It rescued Apple and springboarded them to iPhone, but it's a commoditized market, and it isn't that big of a market. Apple makes more money per quarter selling iPads now than they do with iPods, and that includes the iPod touch.
It's a small market compared to this "post-PC" market which basically will involve the entire technology and media sectors. There's no comparison between the markets.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
There will be plenty of weighing in on this by the "anything but Apple" crowd. This will be their new, potential White Knight coming to save the world from the clutches of the useless toy known as the iPad.
As opposed to all the negative comments from the "anything not from Apple is crap" crowd here?
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
We dont know their losses. However you are correct in that making money on content is their solution.
I'm not sure I understand you right but books in iBook store is already cheaper than in Kindle.
I believe he means for publishers.
Instead of Apple taking 30%, why not change that to 10 or even 5? You'd kill the Kindle market in publisher profits, making even more people publish with Apple.
Ah, it's this kind of troll again. Didn't miss it.
I'm not a troll, I have been pro Apple for over 20 years. I have been a booster when I was right. Right now, they are selling a toy to people who don't (yet) know the difference. I have been right about AAPL all along and I am right now, thanks. People who boost everything AAPL are largely just bandwagon followers. It's not new; actually AAPL's success is now old. What's next is the eventual rise of new replacements for AAPL, in the coming decade.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
People buy this sort of hardware not to own hardware. They buy it to access content. And Amazon knows how to make money selling content.
Apple claims that they just barely break even on content.
Apple's phone sales are dwarfed by Android phone sales. The consensus in some quarters is that is due to lower prices of Android hardware. The carriers use phones as loss leaders to sell services.
Does Apple make big bucks on services?
It seems reasonable to question whether Apple's strategy of cleaning up on expensive hardware while not making money on the back end will serve them well in the long run. Apple did well in the dying PMP market with that strategy. So far, that strategy has served Apple well in the iOS product markets.
Will it work in the long term? Nobody knows. Amazon might change everything.
I've skimmed over the comments of others, so perhaps someone pointed this out, but at a razor thin profit of $20, there will be no leeway for returns. There have been countless complaints about not being able to return defective Kindles, so this untested device is hamstrung out of the gate by not reasonably allowing for defects. An old rule in business is a person happy with a product will tell five people, but a person unhappy with a product will tell 50. Given Amazon's notoriety with not accepting product returns for the kindle, this may be another HP disaster in the works
Although the initial market reaction is positive, markets over time will demand a higher profit margin. It does not like loss leaders.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
The real rub will be the pricing on the 10-inch version.
By piggyback products, I assume you're talking about music/movies/books/everything else Amazon sells? If so, I'd say it's going to be difficult to tell since there's the question of how much prospective Kindle Fire users are willing to spend on the ecosystem - I'd imagine somewhere between Google and Apple in terms of $ per user. They may do better or worse than breaking even, but their move to tablets part offensive and defensive at the same time. Amazon needs to go mobile to complete their ecosystem (end to end) and protect its revenue stream(s).
So yeah, while operating margin is thin, they could still do quite well out of this.
Please show me a 7 inch tablet that has the full might of a Amazon echo system behind it....including the Cloud storage Amazon already has and the Andriod app store it already has.
Bettieblue - I'm with you. The fan boys don't get it...
1. Apple IS NOT ALL successful because of it's products - the major support mechanisms are the iTunes STORE for movies and music. That's the major revenue generators long after the product is sold.
2. Amazon already offers movies and music from it's store, both in a virtual form AND physical form. It's on your Apple iPad and iPhones and computers already in fact. But now, they are offering it also on a closed ecosystem - their OWN tablet, another money making channel of distribution - for AMAZON.
3. As much as the fanboys LOVE the iPad... the truth is... what does it REALLY do for $500?
Well it does, so prettily, Internet, email, movies, books, and games - on demand (or get it now).
Now enter Amazon - it offers (wow pretty too) internet, email, movies, books, and games - on demand... as well as every product in it's stores for $199.
