Quote:
Originally Posted by KindleKat
It wouldn't be the first time a company took a loss on the hardware in hopes to sell software (Xbox? PS3?). I think Amazon will do just fine in the long run.
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It wouldn't be the first time Amazon took a loss overall in the beginning to win the end game.
From
http://en.wikipedia.org/wiki/Amazon.com
Amazon's initial business plan was unusual: the company did not expect a profit for four to five years; the strategy was effective. Amazon grew steadily in the late 1990s while other Internet companies grew blindingly fast. Amazon's "slow" growth provoked stockholder complaints: that the company was not reaching profitability fast enough. When the dot-com bubble burst, and many e-companies went out of business, Amazon persevered, and, finally, turned its first profit in the fourth quarter of 2001: $5 million, just 1¢ per share, on revenues of more than $1 billion, but the profit was symbolically important.
From
http://www.paidcontent.org/entry/419-d6-jeff-bezos
Interview w Mossberg
—Can you imagine a day where Kindle is a really significant part of overall business? Bezos answers yes—without hesitation, What’s meaningful? Amazon did $14 billion in revenues last year, Bezos says, but won’t attach a number to it. He recalls being asked by his CFO when the Kindle process started: “how much are you willing to invest in Kindle?” His response: “How much do we have?”
Based on these comments, I don't assume Amazon is making a profit on Kindle. Kindle is bigger than that. Thus, the question is "how much is Amazon willing to 'invest'?"
So, I suppose Amazon could entertain a subscription model, or a subsidized model of some sort, even at an arguably bigger loss, but they don't have to do this when the product is apparently selling so well. Kindle 1 sold out at least once (2007) and probably twice (2008). I think they found their sweet spot.