Kindle Fire Profitable for Amazon!

Cross-posted from the Hand Held Hack:

As you know, my Kindle Fire is my favorite new tech toy… and we had a report not long ago that Amazon was selling them at a price lower than it costs to make them. But this report seems to indicate that, as we predicted, they are doing fine on sales and profits!

Kindle Fire Could Be More Profitable Than Expected

Amazon’s Kindle Fire, released in November, may wind up being more profitable than was expected, thanks to users’ penchant for purchasing digital goods, according to a new research report from RBC Capital.

Though Amazon actually eats a loss of an estimated $18 for every Kindle sold due to manufacturing costs and other factors, the company makes up for it through sales of ebooks and apps, according to the report. Based on survey of 216 Kindle Fire Owners, RBC analysts estimated that over the course of three years, each Kindle Fire sold could earn Amazon $136.

‘Amazon will break even on a Kindle Fire unit in less than five months, accounting only for direct digital good purchases,’ the report states.

Amazon makes the most money off the Kindle Fire from sales of ebooks, according to the report. RBC estimated that each Kindle Fire owner purchases five ebooks per quarter, generating Amazon roughly $15 per user each quarter. In RBC’s survey, just 19 percent of respondents had not purchased an ebook for their device, while 29 percent purchased three to five and more than 28 percent bought more than six.

Kindle Fire owners also purchase three paid apps on average, per quarter, RBC estimated. In the survey, 66 percent of respondents said they had purchased at least one paid app for their device, while 34 percent had not.
Besides digital content, the Kindle Fire could also generate revenue through sales of physical goods and memberships to Amazon Prime, the company’s ‘preferred’ tier that gives customers free unlimited two-day shipping.”