Amazon makes no profit on its Kindle hardware sales, CEO Jeff Bezos has confirmed, with the ereaders and Kindle Fire tablets sold “at our cost” so as to promote ebook, video, and music downloads. The online retailer has long been tight-lipped on its pricing strategy around Kindle, with ongoing rumors that the hardware was sold with minimum profit in mind or, even, at a loss. That’s not quite the case, Bezos told the BBC.
“We sell the hardware at our cost, so it is break-even on the hardware” the chief executive said. “We want to make money when people use our devices, not when people buy our devices.”
The strategy has allowed Amazon to continue to increase pressure on its ereader rivals, with price cuts by Barnes & Noble, Kobo, and others all usually being parried by trimming of Kindle pricing too. More recently, Amazon has introduced its “Special Offers” system, in which the price of the ereader itself is discounted in return for showing advertising on the lockscreen and homescreen.
According to Bezos, Amazon’s approach has paid off in media sales. “What we find is that when people buy a Kindle they read four times as much as they did before they bought the Kindle” he explained. Nor, perhaps more surprisingly, do they necessarily switch entirely to digital. ”They don’t stop buying paper books” Bezos revealed, “Kindle owners read four times as much, but they continue to buy both types of books.”
Amazon put the new Kindle Paperwhite up for preorder in select European countries today, having seen the illuminated ereader sell out in the US. It will be accompanied by an expansion of the Kindle Owners’ Lending Library system, which allows Amazon Prime subscribers to borrow ebooks as part of their subsidized shipping package.