And the now tiring look of the iPad and the more tiring price of $500... consumers, not fans will use the best price-to-value rationale/logic to make their choices. And my bet is Kindle fire.
As much as you all THINK it's NOT an competitor to the iPad, I got news for you... it is, and it's gonna hurt.
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
Fairly simple to figure out.
Just for the sake of argument, assume the ideal expected gross margin is ~50% (equivalent to the rough number that's been thrown around for iPads). If so, the product would be priced at $360, instead of $200. That's then $160 they have to make up from sale of digital books. This, in turn, means they're lowering the margins on that segment by that amount, or they have to raise prices to make up the difference (lowering demand).
There will be plenty of weighing in on this by the "anything but Apple" crowd. This will be their new, potential White Knight coming to save the world from the clutches of the useless toy known as the iPad.
But there is definitely a market for an inexpensive device that can deliver the basics. We'll just have to wait and see.
Comments
the BookStore isnt as good as kindle, it could be. Make it cheaper.
I'm not sure I understand you right but books in iBook store is already cheaper than in Kindle.
Tell that to the iPod.
It rescued Apple and springboarded them to iPhone, but it's a commoditized market, and it isn't that big of a market. Apple makes more money per quarter selling iPads now than they do with iPods, and that includes the iPod touch.
It's a small market compared to this "post-PC" market which basically will involve the entire technology and media sectors. There's no comparison between the markets.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
I'm not sure I understand you right but books in iBook store is already cheaper than in Kindle.
I dont see that in the UK. I see far less choice. What I mean is charge the publishers less, or charge them nothing.
There will be plenty of weighing in on this by the "anything but Apple" crowd. This will be their new, potential White Knight coming to save the world from the clutches of the useless toy known as the iPad.
As opposed to all the negative comments from the "anything not from Apple is crap" crowd here?
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
We dont know their losses. However you are correct in that making money on content is their solution.
I'm not sure I understand you right but books in iBook store is already cheaper than in Kindle.
I believe he means for publishers.
Instead of Apple taking 30%, why not change that to 10 or even 5? You'd kill the Kindle market in publisher profits, making even more people publish with Apple.
Ah, it's this kind of troll again. Didn't miss it.
I'm not a troll, I have been pro Apple for over 20 years. I have been a booster when I was right. Right now, they are selling a toy to people who don't (yet) know the difference. I have been right about AAPL all along and I am right now, thanks. People who boost everything AAPL are largely just bandwagon followers. It's not new; actually AAPL's success is now old. What's next is the eventual rise of new replacements for AAPL, in the coming decade.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
People buy this sort of hardware not to own hardware. They buy it to access content. And Amazon knows how to make money selling content.
Apple claims that they just barely break even on content.
Apple's phone sales are dwarfed by Android phone sales. The consensus in some quarters is that is due to lower prices of Android hardware. The carriers use phones as loss leaders to sell services.
Does Apple make big bucks on services?
It seems reasonable to question whether Apple's strategy of cleaning up on expensive hardware while not making money on the back end will serve them well in the long run. Apple did well in the dying PMP market with that strategy. So far, that strategy has served Apple well in the iOS product markets.
Will it work in the long term? Nobody knows. Amazon might change everything.
Yes, and I stand corrected by Tallest Skil, iPhone is 3:2 not 4:3. So its screen areas are:
iPhone (3:2): ~6 sq in
Fire (assuming it's 16:9): ~15.6 sq in
iPad (4:3): 48 sq in
So this definitely proves that big things are bigger than small things.
iPhone 3.5" 960x640: 5.65 in^2
Fire 7" 1024x600: 21.37 in^2
iPad 9.7" 1024x768: 45.16 in^2
I used cos(atan(h pixels/v pixels)))*diag to compute the width.
Right now, they are selling a toy to people who don't (yet) know the difference.
Mhmm.
I have been right about AAPL all along and I am right now, thanks.
