Sunday, April 20, 2014
Inquirer Daily News

Experts acknowledge: New Kindles are loss-leaders

Gizmo Guy's suggestion that Amazon's new Kindle Touch and Fire tablets cost more to make than sales prices reflect was underscored yesterday by guys who should know, speaking at a conference in San Francisco.

Experts acknowledge: New Kindles are loss-leaders

 Gizmo Guy's  suggestion  that Amazon's new Kindle Touch and Fire tablets  cost more  to make than the sales prices reflect  was underscored yesterday by guys who should know, speaking at a conference in San Francisco. 

Doug Klein of  Barnes & Noble - purveyor of the rival Nook e-ink and color LCD  tablets -  keynoted the  Intertech Pira eReaders conference  with observations like  "taking the touchpad to $99 is kind of a duh. . . . Wow, I can sell a million of them at $99.  I can sell a million $100 bills if I give them away."

Less oblique comments came later at a panel discussion from Steven Mather, analyst for wireless communications at IHS iSuppli. His company tracks  wholesale component prices from  Far East suppliers and famously breaks apart expensive new gadgets to see what makes them tick. He estimated a $185 "bill of materials" cost  for Amazon's  Kindle Fire color screen tablet, which will sell for $199. But wait, there's more (or less.) When he factors in other costs to create the device and ship it to customers, Mather estimates the real cost to Amazon for each Fire will soar to about $245. So the company will lose $46 on every one it sells.

The bet, of course, is that users will then more than make up the difference by buying lots of content and merchandise from Amazon  on this handy dandy multimedia tablet.

"If you sell a reasonable amount of content including all  kinds of media, if you're (Amazon CEO Jeff) Bezos, you want to get as many devices out there as you can today," said Mather. "You're going to fight another day tomorrow because you're going to come out with version 2.0." Other tablet purveyors  can't play this high stakes game "because no one else has the $50 billion in revenue that Amazon has online."

Klein, B&N's vice president of program and product management, believes there's "plenty of room" for both his Nook Color and the Kindle Fire "to play." While both are Android OS-based, he characterizes  them as "purpose-built" devices, different from iPads and other, far less successful Android clones. Thus, the news media's Fire vs iPad comparisons was really "a non-story," he suggested.

 B&N research finds  Nook customers are 70 percent female, 35-45 years old. They  are "not technology people" and "don't want iPads," Klein said. He predicted B&N will focus on "innnovative" content in the reading world, noting it's currently the "most successful digital magazine reseller in the world  . . . . because we bet heavily on Nook Color and did a lot of work last year."  He believes Amazon's focus with the Fire will be on media content and service - movies and TV shows, music, cloud storage, shopping, etc. 

Jonathan Takiff Daily News Columnist
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Jonathan Takiff Daily News Columnist
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