Actually no, it's not easy to understand, because you're assuming the cost will be $180 per device. At the beginning, maybe, but the cost will keep decreasing after the initial batch. Basically it's like Xbox/Wii etc, at the beginning they even lose money, but after a while they'd start making money even though they cut prices.
You can't assume that either. I was a manufacturer of electronics once upon a time. Costs can drop. But it doesn't always happen. It also depends upon sales. And manufacturers often buy a certain amount of materials in the beginning, and have contracts to keep the prices as low as the initial price, rather than creeping higher. What happens, is that if they sell enough to meet all of their startup costs, R&D and such, they may be able to lower prices, as their cost will have come down. But that's a variable that's difficult to ascertain for a company you don't know. So you have to assume certain things being true. One is that costs won't come down much, and that they won't rise much.
Which would be the case here? I don't know, and neither do you.
In the case of the XBox, MS lost a great deal of money for 7 years. $1.2 billion a year on the entertainment division. but it was only after technology improved enough for their redesigns that lowered the cost twice, that they made a rather small profit for it last year.
It may be impossible for anyone to come out with a really good 7" tablet for close to $300 and hope to make a decent profit on it. At least for a couple more years, that will be a fact of life. Anything that approaches this price will be junk. This tablet is decent, from a hardware perspective, but it lacks everything that would make it competitive as a stand alone tablet.
No cameras. No microphone. Only 8GB flash, and no way to add more, No gyroscope, no touch screen, just a primitive infra-red method, etc.
Add all of that to this, and it's going to be $75-100 more, and that's still losing money. Add another $75 to cancel out the loss and make a very small profit, and you're already up to at least $350. Of course, if you then have to give some profit to retailers, you've got to add at least another $75 to allow for a small discount. Now, you're up to $425.
We can see why this isn't easy.
According to various parts breakdowns at iFixit and other places, your cost estimates are probably a little high Mel, but that's not what puts Amazon's new 7" reader in a different situation anyway.
Unlike the Tab's, iPad's, Xoom's and Playbooks in the market, Amazon will only be selling direct to the consumer. No need to list the price at $350, but sell to retail partners at 25-35% less than that. They won't be dealing with resellers and the necessary wholesale discounts as I understand it. Like Apple's branded stores, they get to keep the entire advertised retail price for themselves if they make the retail sale.
Personally I don't think they're taking the hit that a single analyst has guessed.
If the article here at AI from a few days ago is generally accurate, and the new Kindle Fire is basicly RIM's Playbook with a slower processor, less memory and no camera, the estimated parts bill (who's estimate again?) of $180 may not be accurate.
Back in April, iFixit and TechInsights had teardowns, parts ID's and estimated costs for a few devices, including the Playbook. At that time the total parts cost for the 16GB version was $190. Unless parts prices have gone up quite a bit since April, if Amazon's 8GB, no camera, no multi-touch display and older processor Playbook-ish version should be quite a bit less than that, correct? No camera saves $15, about $8 savings on 8GB rather than 16, plus savings on both the touchscreen and processor (Playbook's item cost was $45 and $17). Would $12 total probably be a fair savings on those two components? If so that's at least $33 less, dropping the parts costs to somewhere around $155 rather than $180, and that's ignoring the minor savings from eliminating bluetooth/radio/gps components.
So assuming AI and it's sources were right, a big assumption perhaps, the cost numbers that some of these analysts are using may be much higher than the reality.
It's hard to say. I don't believe the rumor that this is basically a Playbook in disguise. RIM isn't about to allow some other company walk away with their design. It looks like a Playbook the way a Tab looks like an iPad. It means little. This idea came from the fact that Quanta seems to be making this for Amazon, while making the Playbook for RIM, and they're both 16:9. But Quanta makes things for Apple and other manufacturers as well. So what?
As far as prices go, $180 seems reasonable. But it's not an exact price as are any of these breakdowns. None are exact, as iFixit doesn't know what contracts are made for what number of parts at what quality level. They only do averages from what they can look up in the same catalogs I have. Apple likely pays less than they say, and others possibly pay more. But by how much is anyone's guess.
