than 2 years ago | (#37578736)

Amazon: Hi, I'd like to enter into a contract to manufacture 10 million parts.
Manufacturer: sure, let me look at my price list. It's going to cost you $10 per part.
Amazon: I am getting a BETTER pricing? I think I am going to sell 15 million units in 18 months
Manufacturer: no, because that would prevent interesting posts in slashdot. By the way, we leak all this info so that wannabe estimators can achieve 100% in their estimates. Sorry Amazon.
Amazon: Ok, no worries.

That's probably not how it works. Amazon estimates the price across the device lifecycle (1 year at least and prices are constantly moving). They are very good at bargaining prices with the marketplace. They will sell more tablets than most other vendors (except for iPads) combined in the next couple of years. They are getting quotes now, as opposed to basing their pricing on unreliable, leaked info from tier 2 buyers (only Apple is a tier 1 buyer). For some components, the parts may be similar to computers, but for many, it wont.

So unless the person doing the estimates knows exactly the bargaining power of Amazon, how the deals are structured (does Amazon provide capital, advance cash, pricing terms), what are the counterparts (maybe a company is looking for volume that can drive up efficiencies in some areas where other have an edge so this volume becomes strategic),what are the margins for parts supplied, how is the cost of the supplier's of the manufacturer likely to evolve in a possible down economy, etc. then they will likely be off by +/- some very gentle % figure.

It's likely that Amazon will protect this market so vigorously (against Apple which threatened them with Book seller collusion - there's a trial for that, and their weight on the digital music/video market), against B&N (which is of much lesser concerns), against Google (who also wants to be world's checkout, Books middle-man and universal price finder (Google Shopping), against Netflix (yes, they want to own the Video delivery market, it just makes sense to their EC strategy) then yes, the Fire makes all sense, and buying Palm/WebOS is the next logical move).

I don't think they'll want to lose money, as that wouldn't help their stock. I'd say it's their #1 priority to sell as much as they can, and will bundle dozens of benefits to those buying the devices, as well as those owning their device. And if you root their machine, you lose many benefits. They also hedge the risk of Chrome becoming the the facto standard spy on everyone's doings, that is funding Google up and up.

Re:Well if an anlyst says so it must be true (1)

Anonymous Coward | more than 2 years ago | (#37578978)

It's bogus because they claim amazon are losing about $10 per unit. They have no idea how much Amazon are paying to make these devices, so everything else is a guess. Picking parts out of catalogs tells you how much you would pay to make something, not how much a 1+m seller would be costed. You can be damn sure Amazon is getting a better price than almost all companies other than behemoths like Apple that pay up front. The component supplies may be the ones taking the hit because they know Amazon are going to sell a fucking ton of these things, and repeat business is for them and not their rivals. We all have no idea, so anyone claiming otherwise is full of shit trying to sell the reports, even if it's only for ad impressions.

Re:Well if an anlyst says so it must be true (1)

cfulmer (3166) | more than 2 years ago | (#37579032)

There is a third choice: the estimate is calculated to an unjustified precision. . . . and 63 cents? That sort of precision is destroyed if there's a flu bug running around your factory or if you have an abnormally cold winter or if there's a Hurricane anywhere in the world.

Re:Well if an anlyst says so it must be true (1)

tgibbs (83782) | more than 2 years ago | (#37578324)

And considering that a loss of $10 per unit could add up to substantial cost to Amazon when multiplied by millions of sales, while cutting the price by $10 will not sell appreciably more units relative to selling them at cost, it would be crazy for Amazon to sell them just $10 below cost.

Re:Well if an anlyst says so it must be true (2)

AJWM (19027) | more than 2 years ago | (#37578406)

Not really. It doesn't take many ebook sales to cover that. Three bestsellers at the $9.99 price point would do it, or ten $2.99 books, or fifteen $0.99 books (they take a bigger slice at that price point -- although I'm ignoring whatever goes to overhead on the sale.)

Anything beyond that is gravy. The $199 is a psychological price point; they'd sell far fewer at $209.

