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Amazon's Bezos confirms content pays for Kindle

Finally admits hardware sold at cost

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That Amazon makes little or no money selling its Kindle e-readers has been a popular assumption for some time. But assumption no longer - company chief Jeff Bezos has confirmed Amazon is after content sales profits instead.

The first Kindle was launched in April 2008 and cost $399 - £248 at today’s exchange rate - and follow-up models didn’t get significantly cheaper until October 2009 when Amazon cut the price of the Kindle 2 to $259 (£161) - still thought to be $75 more than the build price.

But in July 2010, Amazon released the Kindle 3 - now called the Kindle Keyboard - for $139/£111 and observers began to talk about book sales subsidising the price of the hardware. Disassemblies of these and subsequent Kindles showed that Amazon wasn’t selling the hardware at a loss, but it was clear it wasn’t making much money on the machines themselves.

However, Amazon would never confirm this. Now, in an interview with the BBC, Bezos has.

"We sell the hardware at our cost, so it is break-even on the hardware," he told the broadcaster. “We want to make money when people use our devices, not when people buy our devices.”

Of course, the same is true to a greater or lesser extent of most other e-reader makers who also sell e-books. The current pricing level of e-readers - largely defined by Amazon’s aggressive price cutting - makes that the case.

However, the majority of Amazon’s rivals use a nominally open DRM technology - it’s proprietary Adobe technology, but at least any third-party can make use of it - allowing users to purchase books from a variety of outlets.

Amazon, on the other hand, uses a unique DRM scheme, ensuring Kindle users can largely buy (DRM limited) books only from the one supplier. Apple does the same with its e-book shop.

To be fair, Amazon’s success in the market suggests most ordinary punters aren’t overly bothered by this at the moment. But it will be interesting to see how, as the e-book market expands, whether this lack of purchase freedom comes to matter, especially if Amazon beefs up its currently fairly weak, easy to remove DRM. ®

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