Kindle Fire Price: IHS Report Finds Amazon Selling Tablets At A Loss

NEW YORK — Amazon.com Inc.'s Kindle Fire tablet, which started shipping this week, costs $201.70 to make, a research firm said Friday. That's $2.70 more than Amazon charges for it.

The analysis by IHS indicates that Amazon is, at least initially, selling the tablet at a loss that it hopes to cover through sales of books and movies for the device. The manufacturing cost of a new gadget usually comes down over time as chips become cheaper.

Amazon CEO Jeff Bezos told The Associated Press in September that the company's goal was to make a small profit from the hardware, but as a retail company, Amazon was willing to live with a smaller margin than most electronics companies would.

"We want the hardware device to be profitable and the content to be profitable. We really don't want to subsidize one with the other," Bezos said.

IHS's estimate includes the cost of components and assembly, but not the costs of development, marketing or packaging. The most expensive part of the Kindle Fire is the 7-inch color touch screen, which costs $87.

Amazon kept the cost of the tablet low compared to Apple Inc.'s iPad and similar tablets by making it smaller – the screen is half the size of that for the iPad – keeping the amount of memory low and excluding a camera and microphone.

But the difference in manufacturing cost is much smaller than the difference in retail price: IHS puts the cost of the basic iPad 2 model at just under $300, while Apple sells it for $499.

Comments

[robert horwitz]

08:56 AM on 11/21/2011

First I'm going to say that I am not writing about Amazon. I like Amazon and I have always have had positive experiences with this Company. I am not writing about the Kindle Fire either. What I am writing about is there are so many of these things on the market now and they all do such similar things even with all the reviews and reading the specs I can't figure out which one of these darn things is right for me. To make things even more complicated they are all always changing. Yes this is a positive aspect but it doesn't make my decision any easier. Maybe I'll just put my name on a couple of dozen Internet gift wish list sites and hope people give me a bunch of different ones and then I will be able to make a more informed decision.

[AppealforJustice2010]

10:25 PM on 11/20/2011

Seriously I'm thinking of purchasing a second fire for my bedside or on the kitchen counter. I like the foldabe cover that converts to a stand. Hopefully I can add my home security apps where I can lock or unlock doors and screens with a click. Love my kindle fire!

[Kache]

06:10 PM on 11/20/2011

Why would Amazon try to make money selling the Fire - it is their "store", not a tablet. Making a profit off their "store" would be like Walmart putting parking meters in their parking lots.

[bring in swat]

09:42 AM on 11/20/2011

for anyone that is interested they've been rooted. let the fun begin...hats off to amazon for making super easy to root and develop for. they clearly just want you to use this device they way You want to use it. well done!

http://www.xda-developers.com/android/kindle-fire-cracked-wide-open-let-the-development-begin/

[mairs]

12:29 PM on 11/20/2011

Could you please explain what rooting is, if you have a moment. I keep reading it, but would love a bit of info about it.

[bring in swat]

06:05 PM on 11/20/2011

basically it's having complete control of your machine. the advantage is being able to install modifications to make your ereader become faster, have more functions, use more applications ie. you could install every kind of ebook reader available for android not just the one for the Kindle or Nook etc. also other modifications that the basic operating system won't allow you to do. for example with my phone the Galaxy S 4G i have a custom ROM(operating system) that is 2.3.5 which is released for a variant of my phone but not My particular model/carrier...this ROM has more function/power/battery life etc. etc. than the ROM that came from TMobile, developers Port over the ROM to work on my type phone and i can take advantage of these features Way before my carrier gets around to releasing the updates to me. hope that helped. if you root you need to read read read!!! make sure to understand what you're doing and how to prevent what is called "bricking" your device and if you do how to get out of it. but seriously, it's not that big of a mystery...most anyone that can upgrade their computer OS can root and install custom ROMs.

[StinkyPete0279]

05:52 PM on 11/20/2011

It's probably less about wanting you to use it any way you want and more about making a conscious decision to not waste time, money, and energy trying to prevent what people are going to figure out eventually anyway.

Regardless of the reason though, hats off indeed.

[bring in swat]

06:18 PM on 11/20/2011

you're probably spot on! Samsung is like this with their phones...if you think about it the really great developers that i follow for my phones can make a little extra side cash from donations and take some of the workload of the hardware manufactures. i could care less who makes the ROM, and frankly the devs are quicker and more streamlined than the trail of corporate red tape BS to get any kind of update to my phone. this way Google releases the source code and the devs go crazy modifying for different hardware, phones/eReaders what ever runs android. i'm more than Happy to donate a few bucks here and there to these individuals. i love the open source community!

[Ty Summers]

02:10 AM on 11/20/2011

you guys posted the same story (maybe a different report but same findings) around a month ago

[Kindle Mad]

07:40 PM on 11/19/2011

My wife and I love our new Kindle Fire. It's lightweight, easy to use and has a great interface. The first thing I recommend anyone with a new Kindle do is install the nook app. We got our instructions from www.kindlemad.com through google.

