Kindle Fire Hurting Amazon’s Profits?

While the Kindle Fire seem to be taking off like crazy, the Kindle Fire may actually really hurt Amazon in the long run.

Amazon, like many other tablet and cell phone manufacturers, will often sell the actual product itself at a loss in order to get it in people’s hand and hopefully make the money back on the content that folks purchase on the devices. This has worked quite well for many businesses in the past, Apple being one of them (think iPhone plus iTunes).

The Kindle Fire is no exception for Amazon, but now it seems that Amazon may end up struggling, at least until the revenue from purchased content catches up. Amazon is having to create millions more Kindle Fire models than they expected due to the overwhelming volume of pre-orders. Each once sold constitutes a loss for the company, and ith more selling than expected, this could really hurt them over the next couple of quarters, especially with Christmas coming up.

However, I predict that Amazon will have no problem recovering. With all of these folks buying the Kindle Fire, most of them will be buying all kinds of content on the device through Amazon, meaning they will get their revenue back in spades once all is said and done!

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  • http://www.chasingmist.com Jason

    I’m pretty sure that Apple does not follow the loss leader strategy with their iPhone, and in fact it’s the opposite. They make a marginal profit on the content they sell, and truly the content exists to make their devices more attractive – and they make a fat profit on every device.

    But taking a loss on the consoles is the strategy that Sony and Microsoft use in video games. (Nintendo does not