I'm not saying educated guesses can't be made. I am saying that Munster isn't showing any more insight into it than forum posters. By this I mean that there are often very astute arguments for things such as cost estimates posted in places like this forum, but I would hope that so much space devoted to a mouthpiece from PJ would have meatier content by 300%. He comes off like a 3rd tier forum poster, not an expert.
These guys have assistants who do the research for them. It's not hard. All he needs to do is to tell them to give him some numbers, and a half hour later he's got them. IFixit is no better. Sometimes I laugh at their naivety. I look at all these numbers with the understanding that Apple pays less, and others likely pay more than what they say.
But we have to understand that the numbers we're shown are already heavily discounted from what I could buy from these same suppliers, and that even Apple isn't going to pay less than about 20% under what we see. Some others may pay 10% more.
In addition, numbers for memory have to taken with a dose of salt, as many manufacturers, especially smaller ones, or this late to market, have to pay spot pricing, which can be much more than what we see. This can happen for SoC's as well, even screens.
And then, it was reported that some cheap Asian brands were using screens rejected by Apple, because they were cheaper.
1) You fail to miss the irony that the most popular Android-based tablet will be forked, closed and propriety version of the OS, not the almighty¡, open source OS you think will dominate the consumer market.
2) There is no Kindle device today that utilizes Android OS in any way. There will be one in mid November which will likely be a month after Apple releases iOS 5.0.
3) How masochistic are you to come to this forum just to get your ass handed to you with every post you make?
You are right Kindle uses a gimped version of Linux....which is the same thing as Andriod minus the name.
Honestly I dont care what OS any Kindle uses, or about any open source movement. Even less I dont care about the makeup of iOS 5 either...or who releases first. How is the release date of iOS better than the Kindle OS release date????
Like I said the Kindle will ship pre-configured with your Amazon account info, and there is no need to have a PC to set it up or sync with it...unlike the iPad. This is just another reason the Kindle is a hit, and helps the Kindle Fire as well.
No. You really have to understand business and economics. It isn't the sale price that matters here, it's the profit off those sales that will pay for this. Last year, Amazon squeaked a very small 3.37% profit off all of their sales. Assuming that average, they made $50 profit on about $1,484 in sales. So they would have to sell that much to just break even on the loss from the tablet. But that would mean that they made no profit on $1,684 in sales. That would be the price of the tablet, plus the sales to erase the loss from the sale.
That's a pretty bad business model. Only Amazon knows how much, on average, its customers buy each year, but this would have to come from sales through the tablet that they hadn't gotten otherwise, or the sale of the tablet would have done nothing to increase their business. I buy a lot of books from Amazon to read on my Kindle app. If instead, I bought the Fire, and bought my books there, even though I buy at least a dozen from them every month, they would be losing money on me, because I was buying those books anyway, and they know it's for the Kindle app on my iPad.
I would suggest though that they are going for more than just selling a few e-books. There must be a strong assumption in their business model that they will be able to sell more Prime memberships, more movies, and a lot more Android apps.
Just because their gross margin was 3.37% in the past, does not mean that's some perpetual limit for them.
Somehow, I doubt they'd launch an entire product line without having some business analyst crunch the numbers first.
It works for razor blades and games because they're both sold at a huge mark-up. Ebooks and music are not. Nobody is making money in ebooks and music. Furthermore, consoles have a long lifespan - the XBox 360 is 6 years old - whereas these tablets are getting updated at least every year. No doubt there'll be a new Kindle Fire next year and they'll have to raise the specs and continue to lose money to meet the price point (if they're losing money now).
But it's not just e-books and games. There's movies, Android apps, music and Amazon Prime. I am willing to bet their business model is based around somebody buying into a large chunk of their ecosystem.
Personally I don't think they're taking the hit that a single analyst has guessed.
Ditto. One analyst guessing a number and everybody takes it as gospel that Amazon has no business analysts on staff who've thought this thing through.
The thing has limited storage, no input/output ports, only wifi, no camera and no mic. It's a 7in touchscreen and that's it essentially. I don't see how it would cost them $200 to design, make and sell. I'm curious to know how this analyst came up with his/her numbers.
According to various parts breakdowns at iFixit and other places, your cost estimates are probably a little high Mel, but that's not what puts Amazon's new 7" reader in a different situation anyway.