It basically unlocks all the Android marketplace apps and unlocks the device. I am one very happy Kindle owner!

[bring in swat]

09:43 AM on 11/20/2011

awesome! i want one!

[mairs]

12:31 PM on 11/20/2011

The browser is really fast. I'm in love.

[Kym Lewis]

07:29 PM on 11/19/2011

Make sense they're trying to lock the market.

[Adrienne Williams]

07:23 PM on 11/19/2011

I said this 2 weeks ago! I need a job Huffpost, hire me! I'm a geek too!

[mmike1969]

02:21 PM on 11/19/2011

Meh, a small 'loss'...
Ask anyone who already bought a Kindle... any Kindle... And they will tell you they have made far more purchases then they would have if it was not for the Kindle. I know I bought more book titles simply because it was easier to buy a copy.

And let me tell ya: I would of bought far more books had they been available in the Kindle format.

[CaptainFrogbert]

02:16 PM on 11/19/2011

So what? Cell phone companies have been doing the same thing for years. They give away $300.00 phones for free with a cell contract.* Schick used to give their razors away for free because they knew they would make back their money on blade sales.

* OK , they *claim* the phones would costs $300. In a free market, they might sell for $79.95, but the principle is the same.

[OneOleMan]

12:59 PM on 11/20/2011

It's not the same thing when you get locked into a 2 year contract. Cell phone - 2 year contract with expensive cancellation fees. Amazon no contract, no cancellation fees.

[snideelf]

01:50 PM on 11/19/2011

Amazon is not really losing money with this item because "kindle fire" is set up to advertise products amazon has for sale at its site. So they are essentially still making a lot of money.

[Adrienne Williams]

07:26 PM on 11/19/2011

Yes the way to go now is services. Amazon will gain every year, $80 bucks from users who want to have the unlimited access to their Prime services. A smart move... Still cheaper then say Netflix at $7.99 just for movies alone.

[Bedingo]

01:41 PM on 11/19/2011

This isn't so outrageous. After all, Gillette did the same thing decades ago. It was possible to buy the razor and two blades for $5 . But then a package of 10 blades would cost $15 or 20. Cars were almost the same thing; manufacturers did and still make a lot of money on parts and supplies than on the vehicle. Hence the built-in obsolescence for which American car manufacturers became famous.

With the price of ebooks the same, and sometimes higher, than paperback or hardback editions Amazon's bottom line will continue to increase inspite of the loss on hardware.

[CaptainFrogbert]

02:21 PM on 11/19/2011

It annoys me no end that an e-book costs the same or more than the paperback version of the book. It costs NOTHING to print, but we are paying as though there were printing costs involved.

This wouldn't be so bad except it's clear the producers haven't even the courtesy to re-format the books for e-nbook readers. We get, essentially, the printer's press-ready EPS file dumped onto to the e-book format.

When will they give us functional, same-page footnotes and at least take out the frikking BLANK PAGES?

[Adrienne Williams]

07:28 PM on 11/19/2011

Sorry as an artist, it's a lot of man hours to design. I know. i think it's still good for artists to get paid what they are worth. Writing, design, photography. It's still less then say an actor or a sport figure, right? $4.99 is nothing in all the man power it takes to create just one issue! I'm talking about a emag.. books it takes so much work to write a book. I'm still on mine...and you don't get paid doing all that time!

[mairs]

12:54 PM on 11/19/2011

I just did a side by side comparison between an iPad 1 and the Fire, both WiFi....loading an article here with comments. The Fire was faster every time, and took 1/2 to 1/4 the time it took the iPad to load the page. The comment section always bogs down on my iPad, but the Fire hardly blinked. Of course this isn't a comparison with an iPad 2. One article took the Fire 15 seconds to load all the way to comments while the iPad took 60 seconds until the comments popped up.

I was trying to figure out why I'm enjoying the Fire so much after having an iPad for over a year. It's because it loads pages so fast. Amazon did say something about their browser sharing the load with their servers when calling up a webpage.

[MarianneD]

12:48 PM on 11/19/2011

I got my KindleFire Thursday - love it! And I am not gadget-friendly so I was happy to find it pretty easy to figure out and use right away. :)

[shirlyujest]

11:12 AM on 11/19/2011

Got my KF yesterday and so far so good. It's doing exactly what it's supposed to do and I can't ask for more than that. Of course, it comes loaded with Amazon Prime so lots of tv, movies and books are included in for the first month...already looks like I'll be dropping Netflix and staying with AP which is less expensive, btw. Also, the support, at least for now is also great. I had one issue I couldn't figure out, asked for a call, got it in about 90 seconds and the techie helped me resolve the issue lickety-split. Early days yet, but as mentioned, so far so very good.