I wonder if analysts have learned yet not to dismiss apparently crazy moves by Jeff Bezos.
"Very importantly, we are willing to be misunderstood for long periods of time.... I believe if you don’t have that set of things in your corporate culture, then you can’t do large-scale invention. You can do incremental invention, which is critically important for any company. But it is very difficult — if you are not willing to be misunderstood. People will misunderstand you."
There's a lot to hate about Amazon. Apparently, it's a totally caustic work environment, that's only making money because Bezos is such a brilliant strategist.
Like A/B testing everything, before it was popular.
Like telling everyone they need web APIs for everything they do, and will be fired if they use non-web APIs to other team's apps. Way to shove SOA down people's throats! The pay-off is modular systems.
EC2. Margins will drop, but he'll make money on up-selling special Amazon services.
My experience has been the opposite, that a deviant subculture can't survive for long and is eventually rejected by the host.
An online store buying stock and building infrastructure !!!!! Crazy , they should be borrowing money and paying themselves bonuses before going bust - that's what Wall St wants
http://news.cnet.com/8301-1023_3-20114722-93/amazon-kindle-f...
In other words, no-one really knows, but it looks like they're probably closer to breaking even than chugger claims. Chugger is taking the worst-case estimate here, and also the one that seems the most unsubstantiated.
Thanks for the link.
If Sony had cottoned onto this strategy, Beta would have been the worldwide video standard and they would have been paid back massively in royalties.
Shifting hardware at a loss to lock in consumers is the oldest trick in the book. Nowhere is it more important than when introducing a new technology and a new way of working. I can see that in 10 years time a Kindle will be almost free.
http://www.joystiq.com/2008/12/01/forbes-nintendo-making-6-p...
So Nintendo was the only manufacturer who did not apply the "razorblade" model of the other console makers, which is understandable since they were and are a videogame company only and thus never had any other branches which could have been able to subsidize their console business in the beginning (unlike for example Microsoft).
I think the first console Nintendo made that actually sold at a loss is the current 3DS handheld and that may be after the very fast initial price cut after the slow reception on the market.
Nintendo, meanwhile, couldn't keep Wii in stock for more than half a day until something like 2 years after launch, so they could have raised the price about $100 and not lost a sale
People are talking like this is a good move by bezos. It's not.
Once you setup your account on your Kindle, it is 1-click purchasing to get yourself a new book.
Sure, you might shop around for an ebook, but most people aren't going to. They'll just search on the Kindle, click the 'yes I want it' button, and you're finished. Total platform lock-in. Tech people might get sniffy but to the average person it's like going from vinyl to iPod.
There are two Kindles in this household. Since their arrival, the yearly book spend has probably tripled. Previously most reading was re-reading older books and taking trips to book exchanges.
All this is possible with other platforms, yes, but the Kindle is just the physical part of an entire delivery system. The margins on ebooks has to be better than print by an order of magnitude, even though the price is lower.
"Well, since Moore's law makes computation really cheap, let's just give away the computation, but keep the data."[1]
Some estimates(read:guesses) think that 50% of kindle users will subscribe to to amazon prime. Prime users are extremely loyal to amazon, do all their online shopping in amazon and use brick and mortar shops much less than before signing with prime.They tend to buy 3x-4x than before, in amazon.
Prime is a very hard service to provide. It requires a big and expensive logistics chain. It's a monopoly level competitive advantage. It can make amazon a monopoly in the range of walmart (maybe).
Also the kindle fire is a great advertising unit. Better than TV - because the ads can be much more targeted, And you can buy with a single click from the ad.
Combine the two, and amazon gets almost total control of the customer.
And given Bezos's brilliance that's probably only the tip of the iceberg.
So what's a little discount on a little gadget to get all of this ?
And like most chicken-and-egg questions, the answer is both and neither.
As someone who has spent far too much time puttering around brick-and-mortar stores recently, before walking away in disgust and just buying it on Amazon, I can't help but think Amazon is just spending to widen an already vast competitive edge.
This isn't apples versus oranges. This is sailboat versus steamboat.
Yes, the 50% is high, but people who tried prime are really , really happy with it, so maybe 50% makes sense.
And yes, it's definitely cars vs horses.
Their policy for the other Kindles was to recover the R&D initially and then sell them at not much more than cost.
First, you need to prove beyond any doubt that the Fire is being sold at a loss. Once you know this, set up some dummy stores and invest the billions of dollars you have laying around in buying as many as you can. Once you have them, put them all in a compactor. Make sure each one is destroyed without anyone having laid a finger on it. See how long Amazon can sell these things at a loss without making anything from them.
The company is reinvesting some of its earnings back into the business, rather than using those profits simply to reward shareholders. It's a long-term move, and Wall Street analysts these days seem wholly incapable of thinking further out than a quarter or two.