Unlike the Tab's, iPad's, Xoom's and Playbooks in the market, Amazon will only be selling direct to the consumer. No need to list the price at $350, but sell to retail partners at 25-35% less than that. They won't be dealing with resellers and the necessary wholesale discounts as I understand it. Like Apple's branded stores, they get to keep the entire advertised retail price for themselves if they make the retail sale.
Personally I don't think they're taking the hit that a single analyst has guessed.
I already mentioned in another post what they would have to do to sell a "full" tablet, and what they would have to add if they sold through other retailers. I also mentioned all of the other costs they will be entailing in this. It's easy to see them taking a $50 loss per sale. But that too is an estimate. It could be lower, and it could be higher.
Personally, I'm not concerned for Apple's sales as this is no iPad competitor, it's far too limited to be useful for much of what the iPad excels at. Some people still think of the iPad as only good for media consumption though by now, everyone should know differently. But the Fire will really be a media consumption device only. Not that there's anything wrong with that. There will be those for whom this is the perfect device, but that won't be people who are looking at iPads.
I'm concerned about B&N. Even though the Nookcolor has been a surprising minor hit, this could destroy that company. It could end the last chance for B&N, and that's sad.
Since the object of marketing and advertising is to dupe consumers into believing a product is better than it actually is I'd say Amazon has a winner. I envision some ignorant consumers confusing Fires with iPads and therefore taking a minute share away from iPad.
::facepalm:: no...no that isn't the object of marketing and advertising...no...
I called the Amazon tablet a poor man's tablet before, but maybe I was wrong.
To be honest, it's closer to a large phone than to a real tablet. A 7" tablet can not run tablet sized apps in a useable fashion, because of the tiny GUI. Can you imagine an app like Garageband on a 7" tablet? Not gonna happen, no way Jose. Steve Jobs was right about the 7" form factor. It may appeal to a few people, but they shouldn't kid themselves. They're not getting a device that offers a tablet experience. They're getting a device that is slightly bigger than the biggest Android phones around.
You are right Kindle uses a gimped version of Linux....which is the same thing as Andriod minus the name.
Honestly I dont care what OS any Kindle uses, or about any open source movement. Even less I dont care about the makeup of iOS 5 either...or who releases first. How is the release date of iOS better than the Kindle OS release date????
Like I said the Kindle will ship pre-configured with your Amazon account info, and there is no need to have a PC to set it up or sync with it...unlike the iPad. This is just another reason the Kindle is a hit, and helps the Kindle Fire as well.
Please stop trying to touch my ass.
Well, you don't need a computer to set the iPad up now. You never did. The folks at the Apple store would do that for you. They asked me if I wanted them to, so for the first iPad, I allowed them to do that. You can also go to an Apple store to get OS upgrades. I know that not everyone can easily get to an Apple store, but it can be done.
But with iOS 5, all iPads, iPhones, and iPod Touches that are upgradable to this, will not need a computer either, for anything. We should get that at the same time Amazon's products will begin to arrive.
Some people still think of the iPad as only good for media consumption though by now, everyone should know differently. But the Fire will really be a media consumption device only. Not that there's anything wrong with that. There will be those for whom this is the perfect device, but that won't be people who are looking at iPads.
Perhaps there are more of that type of people than you think. Undoubtedly, the iPad is a supremely capable device, but after exploring everything (and no, not literally everything) it has to offer by way of apps, and so on, my usage has settled basically into web browsing, email and the odd movie. I don't think I'm alone on that point.
If amazon can flog a 10inch version of the Fire at a significant discount to the iPad, I think there is a significant market to capture.
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I'm concerned about B&N. Even though the Nookcolor has been a surprising minor hit, this could destroy that company. It could end the last chance for B&N, and that's sad.
Personally, I'm not concerned for Apple's sales as this is no iPad competitor . . .
On that particular point we completely agree. This wasn't designed with Apple in mind, and won't be marketed that way either, no matter that Amazon made a "some want to sell for more and some want to sell for less" statement. That was for media attention. This is plainly aimed at the Nook Color.
Rather than scattershot, looks like Amazon is plenty smart enough to concentrate on one target at a time.
That's not correct, either. Gross margin is selling price minus direct costs.
