Why Amazon Loses Money On Every Kindle Fire

If you wanted a tablet but thought the price of an iPad was too steep, Amazon has a message for you. You can't afford NOT to buy yourself a Kindle Fire.

The new table sells for $199 — less than half the price of an iPad. Amazon can sell for such a low price partly because it's willing to sell each Kindle Fire for less than it costs to produce. Amazon hasn't said exactly how much it costs the company to make each Fire. But Andrew Rassweiler of the research firm IHS iSuppli has a pretty good idea. He added up the price of the components in the tablet and came up with a cost of $209.63 for materials and manufacturing per tablet. And Rassweiler's estimate doesn't include the licensing deals Amazon cuts to stream content, or the marketing to promote the Fire. Why does Amazon sell a product at a loss? Because, for Amazon, the Fire is a book store, and a movie theater, and a record shop. And (of course) Amazon is the one selling books, movies and records. Once you're inside Amazon's ecosystem, there are a whole bunch of ways they can make money off you. You buy Amazon's books, movies, and music. You buy Amazon's apps. You see Amazon's ads. There's no Apple store on an Amazon device. You're locked in.