Amazon will lose $5 with the sale of every Kindle reader. According to The Street the $79 device costs Amazon $84.25 to make. The e-reader uses $78.59 worth of materials, with the assembly running an additional $5.66 per unit.
“This is a subsidized device that comes with advertisements that make money for the company and offsets that manufacturing price, giving Amazon its profit margins,” says Rob Enderle, principal analyst at The Enderle Group.
The e-reader is also used to purchase content from Amazon. The bookseller is likely to make up any lost profits pretty quickly on that front when the customer downloads a few books onto the device.
The $79 price tag is for the “special offers” version of the tablet, which requires uses to view ads on the device’s homescreen while they are not reading. Amazon charges $109 for the ad-free version.
[via The Street]