You're not correct in your definition. If you want to be a stickler about it - as you often seem to want to be - Gross Margin is Revenue minus Cost of Goods Sold (also called Cost of Sales or CGS).
Direct costs do not necessarily have a one-for-one mapping with CGS (e.g., Depreciation can be included in the latter), so it's at best a loose approximation.
I was also using a loose approximation (since component costs include the labor and other costs in the value-added chain), so get off your high horse.
I would suggest though that they are going for more than just selling a few e-books. There must be a strong assumption in their business model that they will be able to sell more Prime memberships, more movies, and a lot more Android apps.
Just because their gross margin was 3.37% in the past, does not mean that's some perpetual limit for them.
Somehow, I doubt they'd launch an entire product line without having some business analyst crunch the numbers first.
Their gross margin wasn't 3.37%. their net margin (profit) was. No, it isn't fixed, but it's been pretty stable ever since we could see it once they went public. There isn't any reason to believe it will change much soon.
In order for them to break even on this, assuming that the $50 is close to the truth, as some here don't believe, but I do, then considering that it's not likely that Amazon makes a bigger profit from selling books than Apple does, and giving them the benefit of the doubt, and therefor assuming that their profits are on the high side of estimates, that would give them a 5% profit on the sale of each book. Now, I don't know what the average selling price is. I know that i've bought over 60 books on my Kindle account for my iPad, and iPhone before that. So I can say that I've paid between zero and $14.95 per book. I suppose the average has been about $8 if I don't include the dozen or so that were free.
So say that I bought 50 books at $8. At a five percent profit, that would be about $20 profit for them. But, they still incur all the costs for their web site for free books. So how does that lower the margin? It raises the cost for all books, so perhaps they made $16 profit on me so far. I read a lot of books. I've bought almost as many from B&N through the Nook app, and less from Apple's store, though still over 30. How do I compare to the average reader?
And if we assume that Amazon is making profit at the low estimated range of 3% for book (and music and video sales, as all are estimated to bring in the same profit margin) then it's much worse, $12, not including free downloads.
So that's for books, movies and music. But their profit round the company was 3.37% as we see, so that holds true for anything they sell.
As far as them doing a cost/sales analysis, sure, all companies above a certain size do that. Are they right? Well..., not always. Was Palm right about the Pre and WebOS? Was HP? How about RIM with Playbook shipments and sales? Nope! What about Lenovo's statement that Samsung just sold 20,000 of the one million 7" tabs they shipped last year? Still haven't heard a peep out of Samsung. Why? Because those numbers aren't far off, and they don't want to admit it. So how about their research into how it would sell?
How about Microsoft and WP7? Think they did their homework? I'm sure they did, but it was for the wrong class.
And then there's Motorola. Did their analysis tell them that an $800 Xoom would sell well against the equivalent $729 iPad? I suppose so.
Don't rely on the idea that companies do work before they come out with products, and so they must know what they are doing. It's simply not true.
But it's not just e-books and games. There's movies, Android apps, music and Amazon Prime. I am willing to bet their business model is based around somebody buying into a large chunk of their ecosystem.
Are you planning to buy $2,000 from Amazon next year? If not, then their model is off, assuming you buy the Fire.
Perhaps there are more of that type of people than you think. Undoubtedly, the iPad is a supremely capable device, but after exploring everything (and no, not literally everything) it has to offer by way of apps, and so on, my usage has settled basically into web browsing, email and the odd movie. I don't think I'm alone on that point.
If amazon can flog a 10inch version of the Fire at a significant discount to the iPad, I think there is a significant market to capture.
Life goes on. Nothing is forever.
It doesn't matter how many people want this. Very few of them would have bought an iPad anyway. It turns out that a lot of people who have bought Kindles have iPads as well, but that won't be the case with this.
I'd like to remind you guys that whenever this analyst makes a negative comment about an Apple product, many of you call him a jackass. Hasn't his credibility been kind of low in the past? Regarding Amazon I don't think they're planning on losing on these devices. They're probably breaking even or at a very slim margin in order to lock in customers via pricing.
