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The $79 Kindle Costs Amazon $84 to Make

By - Source: MainStreet | B 29 comments

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.

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  • 17 Hide
    evo_7 , November 12, 2011 6:41 PM
    Just another reason why Amazon is building a greater customer base and loyalty in contrast to other companies like Best Buy. I think Amazon along with NewEgg are few of the e-commerce businesses that still listen to their customers and give them reasons to shop with them over anyone else.
  • 16 Hide
    wildkitten , November 12, 2011 6:59 PM
    reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

    That's only gasoline.
  • 14 Hide
    surda , November 12, 2011 6:11 PM
    well thats a win for us, kudos to you amazon
Other Comments
  • 4 Hide
    Anonymous , November 12, 2011 6:05 PM
    they're takin it from the european ppl for 99 € :) 
  • 14 Hide
    surda , November 12, 2011 6:11 PM
    well thats a win for us, kudos to you amazon
  • 5 Hide
    GreaseMonkey_62 , November 12, 2011 6:39 PM
    Amazon is going for the route of selling the device for as little as possible and make money off the backend. It's giving the handle away and selling the razor blades. That's also why the Kindle Fire is $199 when the nook tablet is $249 for a very similar device, spec wise. Amazon has way more things they can sell and make money off of than B&N does. If B&N wants to avoid going the way of Borders they'll need to really beef up their online products and price match the Fire.
  • 17 Hide
    evo_7 , November 12, 2011 6:41 PM
    Just another reason why Amazon is building a greater customer base and loyalty in contrast to other companies like Best Buy. I think Amazon along with NewEgg are few of the e-commerce businesses that still listen to their customers and give them reasons to shop with them over anyone else.
  • 1 Hide
    SmileyTPB1 , November 12, 2011 6:46 PM
    That only applies to Apple products.
  • 4 Hide
    gelid , November 12, 2011 6:51 PM
    i like the way Amazon is doing business. It is probably the only competition for the iPad
  • 16 Hide
    wildkitten , November 12, 2011 6:59 PM
    reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

    That's only gasoline.
  • 6 Hide
    sykozis , November 12, 2011 10:54 PM
    reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

    Not sure where you got that idea..... Companies can price their products however they see fit, as long as someone is willing to buy it... The only exception is gasoline and cases of price fixing.
  • 0 Hide
    jsc , November 13, 2011 12:32 AM
    reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

    No. What you are thinking about is "price dumping" and that only applies to international markets:
    http://en.wikipedia.org/wiki/Dumping_%28pricing_policy%29

    And if the European version is 99 Euros, that is over the threshold.
  • 0 Hide
    halcyon , November 13, 2011 1:17 AM
    Go Amazon..maybe I'll get one.
  • 0 Hide
    kyee7k , November 13, 2011 3:02 AM
    I thinking about getting the $99 Kindle Touch after Tom's Hardware does a review of it against the other e-readers.
  • 2 Hide
    Anonymous , November 13, 2011 10:42 AM
    This is why Google and Amazon are the new breed of tech companies. Unlike their predecessors, they can deliver a good product at a reasonable price, and make plenty of money in any given market without having to use shady business tactics to monopolize it.
  • 1 Hide
    halcyon , November 13, 2011 10:51 AM
    bidniss_manThis is why Google and Amazon are the new breed of tech companies. Unlike their predecessors, they can deliver a good product at a reasonable price, and make plenty of money in any given market without having to use shady business tactics to monopolize it.

    Don't worry...Apple will learn. They might not want to learn...but they will.
  • -1 Hide
    Anonymous , November 13, 2011 1:27 PM
    A $5/reader loss still doesn't explains the pricing on the eBooks at Amazon. Why is it that an eBook costs more than a hardcover in many cases?
  • 3 Hide
    Anonymous , November 13, 2011 2:48 PM
    I did not see anyone giving props to sony for the playstation when it costed them more to produce than it costed to customers :S

    Not hatting on amazon, just wtf guys, this means nothing much. They take a tiny hit and make tons more by selling 0's and 1's later :p 
  • 1 Hide
    kellogg87 , November 13, 2011 3:13 PM
    @Anonymous: It's 99 euro because the "special offers" option is not offered. The US kindle w/o special offers is also $99.
  • 0 Hide
    monktongaz , November 13, 2011 7:43 PM
    Why is this even news? Loss leaders have been part of business for as long as businesses have been operating.
  • 0 Hide
    DaddyW123 , November 13, 2011 7:52 PM
    remember, it's not amazon that is selling the ebooks at a higher price than the hard covers - it's the greedy publishing companies. Amazon and other e-retailers tried to fight that fight in our favor and lost. If you want what's right - and have cheaper ebooks, write nasty letters to the publishers, tape it to brick and throw it through their windows.
    (disclaimer - that is meant in humor only - I am not inciting a riot in any way. Violance is not the answer, even againts dirty, greedy publishers)
  • 0 Hide
    back_by_demand , November 13, 2011 10:26 PM
    reprotectedI thought it was illegal for a company to sell a product with a price tag lower than it's cost.

    No, unless you have the lost money coming from a seperate revenue stream it's just stupid.
    ...
    If you have a one-off product with no peripherals, like a fridge or a wall clock, if you sold those less than cost the company would just go bust.
    ...
    However with peripheral items such as electronic books, i'm sure the internal numbers show that an average Kindle user buys an average of XYZ books a year but at an average cost of $10 per book they really only need to sell 2 or 3 books for the profits to break even and they know yu are going to buy books otherwise what is the point of buying a Kindle in the first place?
    ...
    So not illegal, and in this instance not stupid either, in fact very smart because the cheap selling price is a hook that leads to a loyal repeat customer.
    ...
    Doesn't anyone around here have an MBA or am I just pissing in the wind?
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