Re:Well if an anlyst says so it must be true (1)

Shoe Puppet (1557239) | more than 2 years ago | (#37578482)

cutting the price by $10 will not sell appreciably more units relative to selling them at cost,

It's psychological pricing. 210 is in the 200's. $199 looks like barely more than $100.

Re:Well if an anlyst says so it must be true (1)

shutdown -p now (807394) | more than 2 years ago | (#37579122)

But if it's true, it's still quite believable.

First, if any company can expect to compensate such a loss from other sales that are attracted by the device, it's Amazon - they've got their fingers in pretty much everything by now, and with very attractive pricing they're more often than not the first choice for many things (compare prices between iTMS and Amazon MP3 some day...). Given their appstore policies, it's likely that most users would make enough purchases there alone to pay that $10 back to Amazon in the very first day of owning the device!

And there's one other catch in there - everyone thought Amazon will be giving out Prime membership for free with Fire, but it turned out that it's only free for the first month. And it's a classic bait-and-switch thing - you get free access to a lot of stuff on Amazon Video-on-demand, so you might as well start watching it - and if you like what you see, then it's $70/year after that month, please. I suspect a lot of people will buy into that.

Re:Well if an anlyst says so it must be true (4, Insightful)

CastrTroy (595695) | more than 2 years ago | (#37577916)

I agree. The only one who knows how much Amazon pays for each individual part is Amazon. These analysts have no idea what kind of deals Amazon has made with their suppliers. When you are dealing in the millions of units, there is quite a bit of negotiating room. Maybe the people who produce the parts are the ones taking a loss (initially) because they figure they can make more as production ramps up, and they would rather not lose the contract entirely. Analysts can make all the guesses they want as to the cost of these things. But something tells me they have no idea what they are talking about. How come the HP Tablet cost $300+ to make, but you can get a netbook with similar bill of materials for $179 retail?

Re:Well if an anlyst says so it must be true (1)

NoNonAlphaCharsHere (2201864) | more than 2 years ago | (#37577998)

And of course, anyone who's ever been near manufacturing knows that the manufactured cost per unit for the pilot run is the same as it will be after you've refined your processes and established blanket POs with all your vendors. /sarcasm

Re:Well if an anlyst says so it must be true (1)

ScrewMaster (602015) | more than 2 years ago | (#37578038)

And of course, anyone who's ever been near manufacturing knows that the manufactured cost per unit for the pilot run is the same as it will be after you've refined your processes and established blanket POs with all your vendors. /sarcasm

True. I think the only BOM here is this estimate.

Re:Well if an anlyst says so it must be true (4, Interesting)

downhole (831621) | more than 2 years ago | (#37578326)

I'd bet that even Amazon themselves couldn't produce a meaningful figure for what any particular one costs to make. They're probably buying enough parts from enough suppliers that all of their deals are changing all the time for each particular part. Not to mention the cost of the design process and creating and maintaining the custom software, production line shakeouts, estimated value of future purchases, estimated value of having control over some percent of the market, etc etc. Some department somewhere probably uses lots of Excel formulas and a little black magic to figure out that they'll do all right overall selling them for $199.

Re:Well if an anlyst says so it must be true (1)

the simurgh (1327825) | more than 2 years ago | (#37578522)

sony loses more than that on every playstation 3 sold, or so i heard. i have heard the figure but not exactly a papertrail to that figure.

A $10 loss is not bad (1)

perpenso (1613749) | more than 2 years ago | (#37577796)

In a relative sort of perspective a $10 loss is not that bad at product launch. A little cost reduction over time, the sale of a book or two, the project could turn profitable in the not so distant future.

Re:A $10 loss is not bad (1)

Hadlock (143607) | more than 2 years ago | (#37578378)

Yup; the break even point (assuming a 50% profit margin on ebooks for amazon) is about four books. I would imagine the average kindle owner buys at least 10 books. This is the same sort of math you see for consoles.

This isn't a new model (0)

Anonymous Coward | more than 2 years ago | (#37577806)

It's just like gaming consoles. The money is in the subscriptions and games that are sold for the device, not the device itself.