Comments
Actually no, it's not easy to understand, because you're assuming the cost will be $180 per device. At the beginning, maybe, but the cost will keep decreasing after the initial batch. Basically it's like Xbox/Wii etc, at the beginning they even lose money, but after a while they'd start making money even though they cut prices.
You can't assume that either. I was a manufacturer of electronics once upon a time. Costs can drop. But it doesn't always happen. It also depends upon sales. And manufacturers often buy a certain amount of materials in the beginning, and have contracts to keep the prices as low as the initial price, rather than creeping higher. What happens, is that if they sell enough to meet all of their startup costs, R&D and such, they may be able to lower prices, as their cost will have come down. But that's a variable that's difficult to ascertain for a company you don't know. So you have to assume certain things being true. One is that costs won't come down much, and that they won't rise much.
Which would be the case here? I don't know, and neither do you.
In the case of the XBox, MS lost a great deal of money for 7 years. $1.2 billion a year on the entertainment division. but it was only after technology improved enough for their redesigns that lowered the cost twice, that they made a rather small profit for it last year.
This is a different case entirely.
It may be impossible for anyone to come out with a really good 7" tablet for close to $300 and hope to make a decent profit on it. At least for a couple more years, that will be a fact of life. Anything that approaches this price will be junk. This tablet is decent, from a hardware perspective, but it lacks everything that would make it competitive as a stand alone tablet.
No cameras. No microphone. Only 8GB flash, and no way to add more, No gyroscope, no touch screen, just a primitive infra-red method, etc.
Add all of that to this, and it's going to be $75-100 more, and that's still losing money. Add another $75 to cancel out the loss and make a very small profit, and you're already up to at least $350. Of course, if you then have to give some profit to retailers, you've got to add at least another $75 to allow for a small discount. Now, you're up to $425.
We can see why this isn't easy.
According to various parts breakdowns at iFixit and other places, your cost estimates are probably a little high Mel, but that's not what puts Amazon's new 7" reader in a different situation anyway.
Unlike the Tab's, iPad's, Xoom's and Playbooks in the market, Amazon will only be selling direct to the consumer. No need to list the price at $350, but sell to retail partners at 25-35% less than that. They won't be dealing with resellers and the necessary wholesale discounts as I understand it. Like Apple's branded stores, they get to keep the entire advertised retail price for themselves if they make the retail sale.
Personally I don't think they're taking the hit that a single analyst has guessed.
If the article here at AI from a few days ago is generally accurate, and the new Kindle Fire is basicly RIM's Playbook with a slower processor, less memory and no camera, the estimated parts bill (who's estimate again?) of $180 may not be accurate.
Back in April, iFixit and TechInsights had teardowns, parts ID's and estimated costs for a few devices, including the Playbook. At that time the total parts cost for the 16GB version was $190. Unless parts prices have gone up quite a bit since April, if Amazon's 8GB, no camera, no multi-touch display and older processor Playbook-ish version should be quite a bit less than that, correct? No camera saves $15, about $8 savings on 8GB rather than 16, plus savings on both the touchscreen and processor (Playbook's item cost was $45 and $17). Would $12 total probably be a fair savings on those two components? If so that's at least $33 less, dropping the parts costs to somewhere around $155 rather than $180, and that's ignoring the minor savings from eliminating bluetooth/radio/gps components.
So assuming AI and it's sources were right, a big assumption perhaps, the cost numbers that some of these analysts are using may be much higher than the reality.
http://www.ubmtechinsights.com/uploa...ison_chart.JPG
http://www.redblackberry.com/blackbe...and-chipworks/
It's hard to say. I don't believe the rumor that this is basically a Playbook in disguise. RIM isn't about to allow some other company walk away with their design. It looks like a Playbook the way a Tab looks like an iPad. It means little. This idea came from the fact that Quanta seems to be making this for Amazon, while making the Playbook for RIM, and they're both 16:9. But Quanta makes things for Apple and other manufacturers as well. So what?
As far as prices go, $180 seems reasonable. But it's not an exact price as are any of these breakdowns. None are exact, as iFixit doesn't know what contracts are made for what number of parts at what quality level. They only do averages from what they can look up in the same catalogs I have. Apple likely pays less than they say, and others possibly pay more. But by how much is anyone's guess.
