While the big two, Apple and Samsung, battled it out with their respective smartphones and tablets, along came Amazon, whose Kindle Fire eased itself into a niche and almost overnight dominated its market, becoming quite successful for Amazon itself and telling the big boys that it was anyone’s game. Of course, one would imagine that having such hot property would make you invariably quite rich, but, according to Amazon CEO Jeff Bezos, Amazon does not make any profit from sales of its handheld devices.
Speaking in an interview with the BBC, Bezos said that such Amazon devices as the Kindle Fire HD and Paperwhite will make Amazon no profit, as they are being sold at cost, quite a unique strategy considering how the smartphone market has been so lucrative. In the interview, Bezos remarked, "We sell the hardware at our cost, so it is break-even on the hardware," adding, "We want to make money when people use our devices, not when people buy our devices."
Being sold at the modest price of $159, Amazon sold, in the last quarter of 2011, around 4.7 million units of its Kindle Fire, shipping around a million a week, with the Kindle Fire HD only just being released last month. However, even with such phenomenal sales, it is quite a revelation to learn that Amazon does not make any profits on its devices. But this is not to say that the firm is working from a philanthropic perspective, as, according to CEO Bezos, the company model is geared toward collecting upon the services that the Kindles offer, namely the books and various other media that the company sells.
Bezos went on to say that Amazon’s model was sound because once users had acquired their devices, their purchase of media through it increased, saying, "What we find is that when people buy a Kindle they read four times as much as they did before they bought the Kindle. But they don't stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books.”
And now with the release of its latest Kindles, the Fire HD and the Paperwhite, Amazon plans to launch new services to increase the media that it sells through its devices.
Presently offering the Amazon Prime service, the firm will be offering access to its Lending Library via subscription to the Prime service, a system that analysts say will increase the amount of money that subscribers spend on the Amazon site.