Amazon Loses Money Every Time a Kindle Fire Is Sold

...and it's totally OK with that
By Kate Seamons,  Newser Staff
Posted Nov 15, 2011 10:04 AM CST
The Kindle Fire is shown at a news conference, Wednesday, Sept. 28, 2011 in New York.   (AP Photo/Mark Lennihan)

(Newser) – The Kindle Fire is officially available as of today, which means Amazon is officially losing money on it. At NPR, Zoe Chace crunches the surprising numbers: The tablet has a $199 price tag—touted as less than half of that of an iPad. But research firm IHS iSuppli tallied all the individual pieces and came up with a $209.63 price tag. That's for materials and manufacturing ... not marketing or content licensing deals, meaning the true grand total is actually higher. And CNN reports that analysts think Amazon could sell 5 million Kindle Fires before 2011 wraps up.

Why is Amazon willing to eat such a big loss? Simple, writes Chace. The Kindle Fire functions as "a bookstore, and a movie theater, and a record shop." And guess who just so happens to sell books and films and music? Once Amazon reels you in, it can get at your wallet in any number of ways—via its entertainment, its apps, its ads. "Amazon is acting like bars in the mid-19th century United States that offered a free lunch—if you paid for drinks," explains Chace. That meal, unsurprisingly, was a salty one. "If having a Fire makes people thirsty for more Amazon products, then the low price pays off for Amazon."

My Take on This Story
Show results without voting  |