Amazon's $79 Kindle ereader is probably as cheap and cheerful as they get, but the device is actually more expensive for Amazon to build than it is for us to buy.
When Amazon announced the exciting Kindle Fire tablet and the new touchscreen Kindle, the company also announced that the ad-supported basic Kindle ereader was dropping down to just $79. The ad-supported Kindle was first launched in April of this year and cost $114, which was seen as extremely cheap for an ereader at the time. When the price dropped to $79, well, we couldn't believe our eyes. However, it seems that selling the device so cheap means Amazon is actually taking a hit when it comes to production costs.
MainStreet reports it has received confirmation from iSupply with regard to the production cost of the Kindle. iSupply said it did a teardown of the new Kindle and found that the total cost of materials used in each device, including the e-ink display screen and printed chip board, is $78.59, while the total cost of putting it together is $5.66. This brings the production cost of each $79 Kindle to $84.25 and would mean Amazon is taking a loss of $5.25 with each unit sold.
Of course, while Amazon is taking a loss of $5 for each Kindle sold, you have to remember that this is the ad-supported model. Amazon can offer it to us for a low price because it's receiving advertising revenue from the companies using the device to promote their products or services. What's more, each person with a Kindle also logs into their Amazon account during device set-up, which means they have a handy direct line to Amazon's book store, where they can spend more money on books.