During our conference trip in San Francisco we befriended an excellent chap from iSupply! He mentioned one of the ways his company determines the core price a product costs to manufacture and release is by a comprehensive tear down. The units are often disassembled and based on each component it can be researched down to the exact cost per component. Today iSupply issued a press release stating that the new Amazon Kindle Fire costs $209.63 to manufacture and entail ALL costs involved.
Amazon is releasing their first Android powered tablet dubbed ‘Fire’ and is set to sell millions of units from November to December. The most attractive aspect of the device is obviously the price point and hits the sweet spot for most customrs wanting a to buy a tablet. One of the drawbacks of the entire tablet sector are the prohibitive costs involved, with the T-Mobile G-Slate charging $799 and most others costing $499 to $899 for a good one.
Amazon is losing money on the hardware by selling its tablet for $199, taking a $10 hit loss on each one sold. The company is betting that it will make the money back in short order by selling content. Services such as Amazon Prime are bundled with the tablet and users are given a 1 month free subscription to check it out. This will provide shipping discounts with buying products from the website and offer streaming video services. Magazines, eBooks and an emerging Netflix-esque subscription system are other options.