The entire rest of the world disagrees.
I was going to explain the inherent difference, but if you're still making this argument, you can't understand why you're wrong.
What inherent difference? That it's important to create a usable GUI for whatever screen size your device is going to have? Brilliant!
I dont see that in the UK. I see far less choice. What I mean is charge the publishers less, or charge them nothing.
In US, it's already cheaper. I really love it every time I searched and see the price on Kindle.
Although the initial market reaction is positive, markets over time will demand a higher profit margin. It does not like loss leaders.
If the BOM is $180 and they're selling it for $199, even allowing for the piggyback products, they're barely breaking even.
The real rub will be the pricing on the 10-inch version.
By piggyback products, I assume you're talking about music/movies/books/everything else Amazon sells? If so, I'd say it's going to be difficult to tell since there's the question of how much prospective Kindle Fire users are willing to spend on the ecosystem - I'd imagine somewhere between Google and Apple in terms of $ per user. They may do better or worse than breaking even, but their move to tablets part offensive and defensive at the same time. Amazon needs to go mobile to complete their ecosystem (end to end) and protect its revenue stream(s).
So yeah, while operating margin is thin, they could still do quite well out of this.
The ignorance continues.
Please show me a 7 inch tablet that has the full might of a Amazon echo system behind it....including the Cloud storage Amazon already has and the Andriod app store it already has.
Bettieblue - I'm with you. The fan boys don't get it...
1. Apple IS NOT ALL successful because of it's products - the major support mechanisms are the iTunes STORE for movies and music. That's the major revenue generators long after the product is sold.
2. Amazon already offers movies and music from it's store, both in a virtual form AND physical form. It's on your Apple iPad and iPhones and computers already in fact. But now, they are offering it also on a closed ecosystem - their OWN tablet, another money making channel of distribution - for AMAZON.
3. As much as the fanboys LOVE the iPad... the truth is... what does it REALLY do for $500?
Well it does, so prettily, Internet, email, movies, books, and games - on demand (or get it now).
Now enter Amazon - it offers (wow pretty too) internet, email, movies, books, and games - on demand... as well as every product in it's stores for $199.
And the now tiring look of the iPad and the more tiring price of $500... consumers, not fans will use the best price-to-value rationale/logic to make their choices. And my bet is Kindle fire.
As much as you all THINK it's NOT an competitor to the iPad, I got news for you... it is, and it's gonna hurt.
How do you figure that? The device is a gadget designed for the most part, to sell digital books. Additionally, it gives people access to amazon.com through yet another source, which means the device is also a gadget that aids amazon in selling all the other stuff the sell to be shipped to your door. If it doesn't cost them money to sell it, it isn't a loss leader, but even if it were, people who own it will probably by enough books in very short time to make the sale of each e-ready (remember the fire is mainly an e-reader) profitable.
Fairly simple to figure out.
Just for the sake of argument, assume the ideal expected gross margin is ~50% (equivalent to the rough number that's been thrown around for iPads). If so, the product would be priced at $360, instead of $200. That's then $160 they have to make up from sale of digital books. This, in turn, means they're lowering the margins on that segment by that amount, or they have to raise prices to make up the difference (lowering demand).
There's no free lunch.
...
I don't think it's right to say that the two devices compete or don't compete. The situation is more complicated than that.
This could easily be good news for Apple.
Amazon makes money from content, mostly so can sell hardware at a loss.
Apple makes money from hardware mostly, so can sell content at a loss.
Spot on.
There will be plenty of weighing in on this by the "anything but Apple" crowd. This will be their new, potential White Knight coming to save the world from the clutches of the useless toy known as the iPad.
But there is definitely a market for an inexpensive device that can deliver the basics. We'll just have to wait and see.
Just read about it....
http://www.amazon.com/Kindle-Color-M...pf_rd_i=507846
It's like bragging about how your Nissan Sentra undercuts the Porsche 911 GT3 on price.