Amazon: We make no profit from Kindles, only services
Amazon has admitted that it will make no profit from its Kindle Fire HD and Paperwhite eReader, instead relying on customers buying eBooks and other media files.
The admission comes just a day after Amazon announced its Kindle Paperwhite was heading to the UK.
Speaking to the BBC, Jeff Bezos, chief executive at Amazon, said: "We sell the hardware at our cost, so it is break-even on the hardware. We want to make money when people use our devices, not when people buy our devices.”
Amazon hopes that as customers visit and use its stores they will be enticed to pay for books and subscribe to the various services on offer, thus making Amazon a tidy profit in the process.
For example, along with the arrival of the Kindle Paperwhite, Kindle Owners’ Lending Library will also be hitting the UK, enabling Kindle owners to borrow an eBook every month. However, this service will be available only if they subscribe to an Amazon Prime membership at £49 per year.
Amazon’s business model is the polar opposite to Apple’s. The Cupertino company says the majority of its profits come from selling devices, with its iTunes store making little in comparison.
Amazon’s approach has meant that the cost of its devices has remained competitive. The Kindle Paperwhite, for example, which introduces an illuminated display, will be available for just £109 for a Wi-Fi-only model and £169 for a Wi-Fi + 3G version.