Despite being the cheapest usable tablet on the market, and although the Kindle is already one of its best selling items, Amazon cut the price of the Kindle Fire HD today from $199 to $169. At that price, it’s almost impossible to imagine any profit at all; when it was released in late 2012, some speculated that the cost of materials and manufacturing alone amounted to more than $185.
It’s easy to imagine the strategy here–that Amazon expects to make money on digital content sales–but, historically, the numbers behind that strategy haven’t panned out. With billions of dollars in content sales, Apple still claims to run the iTunes store at “practically break even.” What makes Amazon think it can pull a profit when even Apple can’t?
While trying to figure out what Jeff Bezos is thinking, I remembered something he told the New York Times in 2011:
“If everything you do needs to work on...
Continue reading →