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Kindle 2 estimated to cost Amazon just $185 to build: Why Whispernet is free
April 22, 2009 | 9:40 am
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By David Rothman
That’s the word in Engadget, relying on a news release from iSuppli Corporation’s Teardown Analysis Service. The E Ink display, the most expensive item, is a mere $60. Wireless adds close to $40. Those are estimates, not necessarily what Amazon is paying.
Now here’s an idea. Suppose Amazon did a WiFi version of the Kindle, without the Kindle 2’s free Sprintbased Whispernet. Couldn’t that slash the cost—maybe even to less than $100 within two years or so? I doubt Amazon would do this, though. What’s more, Engadget wisely obseves that e-books consume little bandwidth compared to, say, music. So maybe the Whispernet costs are not as hefty as some would think.
Besides, via Whispernet wireless, Amazon wants to make it as easy as possible for you to buy—books right now, and maybe plenty else later on, especially when the Kindle comes with a color screen to show merchandise at its best.
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Comments:
Does the Endgadget article include the cost of the Epson controller, which could be significant and is an integral part of the device? Reports on MobileRead indicate the cost was not included.
Im going nuts soon about ebooks, could you please explain me why every book isnt published as ebook yet ? it blows my mind ?
And another thing; all theese devices for reading that annoys me also, in the end it will be either phone or PC that will win that race.
What annoys me the most though, is that Amazon is trying to promote a hardwareunit, Kindle – that i dont want to buy, and i never will. But what i want to – is to read the damn books ?? and i want to do it on my PC.
Quick question: can i read books that i buy on amazon, in kindle format – on my PC ? without owning a kindle ?
The Epson controller is included and accounts for $4.31.
These cost things are pretty useless in telling what the overall profit of a product is. By the time you add on all the other overheads, costs, depreciation, etc. they can come up to more than the cost of the unit itself. I’m sorry, but you can’t infer anything from this figure.
But Paul, remember that Amazon is doing direct distribution. So at least that’s one major way to reduce expenses.
Thanks,
David
We all know, from our publishing experience, that you need to price your product at something between 2 and 8 times the cost of production.
If I had to guess at the numbers underpinning the Kindle, based solely on the retail price, I would expect that the cost of materials would be something like $75. Then add a cost of assembly of another $75, and the project will be economically viable. If the cost of components is more than $75, then Amazon is undoubtedly using the device as a loss leader.
Thanks for your thoughts on this, Marion. Again, keep in mind that Amazon is doing its own distribution. What’s more, it isn’t spending that much on advertising. But, hey, you could well be right. ESP or a Deep Throat in the Amazon Accounting Department would sure come in handy, LOL. David
While it is true that Amazon is a direct to consumer (DTC) merchant, with extraordinary efficiencies in its pick/pack/ship lines, among other places, it is still a retailer. And they almost always need to double their COGS in order to arrive at a minimum sales price. DTC usually requires deeper margins, of course, but I suspect Amazon can get by with the lower, general retail numbers.
That’s why I postulated a total COGS of $150 for an item listing in the high $300s. It gives them room to discount if they can recover the development costs before they need to debut a new model.
Or that’s my back of the envelope guesstimate, anyway.
Lars: Amazon only supports the Kindle and the iPhone/touch for its ebooks. It is the only major supplier of ebooks without a Windows PC Reader. However, many of Amazon’s ebooks come directly from mobipocket.com (an Amazon company) and these are available from multiple ebook stores in MOBI format which does have a Windows Reader.