Re:This isn't a new model (1)

icebike (68054) | more than 2 years ago | (#37578408)

Exactly.

As long as you come close to cost, you will make up any difference in the first month of end-user ownership.
Books, apps, music, magazines, movies.
Bank!

Bulk Prices (1)

RoFLKOPTr (1294290) | more than 2 years ago | (#37577810)

Because it's not as though Amazon is able to get deals on all the parts for buying them in bulk. Yeah, it would cost you $210 if you were to buy all the parts to build your own Kindle Fire, but I don't get why people think it costs Amazon that much.

Re:Bulk Prices (0)

Anonymous Coward | more than 2 years ago | (#37577878)

No, it would cost more like twice as much if you were to build your own Kindle Fire.
But even with very good deals from all suppliers I don't see them going below 200$.
Keep in mind that the Fire uses high quality parts (like an IPS-Panel) that you usually
only find in products that are about a 100$ more expensive in retail.

Re:Bulk Prices (1)

Anne Thwacks (531696) | more than 2 years ago | (#37578852)

I suspect that Amazon's negotiating power is along the lines of "You are going to make me an offer I cant refuse!"

The phrase "There is only one horse in this here town" also comes to mind.

In short: Amazon pays what they want to pay. Not a penny more, nor less.

Re:Bulk Prices (2)

Attila the Bun (952109) | more than 2 years ago | (#37578098)

Because it's not as though Amazon is able to get deals on all the parts for buying them in bulk.

Y'know I think they might have taken that into account. My local friendly electronics store is selling 7" displays for $265, three times the cost estimate in TFA.

Re:Bulk Prices (1)

RoFLKOPTr (1294290) | more than 2 years ago | (#37578228)

Because it's not as though Amazon is able to get deals on all the parts for buying them in bulk.

Y'know I think they might have taken that into account. My local friendly electronics store is selling 7" displays for $265, three times the cost estimate in TFA.

For one, the cost estimates are for wholesale prices directly from the manufacturer and they're for just the panel. Is your friendly electronics store selling just an LCD panel with no frame or buttons or anything attached to it except a ribbon cable to plug into a circuit board? For two, even if they take general bulk pricing into account, there's no way for them to know what Amazon is paying. Amazon is a huge company and they've probably got contracts to make several million units. You can get pretty good deals when buying that many of anything.

Only $10? (4, Insightful)

Sarten-X (1102295) | more than 2 years ago | (#37577812)

So a company with the bargaining power of Amazon makes a new product, and can't get the price down $10 more? I find that hard to believe. On top of that, the component prices in TFA are estimates. I see no indication of how accurate they are. I also don't see any point to this story.

Re:Only $10? (4, Interesting)

melted (227442) | more than 2 years ago | (#37577980)

ISuppli routinely lowballs estimates. Sure, the components cost this much. But how much does it cost to deliver them to the factory, put the devices together, test them, package them, write software for them, run the cloud services, etc, etc. It all costs money, and the fewer devices you sell, the greater fraction some of these costs are. So in a way, costs can't even be estimated until you know the overhead, and until you sell N units. And then Apple will sue their ass, further adding to the cost.

Re:Only $10? (1)

alvinrod (889928) | more than 2 years ago | (#37578294)

Delivery costs are relatively low in general, especially when the factories that build these devices use components produced in other nearby factories. Even shipping these from Asia to other markets is fairly inexpensive considering the high value/volume that these items possess. Manufacturing costs are generally considered to be about $10 per device in most tablet/phone estimates that I've seen. The software is for the most part already been written since it's using 2.x Android, the rest can probably be covered by some in-house developers who are already on the payroll. The cloud services already exist; perhaps Amazon is just looking to keep their hardware utilized.

The costs certainly aren't something to be discounted, but in many cases they are either incredibly low or already covered in some other manner. Additionally, I feel as though the BoM is on the high side. The Playbook was estimated as costing $200 in terms of materials. The Kindle Fire is essentially a stripped-down version of the Playbook with fewer components of certain types, reducing the cost around $20. Also, Amazon is in a position to order sufficiently many of these devices to further reduce the price.

