Amazon Chief Executive Jeff Bezos confirmed on Thursday that the online retailer sells its Kindle e-reader “at cost”, with profit coming instead from sales of online content.
Bezos' remarks, in an interview with the BBC, marked the first time the company had confirmed long-held Wall Street assumptions that it did not make a profit on sales of the popular tablet.
The aggressive pricing furthers Bezos' goal of getting Kindle tablets into the hands of as many buyers of Amazon's online content — from games and books to video — as possible.
Kindles sold at a cost with profit coming from online content
Apple, by contrast, makes much of its profit from hardware sales. It sells a single-sized iPad at costs ranging from $399 to $829, depending on storage capacity, screen resolution and wireless connectivity.
Amazon is hoping to make a dent in a tablet market dominated by Apple's iPad. Amazon has been selling lower-priced tablets at thin, if any, profit margins to boost sales of digital items from its online store. It states clearly that its ad-supported products enable it to sell the Kindle Fires at such low prices. As a result, it has been able to compete with the iPad on price.
The basic 7-inch Fire model will cost $159, down from $199 (approximately Rs 10,998) for the original model. The 8.9-inch model will go for $299 (around Rs 16,525) and start shipping on November 20. The high-end Kindle Fire HD will have two Wi-Fi channels for faster transfers. That will be crucial for high-definition movies and other large files, CEO Jeff Bezos said. The HD model will also have more storage, starting at 16 gigabytes, compared with 6GB for the old Fire.
That means a device nearly as big as the iPad will sell for at least $100 (approximately Rs 5,531) less. The Fire, however, won't have as extensive a selection of apps as the iPad. And while the HD models will have a front-facing camera for video chats, the iPad has one on the rear as well for taking photos and video.
Amazon also unveiled a premium Kindle Fire model, one with the ability to connect to the 4G cellular networks that phone companies are building. It will cost $499 (approximately Rs 27,599) and come with 32 gigabytes of memory and an 8.9-inch screen. A data plan will cost $50 (approximately Rs 2,765) a year.
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