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.