Re:Only $10? (0)

pittaxx (2003818) | more than 2 years ago | (#37578120)

I see no indication of how accurate they are. I also don't see any point to this story.

I am also blind and don't see anything in general.

Re:Only $10? (0)

Anonymous Coward | more than 2 years ago | (#37578438)

The point is simple: a corporate lap dog is doing something for the mother company. They get paid in Amazon coupons. And the hordes of imbecils buy-buy-buy. Just take a look at how many of the answers are ready to estimate in their little stupid greedy minds how much more might Amazon lose. For every moron that thinks Amazon is giving away 10$, Amazon might make 10$. Add whichever incredibly low priced they monkeys might fancy.

And there's more to it: many of the monekys are cheap too. They will buy the ad version. For 30$ upfront discount Amazon might get 25$ from advertising partners. That makes the toy a 5$ investment to have their own banners shown in public.

And there's even more! So far Amazon could tell a lot about someone by looking at their spending habits on the site. Than they also know the "wishes" of the monkey. And what tickling their fancy by logging every show product page. With this device they can store everything that is not encrypted. And most of the net is not encrypted.

So the poor monkey gets to pay cash than make money to Amazon with every click. And all that for a perceived higher value. Yes, humans tend to be that supid, especially well fed primates from the Western hemisfere.

Re:Only $10? (2)

Mr. Underbridge (666784) | more than 2 years ago | (#37578542)

So a company with the bargaining power of Amazon makes a new product, and can't get the price down $10 more?

I don't mean to be rude - but don't you think they were doing that already? That sounds like the Homer Simpson School of Management - "Could you make that cheaper?" Uh, OK...

Whether the estimates are accurate, I couldn't say.

Re:Only $10? (1)

Tim the Gecko (745081) | more than 2 years ago | (#37578938)

So a company with the bargaining power of Amazon makes a new product, and can't get the price down $10 more?

With twenty pointy-haired bosses saying this, they could get the price to zero!

Hmmm (0)

Anonymous Coward | more than 2 years ago | (#37577826)

Isn't it anti-competitive behavior to sell your product below cost? I thought Sony got in trouble for doing this with the Playstation...

Re:Hmmm (0)

Anonymous Coward | more than 2 years ago | (#37577874)

Doesn't that only matter if you have sufficient leverage over the market to force competitors to do the same? I don't know anything about the e-book industry but it seems to me that unless the Kindle Fire is far and away the most popular reader it won't much matter.

Re:Hmmm (1)

spire3661 (1038968) | more than 2 years ago | (#37577984)

Atari blustered about pursuing Playstation 'dumping' charges before the PS1 price was announced and then was never heard from again. They basically said if Sony comes in too low, we'll sue/pay a congresscritter to open an inquiry etc. Nothing ever became of it beyond an idle threat.

Re:Hmmm (1)

NoNonAlphaCharsHere (2201864) | more than 2 years ago | (#37578158)

Isn't XBox still being sold at a loss?

Cherry picking (0)

Anonymous Coward | more than 2 years ago | (#37577830)

Not including content sales in the analysis is like saying Auto Trader loses 25 cents on every paper print.

Re:Cherry picking (0)

Anonymous Coward | more than 2 years ago | (#37578394)

Say it, don't spray it brother, Dang!

__ESTIMATED__ costs (-1)

Anonymous Coward | more than 2 years ago | (#37577832)

How do they know for SURE Amazon is paying that for the components? Maybe Amazon only earn $10 from each Fire sold.

Cost of software (0)

Anonymous Coward | more than 2 years ago | (#37577856)

So, maybe the hardware is sold at $10 loss.

So what? If the hardware was sold at $10 profit, there are still costs for software development, marketing, etc etc.

These cost far offset a loss or profit of the hardware components, and, as others have noted, the device is only a conduit to sell content, which is where the revenue is made.

Launch fail (0)

Anonymous Coward | more than 2 years ago | (#37577896)

If only they were making them available ANYWHERE.

