The $79 Kindle Costs Amazon $84 to Make

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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.

Jane McEntegart
29 Comments Comment from the forums
  • they're takin it from the european ppl for 99 € :)
    Reply
  • surda
    well thats a win for us, kudos to you amazon
    Reply
  • GreaseMonkey_62
    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.
    Reply
  • evo_7
    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.
    Reply
  • reprotected
    I thought it was illegal for a company to sell a product with a price tag lower than it's cost.
    Reply
  • SmileyTPB1
    That only applies to Apple products.
    Reply
  • gelid
    i like the way Amazon is doing business. It is probably the only competition for the iPad
    Reply
  • wildkitten
    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.
    Reply
  • sykozis
    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.
    Reply
  • jsc
    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.
    Reply