Amazon’s Jeff Bezos Confirms Kindles Are Sold at Cost
Like others, I’ve asked Amazon how it manages to keep Kindle prices low while still offering some of the latest hardware, and, like others, I’ve never managed to coax out a straight answer. Just last month, I posed the question to CEO Jeff Bezos, and he dodged again, acknowledging only that “we don’t want to lose a lot of money on the device.”
But apparently Bezos has tired of dancing around the subject, because when the BBC asked on Thursday, he answered: “We sell the hardware at our cost, so it is break-even on the hardware.”
The comments came a week after the company started shipping the Kindle Paperwhite, the well-reviewed new e-reader that comes with a glowing screen. The new Kindle Fire HD with an 8.9-inch display will start shipping Nov. 20.
It should not be a surprise that Amazon doesn’t make money off the sale of these devices. Many teardowns have suggested that the hardware components alone cost close to the sale price. Additionally, Bezos has made it clear that he wants the devices’ success to be measured by the amount of books and other content people buy on them — not on the sale of the hardware alone. That’s probably why Amazon declines to disclose how many devices it sells each quarter despite pleas from Wall Street.
Amazon’s model is familiar to other retail business, where margins are low and made up on tremendous volume. But that’s in contrast with most consumer electronics companies, like Apple, which sells hardware at generous margins. Bezos declined to say which approach was better. In my interview with him, he explained: “Our approach is our approach, and we don’t even claim it’s the right approach. It’s not something that’s new, but it’s something we’ve done since the founding of the company.”