This whole "US ONLY launch" BS does little for adoption. if they want people to buy the thing and consume their services: they need to release to every one at once.

Once the thing launches, it's a race for competitors to come up with "close enough" versions around the price point to destroy adoption IMHO.

So? This is news? (1)

Ecuador (740021) | more than 2 years ago | (#37577920)

Along with R&D and marketing, infrastructure etc overhead, it is losing more than $10 per Kindle Fire sale. And this is news to whom? When you expect a steady stream of income for each device sold, you would be stupid not to subsidize it!
Similar to how many recent video game consoles were sold at a loss when they came out, to ensure a user base.

Re:So? This is news? (1)

Anonymous Coward | more than 2 years ago | (#37578088)

Plus, as tech advances and manufacturing and channel arangements get better, they will hit break even and even get a modest profit per tablet.

Apple's profit margins are like luxury brands like Rolex, Mercedes, or Gucci. amazon may be on to something and may have figured out mass volume at low prices is the only way to compete against a dominator like apple. Also, If it gets more people using android based tablets using amazon services, the better it is for amazon and the other vendors.

Everybody wins but apple. (apple doesn't lose though as the type of people who want to buy a toyota are not the ones who would buy a mercedes)

Amazon's teats (1)

DogDude (805747) | more than 2 years ago | (#37577936)

Hey, if it'll get more users sucking on that Amazon teat for all of their purchases, they should be giving them away for free.

So, this is... (0, Funny)

Anonymous Coward | more than 2 years ago | (#37577966)

A Kindle Fire sale?

$10 seems miserly to me (0)

Anonymous Coward | more than 2 years ago | (#37578014)

Back in the 90's when personal mobile phones were a relatively new phenomena they were sold at a £150 loss in the UK, the reasoning being that the network was a fixed cost and that every call was virtually 100% profit over the minimum monthly tarrif.

$10 seems miserly to me, as a Kindle reader, no bookshop has had my business since last December (guess what I had for christmas) and they are expecting video sales as well.

$10 loss/unit is acceptable (0)

Anonymous Coward | more than 2 years ago | (#37578016)

Given that Amazon will sell between 4-5M units, this amounts to a $40-$50M loss. But if you think of it another way, it is about the same as some companies' marketing budgets. Given that Amazon does not do heavy traditional marketing (except Kindle Ads on TV, print, internet) this is an acceptable loss and when trying to establish a beachhead in the tech industry $50M is a pittance compared to potential future profits.

In addition, if the Palm/WebOS purchase goes through, they could gain enough mobile expertise to launch their own smartphone and also sell that for razor thin margins. Note that from a tax perspective, Amazon should start paying California sales taxes if they buy a company where the majority of the employees reside in California.

Amazon To Lose $10 Per Kindle Fire... (0)

Anonymous Coward | more than 2 years ago | (#37578018)

...sold to customers which don't buy any content from Amazon.

There, I fixed it for you.

A news site... (0)

Anonymous Coward | more than 2 years ago | (#37578022)

... that offers news would be great.

That's just one analyst's guess (1)

sribe (304414) | more than 2 years ago | (#37578044)

I've seen another one that thinks they're losing $50 each, and another that thinks they're making $50 each (which I really doubt).

Re:That's just one analyst's guess (1)

qlayer2 (1122663) | more than 2 years ago | (#37578086)

And it really doesn't matter hardware wise- to make the device a reasonable purchase, you have to add Amazon Prime for $79/year, and I'm sure you'll manage to buy a book or two. Hardware selling at a loss to sell software/add-ons is hardly a new concept- If they could really build them for close to cost, I'm surprised they didn't either low the price more to drive buyers towards it or include a year of amazon prime in the price to make it more attractive to buyers.

Re:That's just one analyst's guess (1)

tgibbs (83782) | more than 2 years ago | (#37578232)

Yes, this is clearly within error of break-even. Amazon is not going to sell appreciably more phone by taking a $10 loss per phone, so why do it? And since the main goal is not to make money on the hardware, but rather to sell Amazon's other products and contents, selling the tablet essentially at cost makes the most sense.

