Each Kindle Fire to generate around $136 in revenue for Amazon

Hardware costs might be overstepping the selling price of Kindle Fire, but Amazon is generating enough money in content sales, and prime membership that we can easily call it a very profitable venture.

According to a survey by investment banking firm RBC, each Kindle Fire sold is generating over $100 in additional revenue thus making up much more than initial loss of around $17.

“Kindle Fire unit economics are likely to be more favorable than consensus expectations, based primarily on frequency of digital goods purchases. Our assumption is that Amazon could sell 3-4 million Kindle Fire units in Q4, and that those units are accretive to company-average operating margin within the first six months of ownership. Our analysis assigns a cumulative lifetime operating income per unit of $136, with a cumulative operating margin of over 20 percent.”

– RBC Capital analyst Ross Sandler said in a research note to clients

As you can see in the table, major amount of additional revenue is coming from e-book sales as well as apps, while physical good might not be generating much revenue that are strengthening company’s core business.

Source


Post Author: Gaurav Shukla

Gaurav Shukla is the editor of AndroidOS.in. If you'd like to reach him, drop an email at 'gaurav@androidos.in' or connect with him on Twitter (@gauravshukla).

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