I'm not saying educated guesses can't be made. I am saying that Munster isn't showing any more insight into it than forum posters. By this I mean that there are often very astute arguments for things such as cost estimates posted in places like this forum, but I would hope that so much space devoted to a mouthpiece from PJ would have meatier content by 300%. He comes off like a 3rd tier forum poster, not an expert.
These guys have assistants who do the research for them. It's not hard. All he needs to do is to tell them to give him some numbers, and a half hour later he's got them. IFixit is no better. Sometimes I laugh at their naivety. I look at all these numbers with the understanding that Apple pays less, and others likely pay more than what they say.
But we have to understand that the numbers we're shown are already heavily discounted from what I could buy from these same suppliers, and that even Apple isn't going to pay less than about 20% under what we see. Some others may pay 10% more.
In addition, numbers for memory have to taken with a dose of salt, as many manufacturers, especially smaller ones, or this late to market, have to pay spot pricing, which can be much more than what we see. This can happen for SoC's as well, even screens.
And then, it was reported that some cheap Asian brands were using screens rejected by Apple, because they were cheaper.
1) You fail to miss the irony that the most popular Android-based tablet will be forked, closed and propriety version of the OS, not the almighty¡, open source OS you think will dominate the consumer market.
2) There is no Kindle device today that utilizes Android OS in any way. There will be one in mid November which will likely be a month after Apple releases iOS 5.0.
3) How masochistic are you to come to this forum just to get your ass handed to you with every post you make?
You are right Kindle uses a gimped version of Linux....which is the same thing as Andriod minus the name.
Honestly I dont care what OS any Kindle uses, or about any open source movement. Even less I dont care about the makeup of iOS 5 either...or who releases first. How is the release date of iOS better than the Kindle OS release date????
Like I said the Kindle will ship pre-configured with your Amazon account info, and there is no need to have a PC to set it up or sync with it...unlike the iPad. This is just another reason the Kindle is a hit, and helps the Kindle Fire as well.
Please stop trying to touch my ass.
No. You really have to understand business and economics. It isn't the sale price that matters here, it's the profit off those sales that will pay for this. Last year, Amazon squeaked a very small 3.37% profit off all of their sales. Assuming that average, they made $50 profit on about $1,484 in sales. So they would have to sell that much to just break even on the loss from the tablet. But that would mean that they made no profit on $1,684 in sales. That would be the price of the tablet, plus the sales to erase the loss from the sale.
That's a pretty bad business model. Only Amazon knows how much, on average, its customers buy each year, but this would have to come from sales through the tablet that they hadn't gotten otherwise, or the sale of the tablet would have done nothing to increase their business. I buy a lot of books from Amazon to read on my Kindle app. If instead, I bought the Fire, and bought my books there, even though I buy at least a dozen from them every month, they would be losing money on me, because I was buying those books anyway, and they know it's for the Kindle app on my iPad.
I would suggest though that they are going for more than just selling a few e-books. There must be a strong assumption in their business model that they will be able to sell more Prime memberships, more movies, and a lot more Android apps.
Just because their gross margin was 3.37% in the past, does not mean that's some perpetual limit for them.
Somehow, I doubt they'd launch an entire product line without having some business analyst crunch the numbers first.
It works for razor blades and games because they're both sold at a huge mark-up. Ebooks and music are not. Nobody is making money in ebooks and music. Furthermore, consoles have a long lifespan - the XBox 360 is 6 years old - whereas these tablets are getting updated at least every year. No doubt there'll be a new Kindle Fire next year and they'll have to raise the specs and continue to lose money to meet the price point (if they're losing money now).
But it's not just e-books and games. There's movies, Android apps, music and Amazon Prime. I am willing to bet their business model is based around somebody buying into a large chunk of their ecosystem.
Personally I don't think they're taking the hit that a single analyst has guessed.
Ditto. One analyst guessing a number and everybody takes it as gospel that Amazon has no business analysts on staff who've thought this thing through.
The thing has limited storage, no input/output ports, only wifi, no camera and no mic. It's a 7in touchscreen and that's it essentially. I don't see how it would cost them $200 to design, make and sell. I'm curious to know how this analyst came up with his/her numbers.
