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Amazon will rake in $136 additional revenue from each Kindle Fire sold, claims study

Posted: , by Nick T.

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Amazon will rake in $136 additional revenue from each Kindle Fire sold, claims study
Given that Amazon sells its Kindle Fire tablet for $199, one could easily presume that the company is not making much money out of its otherwise well-selling device. After all, once the guys at iSuppli gave it the teardown treatment, it became evident that the actual cost of its components exceeds its retail price by a few bucks. However, you might be surprised by the amount of revenue the Kindle Fire is likely to bring straight into Amazon's pockets.

Here is what Ross Sandler, analyst for RBC Capital, said in a research note to clients:

“Kindle Fire unit economics are likely to be more favorable than consensus expectations, based primarily on frequency of digital goods purchases,... Our assumption is that Amazon could sell 3-4 million Kindle Fire units in Q4, and that those units are accretive to company-average operating margin within the first six months of ownership. Our analysis assigns a cumulative lifetime operating income per unit of $136, with a cumulative operating margin of over 20 percent.”

And an additional revenue of $136 per each Amazon Kindle Fire sold is not a bad figure. Most of that money is expected to come from e-books as that is what 80% of Kindle Fire owners are interested in purchasing. According to the analysis, the average Kindle Fire user will purchase five of them each quarter, thus generating revenue of $50 for that period, assuming that each e-book is priced at $10. The rest of the income will come mostly from apps. Out of all the people who participated in the survey, two thirds had purchased at least one of them, and 41 percent said they had purchased three or more. Additional revenue is expected to be collected from video-on-demand services and purchases of physical goods.

source: RBC Capital via AllThingsD

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posted on 19 Jan 2012, 11:16 1

1. TheLibertine (Posts: 484; Member since: 15 Jan 2012)


Great idea Amazon had - make a great tablet (for that price) and earn money after that by letting customers buy what they really want to pay for.

posted on 19 Jan 2012, 11:58

2. downphoenix (Posts: 2267; Member since: 19 Jun 2010)


Not sure if these clowns ever head of the Amazon App Store. I have spent about $40 or so on stuff for my Playbook so far, if I would have gotten a Kindle Fire instead, I would have and still would be at $0 because I have so many free apps racked in from the App Store I would never have to buy any apps, I have no need for downloading music or movies since I already have the options available for me. The only thing I might have to buy would be kindle books, but I prefer the real thing, so amazon would just lose money on a smart consumer like myself.

posted on 19 Jan 2012, 12:33

3. bossmt_2 (Posts: 429; Member since: 13 Oct 2009)


That's the risk they take. They're also intending on creating repeat business.

posted on 19 Jan 2012, 15:36

4. downphoenix (Posts: 2267; Member since: 19 Jun 2010)


One way they could build an actual customer base is by being more exclusive with the products. The service they offer on the Kindle is already offered in full to all Android tablets (unless you count the slow, buggy Silk browser) and most of the services are available on Ipads (amazon app store is the only thing missing, but the Appstore for Apple is even better). What reason do I have to buy a Kindle Fire if I have no exclusive content, nerfed specs (no camera, bluetooth, small amt of internal memory, no expandable memory, reliance on being connected to Wifi) and can get a much better Android tablet for about 50$ more?

posted on 19 Jan 2012, 19:55

5. CellularNinja (Posts: 298; Member since: 27 Sep 2011)


I have a kindle fire and I already have 2 e-books (Steve Jobs bio, and another book) and I have a ton of apps as well, some paid. I've also bought a music track.

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