On the Kindle Fire

Money+ Journalist | Park

199 Dollars-In 2011, Amazon President Bezos on the stage, saying that the Kindle fire was boiling under the price table.

From a single hardware perspective, the tablet is not stunning: a 7-inch widescreen, 8GB-capacity storage, 8-hour endurance, no cameras, microphones, only Wi-Fi, and these hardware cost 179 dollars. Amazon's logistics costs are equivalent to 5.1% of sales, averaging a Kindle Fire, with a logistics cost of $10. These two have already accounted for 95% of the price.

Amazon estimates its own tax at 290 million dollars, but there is no real cash outlay. The main reason is that its business losses in previous years will have tax credits and deferred payments-especially after the Kindle Fire this year. As a whole, Amazon's tax revenue for the entire fiscal year of 2011 accounted for 0.6% of its sales, with the average Kindle fire to pay a tax of just 1.2 dollars. Plus marketing and research and development costs, if you're just buying a Kindle Fire hardware, Amazon will have to pay 221 dollars, which means they're subsidizing you at least 22 dollars--from this figure, it's a losing deal.

Of course, Amazon's ambition is to expect you to pay more for content. RBC Capital estimates that according to Amazon consumer data, a regular Kindle Fire user buys 60 of dollars of e-books within a year, according to a book-sharing agreement, in which Amazon can be divided into 30%, or 18 dollars. At the same time, RBC Capital expects consumers to buy 12 apps in the Kindle Fire App Store for a year, plus a charge of matching items, including paid film and Kindle Fire, that will bring Amazon $102.4 trillion in revenue, with a profit of 9.4 dollars. In this way, a Kindle Fire is priced at 199 dollars, but each consumer actually consumes 301.4 dollars on the Kindle Fire. All kinds of services can bring Amazon 27.4 of dollars of profits a year, minus the previous sales of products in the loss of 22 U.S. dollars, the actual profit of 5.4 U.S. dollars. With the Kindle Fire maturing, it is believed that the number will rise sharply in the future.