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Ever wonder how Amazon can price its Kindle and Kindle Fire tablets and e-readers so amazingly cheap? The e-tailer hasn't found any secret sauce -- its CEO finally confesses that they're just selling them at cost.
BBC News is reporting that Amazon CEO Jeff Bezos has finally 'fessed up as to how the e-tailer can keep its prices so low on tablet and e-reader hardware: The profit is in the content.
"We sell the hardware at our cost, so it is break-even on the hardware," Bezos explained in an interview this week.
On tour to promote the arrival of the Kindle Paperwhite e-reader in the United Kingdom, Germany and France, Bezos made it clear that Amazon is counting on content sales and services such as the $79 per year Amazon Prime to make a profit.
That strategy is the mirror opposite from Apple, whose iPhone, iPad and iPod touch products are sold at a healthy profit, and then Cupertino scores again by receiving 30 percent of iTunes Store content such as music, movies, TV shows, books and apps.
"We want to make money when people use our devices, not when people buy our devices," Bezos elaborated.
The strategy appears to be working, with the average Kindle owner buying four times as much content as they did prior to owning one.
"But they don't stop buying paper books," Bezos added. "Kindle owners read four times as much, but they continue to buy both types of books."
Follow this article’s author, J.R. Bookwalter on Twitter