No Profit in Kindles

Amazon Sells Kindles at Cost

In an interview with the BBC on Wednesday, Jeff Bezos admitted that Amazon sells the Kindle Paperwhite and Kindle Fire HD at cost, making the company literally no profit on the devices.

“We sell the hardware at our cost, so it is break-even on the hardware,” Jeff Bezos, CEO of Amazon, told the BBC.
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“What we find is that when people buy a Kindle they read four times as much as they did before they bought the Kindle,” said Bezos in the interview with the BBC. “But they don’t stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books.”

This strategy has worked well for other types of devices that deliver content – such as gaming consoles – but it will be interesting to see whether consumers ultimately prefer a high up-front cost for a tablet that offers a plethora of free content (such as the iPad), or the lower cost of the Kindle, while ultimately paying more for it – via the content – in the end.

Count me among the people who read more as a result of the Kindle.  An avid read since early childhood, I had almost gotten out of the habit of buying books, simply because there was no decent bookstore convenient to my daily schedule.  Once Georgia gave me the Kindle, my reading (and e-book buying) soared dramatically.  The convenience of being able to buy a new book while sitting in the back of the car on the way to work is just irresistible.

My major complaint is the cost of e-books, which, for the most part seem over priced, considering they are difficult or impossible to sell or trade.  Regarding that, I was interested when I received the following email today:

Dear Kindle Customer,

We have good news. You are entitled to a credit for some of your past e-book purchases as a result of legal settlements between several major e-book publishers and the Attorneys General of most U.S. states and territories, including yours. You do not need to do anything to receive this credit. We will contact you when the credit is applied to your Amazon.com account if the Court approves the settlements in February 2013.

Hachette, Harper Collins, and Simon & Schuster have settled an antitrust lawsuit about e-book prices. Under the proposed settlements, the publishers will provide funds for a credit that will be applied directly to your Amazon.com account. If the Court approves the settlements, the account credit will appear automatically and can be used to purchase Kindle books or print books. While we will not know the amount of your credit until the Court approves the settlements, the Attorneys General estimate that it will range from $0.30 to $1.32 for every eligible Kindle book that you purchased between April 2010 and May 2012. Alternatively, you may request a check in the amount of your credit by following the instructions included in the formal notice of the settlements, set forth below. You can learn more about the settlements here:
www.amazon.com/help/agencyebooksettlements

In addition to the account credit, the settlements impose limitations on the publishers’ ability to set e-book prices. We think these settlements are a big win for customers and look forward to lowering prices on more Kindle books in the future.

Thank you for being a Kindle customer.

The Amazon Kindle Team

I might get a significant return on that. I guess the question is whether to take the e-credit, or ask for a check and take Georgia out to dinner.