Quote:
Originally Posted by Shaggy
Amazon is taking a cut on their profit margin in order to increase the kindle market.
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I'm afraid to say that you are completely incorrect.
Bezos has already publicly stated that the Kindle Reader and Kindle Books are treated as two separate business units, that one does not subsidize the other, and both turn a profit.
That's one reason why the Reader is expensive -- and why they are making an effort to put Kindle Books onto more mobile devices. As far as they're concerned, a Kindle iPhone app doesn't cannibalize their business model; it extends their reach. (Also, Bezos presumes that the target audience for the Kindle, which are the people who buy 15 or more books a year, will still want a dedicated e-reader.)
There are already a few threads discussing this:
https://www.mobileread.com/forums/sho...ighlight=bezos
https://www.mobileread.com/forums/showthread.php?t=49173
From what I have gathered, Amazon is paying the standard wholesale price for the books. If it's a best-seller, then just like paper books, it's a loss-leader. Remember, with an e-book they are getting half the savings -- no shipping to or from the warehouse and no losses on "free shipping," no inventory costs, no physical returns.
It is also possible that, given their clout, they do in fact get better pricing than some other retailers and/or can resist pricing pressure better. Sony or Mobipocket are not major retailers and do not have much, if any, leverage over publishers. Even Google, an Internet powerhouse by any standard, is going to let publishers set prices (at least initially) for their e-book effort.
And again, the revenues from advertising would be puny -- nowhere near enough to subsidize anything. A typical static banner ad on a web page gets maybe 50¢ per 1,000 page views. A book with even $2 worth of advertising would be completely unreadable.