Amazon’s Kindle Strategy

Peter Osnos:

During a BBC interview the other day, Amazon CEO Jeff Bezos, in an uncharacteristic moment of revelation, disclosed that the company makes no profit on its various Kindle devices. “We sell the hardware at our cost, so it is break even on the hardware.” Why then is Amazon is so aggressive in its development of ever-more refined e-readers and tablets? “What we find,” Bezos explained, “is that when people buy a Kindle they read four times as much as they did before they bought the Kindle. But they don’t stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books.” The Bezos strategy is clearly aimed at driving profit margins through hard bargaining with publishers, whose dependence on Amazon as a principal retailer has been growing significantly each year.