Amazon could sell its upcoming tablet for less than it costs to make but still take home a profit in the long run, according to tech industry analyst Tim Bajarin.
Discussing Amazon's expected tablet in a column for PC Magazine last week, Bajarin derived an estimated cost for the device of $300 based on information from various sources. Assuming Amazon then discounts the retail price, consumers could pay as little as $249, projects the analyst.
Though the retailer would take a loss on the initial sales of the tablet itself, the company would more than make up the gap by selling a certain number of videos, songs, books, cloud storage, and other type of content to a typical buyer.
"By my guestimates, Amazon would make back that lost $51 within six months and reap a profit of anywhere from 10 to 30 percent on the tablet over the last 18 months of the device's accounting period," wrote Bajarin.
Bajarin's figures are certainly open to debate, but other analysts believe Amazon would turn more of a profit from content than from the tablet itself by using the device to sell the content, much as it does with the Kindle e-reader.
With Amazon combining the right brand, content, and retail channel, the company could sell the tablet at or below cost, believes Epps, and earn most of its profits by selling content.
Assuming Amazon does go down this road, Bajarin sees a potential shakeup affecting other tablet makers that would have difficulty competing on price.
"When measuring by units shipped, this method could make Amazon the king of Android tablets very quickly," Bajarin wrote. "In fact, I would go as far as to say that it could 'own' the Android tablet market."
The market has speculated for several months forecast as much in a May column, though at the time he pegged the costs at $349 for the 7-incher and $449 for its 10-inch big brother, which would still price the tablets aggressively.. Some reports say the retailer will . Bajarin himself
Despite the rumors, Amazon itself has stayed mum. In an May interview with Consumer Reports, though, CEOby advising people to "stay tuned."