Amazon: We make no profit on Kindle hardware

During a recent interview, Amazon CEO Jeff Bezos admitted that the company does not make any money on its new Kindle Paperwhite or Kindle Fire HD hardware, selling the lineup at cost, give or take a few pennies.

The strategy is notably different from Apple, which sells each iPhone or iPad with a margin as high as 40 percent, making significant profit on every piece of hardware they sell.

Amazon does not have the same strategy instead choosing to get the devices into as many hands as possible so consumers can purchase more online content from Amazon's extensive ecosystem.

The company offers shopping, music, movies, apps, and books.

"What we find is that when people buy a Kindle they read four times as much as they did before they bought the Kindle," added Bezos. "But they don't stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books."

Written by: Andre Yoskowitz @ 14 Oct 2012 12:51

LordRuss

I find this slightly hard to believe. Something has to be made. Nobody makes 'that' kind of belligerent high end investment risk (especially LONG run risk) without some kind of payoff in it.

I'll buy that they don't expect a huge turnaround, say like the entertainment industry. That's completely plausible. But not when it comes to electronics. FAR too volatile a market to be playing that kind of risk game.

Granted, like the video gaming industry, it's the resale market of software titles that nickel & dime the real money into their pockets like dreams from the sandman overnight.

http://onlyinrussellsworld.blogspot.com

14.10.2012 13:05 #1

VGamer360

Originally posted by LordRuss: I find this slightly hard to believe. Something has to be made. Nobody makes 'that' kind of belligerent high end investment risk (especially LONG run risk) without some kind of payoff in it.

I'll buy that they don't expect a huge turnaround, say like the entertainment industry. That's completely plausible. But not when it comes to electronics. FAR too volatile a market to be playing that kind of risk game.

Granted, like the video gaming industry, it's the resale market of software titles that nickel & dime the real money into their pockets like dreams from the sandman overnight. Amazon makes their money through selling their digital books. Granted, it may not be much, but with their large quantity, it adds up quickly.

14.10.2012 13:38 #2

Bozobub

Both Sony and M$ used this approach for their game consoles for years. It's relatively recent, that any Playstation or XBox product has turned a profit for the console itself.

14.10.2012 16:48 #3

DVDBack23

Originally posted by LordRuss: I find this slightly hard to believe. Something has to be made. Nobody makes 'that' kind of belligerent high end investment risk (especially LONG run risk) without some kind of payoff in it.

I'll buy that they don't expect a huge turnaround, say like the entertainment industry. That's completely plausible. But not when it comes to electronics. FAR too volatile a market to be playing that kind of risk game.

Granted, like the video gaming industry, it's the resale market of software titles that nickel & dime the real money into their pockets like dreams from the sandman overnight. As written in the article, Amazon makes all their money off high margin digital content. The hardware doesn't matter as long as it's in the most hands.

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14.10.2012 17:20 #4

LordRuss

Originally posted by VGamer360: Originally posted by LordRuss:
Granted, like the video gaming industry, it's the resale market of software titles that nickel & dime the real money into their pockets like dreams from the sandman overnight. Amazon makes their money through selling their digital books. Granted, it may not be much, but with their large quantity, it adds up quickly. Originally posted by Bozobub: Both Sony and M$ used this approach for their game consoles for years. It's relatively recent, that any Playstation or XBox product has turned a profit for the console itself. Originally posted by DVDBack23:
As written in the article, Amazon makes all their money off high margin digital content. The hardware doesn't matter as long as it's in the most hands. And as I have written in the past, all far too often, there seems to be a mighty race to be a singular king crowned atop that pissant mountain named "Right".

I 'did' happen to read the whole article & I 'did' happen to comprehend it. Had you all read my entire comment, you too would have noticed I shared your sentiments. I simply still don't share your ideology that they would lose money on a venture hoping that they would make it up on a software only solution.

$ony & M$ can "possibly" do it through over priced games, but $1 at a time is a serious undertaking. Especially with companies STILL following the almighty 80s business model of "screw them, they bought it, let them deal with it" mentality.

