It wasn’t long after the Kindle Fire was released as Amazon’s first tablet offering at $199 that the profitability of the device came into question. There were several online firms that did a piece by piece tear down of the tablet that revealed it cost more to make each unit than the $199 retail price. Of course, the Kindle Fire 7 inch tablet provides direct access to Amazon’s huge media library, therefore guaranteeing the purchase of high-margin and low cost e-books and applications, and that is a pricing model that Jeff Bezos and Amazon hopes will work out to their advantage.
And according to recent research released from RBC Capital, the $18 every Kindle loses immediately on purchase due to manufacturing costs and other issues will probably be easily overcome in short time. RBC analysts surveyed 216 Kindle Fire owners and estimated that over the course of approximately 3 years, each Kindle Fire tablet owner would spend at least $136 on Amazon e-Books, apps, newspapers and magazines.
They further went on to conclude that the Kindle Fire will give Amazon a breakeven point after less than five months of ownership. RBC found from their survey that each Amazon Kindle Fire owner purchases approximately 5 e-Books per quarter, and these purchases generate about $15 revenue per Kindle Fire owner per quarter. In that same study, only 19% of those responding to the survey claimed they had not yet purchased an e-Book for their Kindle Fire. However, a full 29% reported purchasing 3 to 5 e-Books, and 28% purchased six or more.
After all the results were processed concerning applications, Kindle Fire owners in this study on average showed a purchase of 3 paid apps per quarter, RBC estimates. They also discovered that a full 66% of those responding to the survey claim to have purchased at least 1 paid application, while the remaining 34% had not. And besides the digital content that Amazon offers, Kindle Fire owners could add revenue to Amazon by purchasing physical goods on their Kindle Fire tablet, and to promote this behavior, every Kindle Fire receives 30 free days of membership to Amazon Prime. Amazon Prime gives free and unlimited two-day shipping for the purchase of any product from the Amazon retail website.
Buy the Kindle Fire for $199
And on yet another positive note for Amazon, almost 80% of those surveyed were “extremely satisfied” or “very satisfied” with the Kindle Fire while only 5.9% claimed they were “somewhat satisfied” or “not satisfied” with the device. Learn more about this low priced tablet in our Amazon Kindle Fire Review.
