Originally Posted by MacRulez
And even if that were the case, for a media distributor like Amazon would that necessarily mean a net loss?
The metaphor of razors was brought up here before, apparently missed.
Exactly. Why the rush to condemn Amazon as committing some sort of blatant stupidity in the absence of any actual data?
It seems at this point you and I are in complete agreement: everyone here saying this is necessarily stupid is being a bit premature. The presumption that one of the world's greatest success stories can't do simple arithmetic says more about the person making the suggestion than it does about Amazon.
You can go to almost any business site and find an article questioning it.
Look, I'm wondering if this concept will work. It may, and it may not. But, it does seem to be touchy. It wouldn't be the first time that companies have tried this idea and failed.
You know how it is. When working this up, and doing the analysis, certain assumptions must be made, and plugged in. If they are correct, then everyone is happy. But if they were wrong, then there's a problem. Amazon supposedly broke even on Kindle sales, and made a small profit on book sales. But Kindle buyers are big readers, and so might not fit this buying profile. What are the assumptions Amazon is making? We see from the examples I gave as a reply to another post, that several major companies made assumptions after research that were totally wrong.
I'm finding it difficult to get a handle on exactly how much, and what, an individual needs to buy, and over what time period for Amazon to make a reliable profit from this. My estimates seem high to some people, but they may not be that far off. The problem Amazon has is that if they are losing a fair amount on each sale, and if there are a substantial portion of buyers who just don't buy nearly as much as needed, then what's the guarantee that the loss will be made up by those who do buy? Also, if someone buys a certain amount of stuff from them before buying the Fire, and continues buying the same amount of stuff, there is no net gain from that Fire sale. So if I bought a Fire and continued buying the same number of books a month as I do now for my iPad from them, they will take a loss from that sale.
Then, there's the business of Prime. That's a nice thing for some people. But it can also be a loss for Amazon, depending on what, and how much you buy. Even so, how many Fire owners will subscribe after the first free month? I've been wondering how they can figure this surely, and I don't think they can. As I've said before, I think this is an experiment on their part. While a company must project confidence, they could be wondering about the same things I'm wondering about.
Every company makes mistakes. We still don't know how many Kindles they sell, and that's just plain strange, considering how well they say they're doing. I think this will sell at least fairly well, and perhaps better than that. I'm just not sure if they will make a profit.