I'm not saying Amazon is as lustful or wanton, but let's not forget they are from a similar mold here.

http://onlyinrussellsworld.blogspot.com

15.10.2012 10:49 #5

Bozobub

a) No one implied or accused you of not reading the article, or failing to understand it. "As written in the article", in this case, is - in my eyes - simply the citation DVDBack23 used to justify his argument. I honestly don't see the reason you're upset with me at all.

b) The remarks you received were reasonably correct (I was wrong, BTW, in that the Playstation 1 was apparently profitable for most of its life, after they redesigned it to be cheaper/fix overheating issues from the CD being right over the PSU). All of the later PS consoles and all of the XBox consoles, however, only made/make a profit on the hardware late in their lifespan, if ever; the profit is in software publishing/licensing. This encourages adoption of the hardware in the 1st place, wouldn't you agree? And software publishing, once you've paid the licensing costs, is a VERY high-margin business; it costs next to nothing to press disks. For Amazon, this is taken even further, as many of their Kindle offerings are digital downloads, meaning nearly *zero* costs, beyond licensing.

c) Bezos is unlikely to claim Amazon is not making a profit on Kindle sales, if it's not true. While not necessarily a bad business decision (as Sony, M$, and other hardware + content developers have shown, per the arguments above), it's also not exactly great press to the shareholders, who often are shortsighted about things like this. *cough* Sort of like you? ^^'

d) The examples given by both DVDBack23 and I were intended to debate your premise, that Amazon probably wouldn't be willing to lose money on Kindle sales, not to make you look like an idiot.

e) You're the only one "racing" in this instance, LordRuss.

Relax, homes. If you don't agree with either of us, that's perfectly fine, but perhaps you could remove the schmekel from your response..?

15.10.2012 11:57 #6

LordRuss

Originally posted by Bozobub: Relax, homes. If you don't agree with either of us, that's perfectly fine, but perhaps you could remove the schmekel from your response..? I'm in a constant state of disagreement... You seem to find that with me at every turn.

At no time do I ever conclude that I'm wrong - just incorrect when & if the time presents itself. Everyone's comments were nothing more than blanket statements stating simply that what each respective company had supposedly reported in a press release; to which there was little or no way of rebuking.

I contest it, but, redundantly, have no equal quantifiable information that any other multi-million dollar journalistic resource has to contest my theory other than years of self education (the same information gathering you folks have) & the powers of deductive reasoning to render my hypothesis.

This deductive reasoning is also used to support my theory that you did not indeed see that I agreed in part with you (again) that Amazon (Sony/M$) in part make their highest profit margin via through software sales. But you continue to refuse to recognize that. Thus, the 'race' to your own conclusion.

We've been through this 'mental' charade before sir, which leaves others viewing one or the other of us as being as shallow as a puddle. I can live with a stigma, because I have been called names. I feel you can not, for I feel you constantly have something to prove.

I've told you repeatedly in forums past; I've already made my mark in this word & have at least one more to make (which don't include you). Go make your own - I'm not it.

http://onlyinrussellsworld.blogspot.com

15.10.2012 13:24 #7

Bozobub

Actually, you're incorrect, in that the cost/profit data for the XBox AND the Playstation series was 1st reported by 3rd parties. It took a relatively long time for either company to admit the truth. Google it yourself =) . Again, the reason was quite obvious: Shareholders don't do as much long-term analysis as they should, even though the strategy has at least some merit.

My position is supported by both significant publicly-available 3rd-party research and statements from the companies involved, and is quite easily researched. If you're too lazy to do that research, I'm too lazy to cite the many references that can be found. Again, none of the corporations involved would appear to have any particular incentive to lie about the matter; care to name one reason why they would..?

Furthermore, YOU are apparently completely incapable of realizing that disagreeing with one part of your argument, does not necessarily equate to disagreeing with all of it, which is - amusingly enough - exactly what you're accusing me of.

As to finding disagreement with you "at every turn", that's not just hyperbole, it's patently incorrect. Most of the time we simply don't interact.

Your assertion of the need to "race", after I made a simple statement disagreeing with your initial claim, is not only quite transparent projection of your own motives upon others, it's also a lame cop-out in a - up to the point you decided to flip your lid - polite debate. Disagreeing with any statement you make is quite valid in any debate, especially since *I* have evidence to back up my argument. Where's yours?

