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On this blog we will track down the latest Amazon Kindle news. We will keep you up to date with whats hot in the bestsellers section, including books, ebooks and blogs... and we will also bring you great Kindle3 tips and tricks along with reviews for the latest KindleDX accessories.

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September 2016
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Kindle Fire HD Sold At Cost – Jeff Bezos

People have generally assumed that Amazon was subsidizing the Kindle Fire to some degree.  Analysts have estimated that the cost of materials and manufacturing was roughly equal to the asking price and when the first Kindle Fire was launched it was suspected that Amazon could be losing as much as $15 per device to keep the costs down.

When the first Kindle eReader was released, Amazon’s position was that the hardware had to justify its existence by providing profits separate from the digital content sales it encouraged.  With the frequent price drops that have occurred in the past few years, that’s obviously harder to stick to.  The Kindle was first priced at $399 and sold out in a matter of hours.  Now you can get a basic Kindle for just $69, so it’s hard to imagine the money coming in at the same rate.

The new position makes more sense given Amazon’s digital content ecosystem.  Bezos has come out and said, for the first time, “We sell the hardware at our cost, so it is break-even on the hardware.”  It isn’t a surprise and it certainly isn’t going to upset the status quo, but the confirmation of even fairly obvious suppositions breaks the secretive pattern that generally surrounds Amazon’s hardware business.

This is a convenient way to highlight the differences in sales philosophy between major competitors at a time when Android tablets are drawing roughly equivalent in both price and performance while Apple is rumored to be releasing a smaller version of the iPad before the holidays.

Apple, for example, is not known for releasing any hardware they can’t make at least a 40% profit from.  This is the biggest point against the constant rumors of iPad Mini development.  The only reason it’s becoming likely that Apple will release a smaller iPad at this point is the possibility of being shut out of a growing market.  Even then we can expect them to be getting significant return on each sale.  They’re not a company that’s willing to settle for the 30% cut they get from every sale of associated content.

Google, on the other hand, sells their Nexus 7 at cost with the expectation of a different return.  Yes they have a return from their Google Play sales, but the real money is in information acquisition.  Android is available for free to anybody who wants to use it because unless significant effort is made to avoid it, Android ties people into the Google system.  That means more marketing data and more potential for advertising revenue.

Amazon’s course, hoping that cheap devices will result in such a significant increase in sales that it will be worth the initial investment so long as no money is actually being lost on the hardware itself, may be the least obviously profitable of these.  Their experience and expertise when it comes to suggested sales and media serving make it totally believable that the Kindle encourages people to read four times as much as they normally would, but it’s not something that many other companies could hope to pull off.

Amazon Kindle Smartphone Rumor Spreads

According to people with knowledge of the situation, Amazon is planning to bring out their own smartphone to compete with Apple’s iPhone line.  A Bloomberg revelation provided that information recently.  The idea of a Kindle phone is something that has been touched on here before, particularly during the days leading up to the formal announcement of the Kindle Fire when anything seemed possible.  It is increasingly likely that this is going to be the next stage of Kindle growth now that a tablet presence has been established.

The Kindle Fire gives the retail giant a foothold in portable electronics in a way that even the Kindle eReader couldn’t accomplish.  The Kindle built its own market and basically kicked off the previously minimal eBook industry.  The Kindle Fire proved that Amazon was both willing and able to enter into an existing device market and hold their own.  In addition to building up consumer trust, it helps get things ready to enter into an even more competitive market.

Selling a smartphone is not likely to be a simple task, even for Amazon.  This is not a company known for passing any large amount of control to their partners.  While it is standard practice for carriers to demand custom devices, it is hard to imagine a Kindle phone going that way.  The whole point of Amazon’s hardware development is to lock people into a fairly closed loop of media services provided by Amazon and nobody else.  Allowing carrier customization would seem likely to dilute their own branding somewhat.

This move would also open the company up to any number of patent disputes.  It doesn’t matter whether they manage to acquire a large patent portfolio to defend against infringements, though sources indicate that this is exactly what is happening already, lawsuits over mobile devices are the norm rather than the exception right now.

On the plus side, the fact that Amazon already has a well-received fork of the popular Android OS will help them get off the ground.  Despite running on Google’s software, the experience provided by the Kindle Fire is sufficiently unique to make it stand out.  A similar effort released in a smartphone would provide an attractive alternative to the competition.

It would also greatly expand the potential user base for Amazon’s Appstore for Android, which many users find preferable to Google Play’s less carefully policed app store already.  More users would naturally add additional pressure for app developers who might be on the fence about signing up with Amazon so far.

Since we have no more solid information aside from comments by “people who should know”, this can’t be taken too seriously.  It would definitely be a smart move in some ways, but the added expenses from carriers, legal defenses, and assorted other problems particular to the mobile communications industry would make it difficult for Amazon to continue maintaining their policy of providing ridiculously low prices on all their hardware.

Would a Kindle phone sell well?  Probably.  Would it sell well enough for it to be worth the investment?  It’s too early to tell, though Amazon seems to be considering the possibility.

Kindle Fire Now #1 Android Tablet

Android has seized a greater share of the tablet market than ever before in the last year, with fourth quarter usage of Android tablets up to 39% of the total (up from 29% the previous year).  A great deal of this improvement comes as a result of Amazon’s Kindle Fire tablet.  With the whole tablet market seeing huge growth (including Apple’s sales numbers we saw around 150% growth and a total of over 25 million tablets sold) it is no small feat for something as new as the Kindle Fire to already be edging ahead of more established competition.

These numbers deal specifically with device usage as reported by analytics firm Flurry, based on app sessions.  Given the importance of content sales compared to hardware profits, this is probably a significantly better estimate of consumer preference than simple sales or activations.  Thanks to this data, we can tell that the Kindle Fire’s approach to content is making a pretty big difference to the user.

The alternative method of analyzing the success of the Kindle Fire would be along the lines of what Google has been doing when describing Android as building up momentum compared to the competition.  That would be looking at device activations.  While this is not misleading, necessarily, it does focus entirely on numbers that fail to directly equate to post-purchase satisfaction.  Even using this method, the Kindle Fire is doing amazingly.  Approximately 10.5 million android tablets were sold in Q4 2011.  While Amazon is not releasing sales numbers, we can say with a fair degree of certainty that around 5-6 million of those were Kindle Fires.  The numbers are favorable, to say the least.

While there is not any indication that this is having a negative effect on iPad sales, there is also little to support the notion that Amazon had any intention of making a direct attack on Apple with this first tablet.  It is likely, given how much the two companies overlap in their digital media sales markets that there will be some more direct Kindle vs iPad competition down the road, but a 7″ $200 tablet that clearly lacks the potential to replace even the functionality of a netbook is not something you could take seriously if they were heading for a confrontation with the iPad 2 right away.

The biggest impact of all this is probably going to be on Google.  Since Amazon is running such a heavily forked version of Android, and since it lacks easy access to Google’s app marketplace, the success of the Kindle Fire will tend to draw people away from Google services despite technically relying on their original concept.  This has the added effect of drawing developers away from the more general marketplace.

While Amazon’s Appstore has not been a favorite destination for many developers thus far due to the heavy oversight and lengthy screening process for even minor updates, the most important thing will always be going where the customers are.  Right now, for better or worse, it is looking very much like that is the Kindle Fire if you’re talking Android tablets.