Re:That's just one analyst's guess (1)

tgibbs (83782) | more than 2 years ago | (#37578274)

oops...meant "tablets" not "phone"

Analysts (0)

Anonymous Coward | more than 2 years ago | (#37578078)

estimates a lot, their beancounter logic add's up (no pun intended), does not mean it's correct. Even *if* the hardware-components all by themself cost more than Amazon sell's them, it does not mean Amazon actually pay's more, and it does not mean they loose money on the long run...

Buying one makes Amazon *lose* money? (2)

SteveFoerster (136027) | more than 2 years ago | (#37578124)

Now that's a good reason to buy one!

Re:Buying one makes Amazon *lose* money? (0)

Anonymous Coward | more than 2 years ago | (#37578356)

They are already down $210 per kindle, buying one will bring them up by $200

Re:Buying one makes Amazon *lose* money? (0)

Anonymous Coward | more than 2 years ago | (#37578568)

Now that's a good reason to buy one!

Why do you want Amazon to lose money? Because it's a "corporation" and therefore "evil?" Amazon has treated me, a mere low-level customer, with excellent customer support, 100% no-questions-asked returns, and their Prime program is fantastic. Would you rather Amazon go out of business and the Wal-Marts of the work take over?

Loss leader pricing strategy (1)

Achoi77 (669484) | more than 2 years ago | (#37578168)

I don't see this as being any different as Sony or MS trying to push out their gaming consoles at a loss - just business as usual. Amazon's true advantage over direct hardware manufacturers is that they can afford to risk gambling with loss leaders while direct manufacturers like ASUS and Archos cannot. Sure, they may probably make less profit, but the opportunity to gain marketshare is too great to ignore - which is the point: to get _everybody_ to use amazon's services.

Sure, just for the first few months... (1)

LynnwoodRooster (966895) | more than 2 years ago | (#37578192)

At the rate that electronics components drop in price, it'll only be a "loss leader" for a few months at most. After that, it'll be a break even or small profit-maker on its own - regardless of the amount of content consumed.

stupid business (0)

Anonymous Coward | more than 2 years ago | (#37578252)

It's amazing how companies do this all the time thinking they can somehow make money someday by digging themselves a big hole and losing money on products. Apple has huge profit margins and has no trouble selling. They think their tablet sucks so much that people won't buy it for half the cost of an ipad at $249? Pretty pathetic.

They're Losing Nothing (0)

Anonymous Coward | more than 2 years ago | (#37578272)

At least not from me. It'll be a cold day in hell before I buy a device that sends the title of every book I read and how long I look at each page back to its master.

Amazon makes money on books, not hardware (1)

longhunt (1641141) | more than 2 years ago | (#37578290)

In business school they call this the Gillette strategy, after the razors. Sell the razors at a loss...make your money back easily on the blades. Nail guns are sold the same way. The companies have been know to pass out free nail guns to construction companies just so they will buy more nails. Even if you buy a gun in a store, they are sold at pretty close to cost. Its a classic strategy. Besides, the more volume they can build, the closer to break-even they can get. By this time next year I bet they will be making a profit.

Re:Amazon makes money on books, not hardware (1)

ThorGod (456163) | more than 2 years ago | (#37578596)

The term you're looking for is "loss-leader".

An analyst "estimates the cost?" (1)

edibobb (113989) | more than 2 years ago | (#37578306)

An analyst's estimate could be much more than $10 to high (or low). Amazon probably knows how much they're making (or not) on each Kindle Fire, but I doubt any outside analyst does. Maybe Amazon gets the parts cheap on Amazon.

Translation (1)

samwichse (1056268) | more than 2 years ago | (#37578310)

CorporateSpeak (R) translation follows:

The device will be locked down HARD.

Sam

Not according to Amazon (4, Informative)

manekineko2 (1052430) | more than 2 years ago | (#37578426)

http://www.pcmag.com/article2/0,2817,2393740,00.asp#fbid=ajRIdnxQUAV [pcmag.com]

"Amazon isn't doing anything special to prevent techies from "rooting" and rewriting the software on its powerful yet inexpensive new tablet, Jon Jenkins, director of Amazon's Silk browser project said."