Additionally, "wrong" is a synonym for "incorrect" (also easily researched; it's called a "thesaurus"). You can split hairs all you like, but you don't happen to define the English language for the rest of us.

Finally, you have demonstrated in the past that you are unwilling to actually *debate* others (not just me, by any means), without getting your privates all mixed up in the matter. Why do you bother? You don't bother to actually respond to any counterpoints, you simply (metaphorically) stomp your foot and insist loudly that you're right. Not to mention your dabbling in juvenile ad-hominem, which has *repeatedly* involved you in warnings from AD staff. Yet you think you're somehow going to "make your mark upon the world" with that kind of petulant nonsense?!

Maybe on "Cops" - lol...

If you can't handle the heat, stay the hell out of the kitchen, Junior.

15.10.2012 13:51 #8

GernBlan

Amazon is like Wal-Mart -- huge. They can afford to sell bananas cheaper than the local grocery stores because they can just raise the price of boxer briefs $.05 to make up for it. I'm sure they can supplement any loss in Kindle profit by simply increasing profits from their other Amazon departments/divisions. Barnes & Nobles can't do this, and Apple can't either (at least not as easily as Amazon). Is this a long term solution? No, at least not a wise one, but it will definitely work short term and is one of the benefits of the Amazon business model.

18.10.2012 10:51 #9

LordRuss

Originally posted by Bozobub:

Finally, you have demonstrated in the past that you are unwilling to actually *debate* others (not just me, by any means), without getting your privates all mixed up in the matter. Why do you bother? You don't bother to actually respond to any counterpoints, you simply (metaphorically) stomp your foot and insist loudly that you're right. Not to mention your dabbling in juvenile ad-hominem, which has *repeatedly* involved you in warnings from AD staff. Yet you think you're somehow going to "make your mark upon the world" with that kind of petulant nonsense?!

Maybe on "Cops" - lol...

If you can't handle the heat, stay the hell out of the kitchen, Junior. Fine, you want debate, I give you debate. Google is not always the best "last resort" for 'all that is holy' in information gathering. Research gathering involves actual boots on the ground & talking to people. Face to face commitment, not some sound bite taken out of context.

You already know 3rd party reports can be slanted & bought to say whatever needs saying in order to make sales or promote bank loan leverages, incite a major loss for taxation purposes, but I guess you wouldn't know about those kind of insider corporate games.

Top end shareholders DO actually put in the long-term analysis or should I say, PAY for the service. You're far too naive to think they wouldn't & continue to invest in such demonstrative ventures without the expectation of belligerent returns. Day traders get shit on. It's expect practice as the 'real' Wall Street traders feel they have it coming. I.e., your low end shareholder strategy doesn't hold water, because THEY aren't the decision makers.

Why would they lie? I refer you back to any company prosecuted for fraud, toxic dumping, & major safety violations - knowingly covering up the foreknowledge of it's existence. Are they criminal here? No. But I also refer back to your naivete. I did my research & found you are speculating. I.e., bluffing. Nice try. Don't play poker with card sharks, you'll probably get burnt.

As for me being completely incapable of arguing single points of a subject... I think it's just you. Simply because I'm finding you so boorish that I'd rather stick needles in my eyes than entertain you with more more written material. I certainly don't go out of my LOOKING for something to single YOU out. It just so happens THIS article 3 people decide to take umbrage with my statement, That I found the article "hard to BELIEVE"

Most of the time, holy shit, ready for this(?), you're right... I have nothing to say to you.

And please, the "flip your lid" & the verbal dance about the "race"-ing comment - give it a rest already. You're young & supposed virile to get your panties in a wad. Let it go. Where you're getting all this emotion from me in the original comment is hokum. Somehow you managed to open an entire Pantone color scheme on that one & I didn't look at that comment with 16 shades of grey. Shue the fly & change the channel.

And for shits sake, when I need help from a dictionary I won't be calling on you, so kindly step aside. That's what I have a wife for, as like you, she seems to think she knows everything too. So when you decide you want to define the English language, how about you take a moment & decide if you should allow the English language to define you.

