Amazon will reportedly turn a profit of approximately $49 for each Kindle Fire it sells following the device’s launch next month. Earlier rumors painted a very different picture of Amazon’s strategy with its first media tablet, suggesting the retailer would be selling the slates at a loss of between $10 and $50 per device. The theory, these reports claimed, was that Amazon hoped to make up the difference and then some thanks to deep integration with paid Amazon services such as Amazon Video On Demand, the company’s popular MP3 music store and its Kindle eBook store. According to market research and consulting firm UBM TechInsights, however, these reports are not accurate. In fact, the firm says Amazon is looking at a sizable 25% profit margin on the device despite its low end user pricing. Read on for more.
Using estimated component costs of Research In Motion’s BlackBerry PlayBook as a point of reference — the Quanta-designed Kindle Fire is, after all, basically the same tablet in terms of hardware — UBM TechInsights was able to piece together what it believes to be a fairly accurate breakdown of Amazon’s cost on the Kindle Fire.
According to the firm, the 16GB version of RIM’s PlayBook carries a cost of $170 per unit. Cut $10.50 for the camera system, $1 from the cost of radio components, 50% from the cost of memory since the Fire only includes 8GB of storage, and $2 from the cost of various sensors, and you’re left with a $150 tablet that Amazon is selling for $199. Add to that profit from Amazon Prime subscriptions, Amazon Appstore app sales and money made from Amazon’s numerous other services, and the Kindle Fire is shaping up to be a solid moneymaker for the emerging tablet vendor.
Strategy Analytics projects that Amazon will sell more than 15 million Kindle Fire tablets by the end of 2013. The Kindle Fire begins shipping on November 15th.