OMG this is a new concept! (1)

TavisJohn (961472) | more than 2 years ago | (#37578370)

Content providers have only been doing this for DECADES!
Atari did this back when the 2600 first came out. Sell the console cheap, and require all software developers to pay them for the privilege to make games for their console.

Re:OMG this is a new concept! (1)

Belial6 (794905) | more than 2 years ago | (#37578510)

No, when the 2600 came out, Atari made all games in house, and thought they could use the courts to prevent any 3rd party developers from making games for "their" system. Activision was formed from previous Atari employees, and the games they originally made were not endorsed in any way by Atari. In fact, Atari sued them to try to stop them. It was from that incident that the idea of licensing 3rd party software developers arose.

Re:OMG this is a new concept! (1)

Thing 1 (178996) | more than 2 years ago | (#37579148)

And, damn did those Activision games have more pixels! That was a good precedent. (I also had the ... Iforgetthename, it was a cartridge twice as large and loaded games from cassette tapes, which were even cooler than the Activision games; there was an Asteroids clone, and a Dragon Stalker or something like that which I recall spending many hours on.)

Figure implies accuracy that it cannot have (0)

Anonymous Coward | more than 2 years ago | (#37578404)

The cost figure should not be accepted as Gospel, as implied in the "estimated" value, down to the penny.
Regardless, just imagine it as some nonzero loss amount, which possibly might be mostly eliminated
by the extended warranty income. But eliminated or not, this is not a large amount - I was expecting more
than twice this amount in terms of a loss - around $25.

the're not going to lose 1 cent (5, Interesting)

cats-paw (34890) | more than 2 years ago | (#37578452)

These kind of stories always show up - but no matter how much they think they know about the production they are STILL
underestimating the amount of buying power somebody like Amazon has.

Amazon is probably quoting an _initial_ production run of 10 million units. They are getting excellent pricing.
There is no way they are losing a penny on these things.

Story ignores..... (1)

ThisIsNotMyHandel (1013943) | more than 2 years ago | (#37578466)

Story ignores shipping, advertising, infrastructure, ect.

What Amazon Has Accomplished is Significant (0)

Anonymous Coward | more than 2 years ago | (#37578640)

What Amazon has accomplished here is significant. Apple said that a 10" WiFi only tablet must cost $499. Amazon has now said that a 7" WiFi only tablet must cost $199. This calls into question of those remaining 3-inches are really worth a 150% $300 premium? I expect that Apple will now have to come out with a competing product that somehow doesn't eat into their high margins on their current devices. As I see it, Amazon just took a bit bite out of the Apple.

A lesson to HP... (1)

luis_a_espinal (1810296) | more than 2 years ago | (#37578676)

... and other tablet manufacturers. Selling at a lost, though always a risk, can be an acceptable maneuver.

10 Bucks? 20 Bucks? Whatever (1)

tgeek (941867) | more than 2 years ago | (#37578776)

Easily offset by the sales of Amazon Prime memberships after the free month trial period. Assuming a $10/unit loss it'll only take one new subscriber out of every 8 units sold to recoup the loss. Sure there's costs associated with providing AP but also other benefits to Amazon other than selling more Kindles -- increased sales of other items, selling non-Prime streaming content (the Prime content sure ain't anything to write home about), etc.

So what? (0)

Anonymous Coward | more than 2 years ago | (#37578794)

It's a very old business model: give away the razor and sell the blades. No mystery here.

Even if this is accurate (0)

Anonymous Coward | more than 2 years ago | (#37578884)

They'll make it up on sales of ebooks, your information (ala Silk). No need to cry for them. I 3 amazon

Does it qualify for free shipping? (0)

Anonymous Coward | more than 2 years ago | (#37578926)

Add another $5 to that price tag, because you know it does.

Kill the monopoly (0)

Anonymous Coward | more than 2 years ago | (#37579062)

We must hack these below-cost devices to prove to businesses it's a futile business model! Who's with me?

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