Amazon's Jeff Bezos admits Kindles are sold at cost
Bezos tells the BBC what most analysts already figured out: At best Amazon breaks even on the latest Kindle hardware.
Amazon's Jeff Bezos doesn't like to reveal much about the Kindle hardware business. When he was asked in an interview with All Things D whether Amazon made money on the new Kindle hardware, ranging from $69 to $499, introduced September 6, he responded, "We don't disclose the exact bill and materials, so I can't answer that. But we don't want to lose a lot of money on the device because then we'd really hate it if you put it in the desk drawer. On the other hand, if you make a lot of money on the device, I believe you haven't earned your money on it yet, and then you've incentivized them [the customers] to stay on the upgrade treadmill that I mentioned today."
Speaking to the BBC on Wednesday, Bezos came clean on the Kindle hardware question, disclosing that the Kindle Fire HD and Paperwhite sales don't render any direct profit to Amazon. "Basically, we sell the hardware at our cost, so it's break-even on hardware," he said. For contrast, Apple reportedly margin on its WiFi-based iPad, which is priced higher than a similarly configured and less feature-rich Amazon Kindle.
He explained Amazon's strategy, adding what is well know about the company's business model: "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." He noted that Kindle buyers become more avid readers and purchasers of Amazon's digital books. They read four times as much as they did before they bought the Kindle, he said.
Bezos was in the U.K. to launch the Paperwhite Kindle and Kindle Owners' Lending Library in the country, as well as Germany and France.
Below is Amazon's latest lineup of Kindle ereaders:
Kindle e-reader: A new bare-bones e-ink reader. Slight upgrade from last year's version (improved display, still no touch screen), and a tad cheaper: $69 (ad-supported), $89 without ads. Available now. Kindle Paperwhite: Amazon's first self-illuminating e-ink reader, and now its only touch-screen model. It's $119 with Wi-Fi, $179 for 3G (both ad-supported; add $20 for ad-free versions). Ships October 1. Kindle Fire: Amazon's new baseline tablet. For just $159, you get a faster CPU and longer battery life than the older model. Ships September 14.
- Kindle Fire HD (7-inch): The cheapest "new" tablet in Amazon's lineup. It's $199 for 16GB, $249 for 32GB. Fully featured tablet with Amazon's customized version of Android, 1,280x800-pixel display, front-facing camera, dual-band MIMO Wi-Fi, ships September 14.
Kindle Fire HD (8.9-inch): Same as above with bigger, more-high-res screen (1,920x1,200 pixels). The 16GB model costs $299, 32GB is $369. Ships November 20. Kindle Fire HD (8.9-inch, 4G LTE wireless): The same big dog as above, but with a built-in LTE connection (on AT&T). It's $499 for 32GB, $599 for 64GB, plus $50 a year for 250MB of data a month. Ships November 20.