Cell phones use Kindle Fire strategy so why are people freaked out?
I heard that they are selling the Kindle Fire for about break-even and everyone seems to be freaking out about it that they are not making any money off it. What is the big deal? Cell phone manufacturers do this all the time but at even more insane prices. I mean I see cell phones all the time selling for FREE, or 99 cents, or a few bucks. How come people don't freak out over cell phone manufacturers taking a loss of $100.00+ per phone yet they freak out over the Kindle Fire selling for break-even? I mean look at the numbers if the Kindle Fire sells for exactly break-even then Amazon doesn't make or lose anything on the sale of them (that is what break even means folks). However though they made no money on the sale of them, all of a sudden you have 4-5 million people with them. Of course once they have them they will buy books for them, or movies, or games, etc. So now Amazon instantly has 4-5 new customers who are looking to Amazon for future purchases and since Amazon broke even getting these devices into the hands of people it is kind of a win win IMHO. I still think the stock is a bit highly valued but not because of the Kindle Fire.
Except that people are buying the Fire in place of another electronic device- which they probably would have bought on Amazon, for a profit.
And Amazon.com takes 8 second to load on the Fire, is harder to use with no keyboard, and doesn't look as compelling with a 7 inch screen- problems they wouldn't have if their customers had gone with a laptop, a desktop, or an Ipad or Honeycomb tablet.
The Amazon access isn't permanently on like it would be if your customer had gone with a 3g cell phone.
And LCD isn't super reader-friendly like eink is, so they don't get the big ebook buying boost you would see if the customer picked a traditional Kindle.
So Amazon blew a sale AND made the core business a little harder for customers to access than it otherwise would have been. Lose-lose.
And- oh yeah- a lot of people are actually going to Best Buy, Target, Radioshack, etc. to actually make the initial purchase. They've created a loss leader- for the competitors!