Amazon's $79 Kindle actually costs $84 to build
updated 09:45 am EST, Thu November 10, 2011
Amazon 4th-gen Kindle sold at loss
Amazon's fourth-generation Kindle costs more to make than its $79 selling price, a cost breakdown has uncovered. IHS iSuppli told Main St that the e-reader costs $84.25 to build, or a combination of the $78.59 in raw parts and $5.66 in assembly. The most expensive part was the E Ink Pearl screen, at $30.50, while the circuit board was next at $30.37.
Many of the other costs are very small, such as the shell and the box.
The costs show that, at face value, Amazon would likely be taking a loss as it has with many of its Kindles. The $79 reader may ultimately be profitable, however, as the ad deals inherent to the Special Offers model could be paying for any differences, even including other costs such as shipping and marketing.
Amazon is known to be taking a loss on the Kindle Fire and will shed millions in profit to build market share. The bookseller has been expecting tough competition with Barnes & Noble, which will not only answer Amazon with the Nook Tablet and a price-cut, $99 Nook Simple Touch.
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Joined: Apr 2001
More than that...
These iSuppli tear downs only include the hardware costs and a small addition of a "build" cost. They don't include software, marketing, manufacturing or development costs.
The true cost of a Kindle is probably in the realm of $100 to $120 depending how many Amazon sell. And, at some point, if Amazon sells more than their manufacturing capacity, the costs of a Kindle can goes up even more.
I suspect that Amazon is comfortable taking as much as a $50 loss on a Kindle because the average Kindle user not only buys an average of three books per month during the first year of ownership (36 books), but it locks the user into Amazon. You can't get Kindle books at Barnes and Nobel or your local independent book reseller.