According to various parts breakdowns at iFixit and other places, your cost estimates are probably a little high Mel, but that's not what puts Amazon's new 7" reader in a different situation anyway.
Unlike the Tab's, iPad's, Xoom's and Playbooks in the market, Amazon will only be selling direct to the consumer. No need to list the price at $350, but sell to retail partners at 25-35% less than that. They won't be dealing with resellers and the necessary wholesale discounts as I understand it. Like Apple's branded stores, they get to keep the entire advertised retail price for themselves if they make the retail sale.
Personally I don't think they're taking the hit that a single analyst has guessed.
I already mentioned in another post what they would have to do to sell a "full" tablet, and what they would have to add if they sold through other retailers. I also mentioned all of the other costs they will be entailing in this. It's easy to see them taking a $50 loss per sale. But that too is an estimate. It could be lower, and it could be higher.
Personally, I'm not concerned for Apple's sales as this is no iPad competitor, it's far too limited to be useful for much of what the iPad excels at. Some people still think of the iPad as only good for media consumption though by now, everyone should know differently. But the Fire will really be a media consumption device only. Not that there's anything wrong with that. There will be those for whom this is the perfect device, but that won't be people who are looking at iPads.
I'm concerned about B&N. Even though the Nookcolor has been a surprising minor hit, this could destroy that company. It could end the last chance for B&N, and that's sad.
Since the object of marketing and advertising is to dupe consumers into believing a product is better than it actually is I'd say Amazon has a winner. I envision some ignorant consumers confusing Fires with iPads and therefore taking a minute share away from iPad.
::facepalm:: no...no that isn't the object of marketing and advertising...no...
granted people often pervert it that way.
To be honest, it's closer to a large phone than to a real tablet. A 7" tablet can not run tablet sized apps in a useable fashion, because of the tiny GUI. Can you imagine an app like Garageband on a 7" tablet? Not gonna happen, no way Jose. Steve Jobs was right about the 7" form factor. It may appeal to a few people, but they shouldn't kid themselves. They're not getting a device that offers a tablet experience. They're getting a device that is slightly bigger than the biggest Android phones around.
You are right Kindle uses a gimped version of Linux....which is the same thing as Andriod minus the name.
Honestly I dont care what OS any Kindle uses, or about any open source movement. Even less I dont care about the makeup of iOS 5 either...or who releases first. How is the release date of iOS better than the Kindle OS release date????
Like I said the Kindle will ship pre-configured with your Amazon account info, and there is no need to have a PC to set it up or sync with it...unlike the iPad. This is just another reason the Kindle is a hit, and helps the Kindle Fire as well.
Please stop trying to touch my ass.
Well, you don't need a computer to set the iPad up now. You never did. The folks at the Apple store would do that for you. They asked me if I wanted them to, so for the first iPad, I allowed them to do that. You can also go to an Apple store to get OS upgrades. I know that not everyone can easily get to an Apple store, but it can be done.
But with iOS 5, all iPads, iPhones, and iPod Touches that are upgradable to this, will not need a computer either, for anything. We should get that at the same time Amazon's products will begin to arrive.
Some people still think of the iPad as only good for media consumption though by now, everyone should know differently. But the Fire will really be a media consumption device only. Not that there's anything wrong with that. There will be those for whom this is the perfect device, but that won't be people who are looking at iPads.
Perhaps there are more of that type of people than you think. Undoubtedly, the iPad is a supremely capable device, but after exploring everything (and no, not literally everything) it has to offer by way of apps, and so on, my usage has settled basically into web browsing, email and the odd movie. I don't think I'm alone on that point.
If amazon can flog a 10inch version of the Fire at a significant discount to the iPad, I think there is a significant market to capture.
I'm concerned about B&N. Even though the Nookcolor has been a surprising minor hit, this could destroy that company. It could end the last chance for B&N, and that's sad.
Life goes on. Nothing is forever.
Personally, I'm not concerned for Apple's sales as this is no iPad competitor . . .
On that particular point we completely agree. This wasn't designed with Apple in mind, and won't be marketed that way either, no matter that Amazon made a "some want to sell for more and some want to sell for less" statement. That was for media attention. This is plainly aimed at the Nook Color.
Rather than scattershot, looks like Amazon is plenty smart enough to concentrate on one target at a time.
