Originally Posted by nikon133
I don't think they are loosing money, but making less money? They probably are.
Otherwise, company loosing money on pretty much everything they sell would not be with us for too long.
They were willing to lose as much as $5 per book they sold. They were paying the publishers 50% of the list price, which was up to $30. They were then selling those books for $9.99. While I was always suspicious that they would either raise the price someday, or go back to the publishers and demand that they pay far less, once they had established a monopoly in e-book sales, as they were trying to do with this tactic, there was no indication when either of those concepts would happen. Meanwhile they were blithly losing from $1 to $5 every time they sold a book, plus the transaction costs.
Apple is estimated to be making 5 to 6 cents profit per song at a sale price of 99 cents. Amazon has been selling them for 89 cents. That would be about 5 cents below Apple's costs. And Apple sells over ten tines as many songs, so their cost per song is much less. Amazon must be losing money there as well.
Same thing for these Tv shows. Apple will again be making pennies on these rentals. Making an assumption that each download costs the same, after the first download by Amazon, it's going to cost them the same as the first time. The more times someone downloads a show, the more Amazon is in the hole for it. There's no way out for them. It's impossible that the companies gave them a better deal, as they think that 99 cents for a one time rental is already too little. So Amazon must be paying them everytime someone downloads it again.
Amazon, like Apple has risen quickly. Their sales are very large now, and they've been making good profits. They are taking the low road to marketshare. Like MS, they're using their profits in other areas to finance losses in these areas they think are so important to their future. They must believe that at the end of the day they will be able to squeeze money out of it. I'm sure they have a secret plan for that. But if they can't manage to corral the majority of the market, that plan can't be enacted.
It's tough for them as Apple is not seeing media sales as a way to large profits. They see it as a way to sell the hardware that IS the way to large profits. So they can't undersell and still eck a small profit out of it. They are taking losses. But Apple went around them in the book market, and forced the prices up to the point where everyone will make money on it for the long term, including Amazon.