And in closing, I'm not 100% sure what your deducing as being able to debate or not. If you mean squabbling with individuals who 'wish' things were one way as apposed to how things are or facts from fiction, then no - I don't suffer fools.

As for summarily stating in an open forum that I am a trouble maker & prone to being called down by moderators then you are dead wrong. I have not been IMed by anyone for missuse of forum policy. If the forum discussion had gone profusely off topic (as this one now has, thank you so ever much) then yes, I have guilty with a few other forum guests a couple of times. To which I make I've made my apologies in accordance.

Which means you haven't looked into my background as heavily as you stated or you only wish to center on your perceived negativity of me. Which just seems to confirm my theory that you're an unhappy guy wishing to make others unhappy as well.

So what if I make juvenile statements, they've NEVER been called down. And for your juvenile attempt at displacing my "mark on this world". How many rock concerts have you worked on? How many movie/TV production sets have you worked on. Where is your DD214? And that's just the last 30 years of my life, I figure I've got at least 20 more left.

I do indeed KNOW what an AK47 sounds like when it's fired at me. So , yeah, I CAN take the heat 'toddler' - stay out of my kitchen.

Let's just stay off one another's property for the sake of civility.

http://onlyinrussellsworld.blogspot.com

21.10.2012 12:50 #10

Bozobub

Go pee up some other tree =).

First off, research supports my claim, and you STILL have produced none, whether via Google, any other search engine, or any other document; only your unverifiable personal experience. Are you expecting me to believe you went to Redmond, WA and Japan to question M$, Sony, and Nintendo? Really?

Second, you still have not explained why any corporation would want to deny making a profit on the hardware they sell, when it can only benefit their share price to make said profit. Again, many shareholders are as shortsighted as, well, YOU. Furthermore, it was like pulling teeth to get Sony to admit their actual margins on the PS2 and 3, and it wasn't much easier to get the same details re: the XBox or Nintendo series. And guess what? many shareholders - a large percentage of most companies' worth - are NOT particularly as well-informed as they ought to be. Care to argue some more? We had a giant financial meltdown that we're slowly recovering from in this country, partially due to this very reason, you know.

Third, YOU are the one getting emotional, silly, as your Wall-O'-Text above patently signifies. YOU are the one who decided it was OK to be an insulting boor. YOU, however, are not going to push that load off on me, no matter how hard you try. If you can't handle people disagreeing with you - and politely, I'll add, at first - then why the hell are you posting on any forum or blog?

And young and virile? Thanks, but 42 is old enough, at least for me; your opinion on the matter is irrelevant, of course.

Last, it's a thesaurus, not a dictionary, that you apparently lack. Stating you are not "wrong", but "incorrect", and then quibbling about the matter, merely shows your lack of understanding of the English language, nothing more. Again, YOU are the one who got upset about it, bub; I was merely laughing at you splitting nonexistent hairs, and pointed that out.

It's been quite illuminating, that you took a simple disagreement with a blanket statement you made, and tried to turn it into some sort of pissing match, or to steal your term, a "race". Do you feel complete now? Have you "won"..?

Don't be a rude snot, then expect loving responses in return. If you can point out how my initial response to you was in any way rude or offensive, then I'll apologize, of course. But your chosen tack of trying to out-testosterone me on a forum is not going to work.

Oh, and by the way? I was in the US Army, myself, as an infantryman, so you can stop waving that flag at me; it doesn't make you any more correct in an argument, any more than having helped organize a concert, so give it a rest. My DD-214? Somewhere in St. Louis; I lost my copy a long time ago (which, frankly, is a pain, because they're a serious PITA to get out of the archives, and I want a VA loan); where's YOURS? You now want to start waggling your military-peen at me, as well..?! LOL

21.10.2012 17:40 #11

Ripper

I've never been shot at so I don't think I really have a lot to add to the discussion.

21.10.2012 19:13 #12

ddp

LordRuss & Bozobub, knock it off or i'll temp ban you or worse!!!!

21.10.2012 20:51 #13

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