That's not correct, either. Gross margin is selling price minus direct costs.
You're not correct in your definition. If you want to be a stickler about it - as you often seem to want to be - Gross Margin is Revenue minus Cost of Goods Sold (also called Cost of Sales or CGS).
Direct costs do not necessarily have a one-for-one mapping with CGS (e.g., Depreciation can be included in the latter), so it's at best a loose approximation.
I was also using a loose approximation (since component costs include the labor and other costs in the value-added chain), so get off your high horse.
I would suggest though that they are going for more than just selling a few e-books. There must be a strong assumption in their business model that they will be able to sell more Prime memberships, more movies, and a lot more Android apps.
Just because their gross margin was 3.37% in the past, does not mean that's some perpetual limit for them.
Somehow, I doubt they'd launch an entire product line without having some business analyst crunch the numbers first.
Their gross margin wasn't 3.37%. their net margin (profit) was. No, it isn't fixed, but it's been pretty stable ever since we could see it once they went public. There isn't any reason to believe it will change much soon.
In order for them to break even on this, assuming that the $50 is close to the truth, as some here don't believe, but I do, then considering that it's not likely that Amazon makes a bigger profit from selling books than Apple does, and giving them the benefit of the doubt, and therefor assuming that their profits are on the high side of estimates, that would give them a 5% profit on the sale of each book. Now, I don't know what the average selling price is. I know that i've bought over 60 books on my Kindle account for my iPad, and iPhone before that. So I can say that I've paid between zero and $14.95 per book. I suppose the average has been about $8 if I don't include the dozen or so that were free.
So say that I bought 50 books at $8. At a five percent profit, that would be about $20 profit for them. But, they still incur all the costs for their web site for free books. So how does that lower the margin? It raises the cost for all books, so perhaps they made $16 profit on me so far. I read a lot of books. I've bought almost as many from B&N through the Nook app, and less from Apple's store, though still over 30. How do I compare to the average reader?
And if we assume that Amazon is making profit at the low estimated range of 3% for book (and music and video sales, as all are estimated to bring in the same profit margin) then it's much worse, $12, not including free downloads.
So that's for books, movies and music. But their profit round the company was 3.37% as we see, so that holds true for anything they sell.
As far as them doing a cost/sales analysis, sure, all companies above a certain size do that. Are they right? Well..., not always. Was Palm right about the Pre and WebOS? Was HP? How about RIM with Playbook shipments and sales? Nope! What about Lenovo's statement that Samsung just sold 20,000 of the one million 7" tabs they shipped last year? Still haven't heard a peep out of Samsung. Why? Because those numbers aren't far off, and they don't want to admit it. So how about their research into how it would sell?
How about Microsoft and WP7? Think they did their homework? I'm sure they did, but it was for the wrong class.
And then there's Motorola. Did their analysis tell them that an $800 Xoom would sell well against the equivalent $729 iPad? I suppose so.
Don't rely on the idea that companies do work before they come out with products, and so they must know what they are doing. It's simply not true.
But it's not just e-books and games. There's movies, Android apps, music and Amazon Prime. I am willing to bet their business model is based around somebody buying into a large chunk of their ecosystem.
Are you planning to buy $2,000 from Amazon next year? If not, then their model is off, assuming you buy the Fire.
Are you planning to buy $2,000 from Amazon next year? If not, then their model is off, assuming you buy the Fire.
No he's not, and neither are the people who are getting all giddy over this tablet, simply because of the cheap price.
It's plain common sense, people who are buying this because it's cheap will also be cheap when it comes to buying content.
Perhaps there are more of that type of people than you think. Undoubtedly, the iPad is a supremely capable device, but after exploring everything (and no, not literally everything) it has to offer by way of apps, and so on, my usage has settled basically into web browsing, email and the odd movie. I don't think I'm alone on that point.
If amazon can flog a 10inch version of the Fire at a significant discount to the iPad, I think there is a significant market to capture.
Life goes on. Nothing is forever.
It doesn't matter how many people want this. Very few of them would have bought an iPad anyway. It turns out that a lot of people who have bought Kindles have iPads as well, but that won't be the case with this.
It's sad because there will be less choice.