walkitout (walkitout) wrote,
walkitout
walkitout

What iSuppli Actually Said ... and what it turned into

http://www.isuppli.com/Teardowns/News/Pages/Amazon-Sells-Kindle-Fire-at-Low-Profit-Margin-to-Promote-Online-Merchandize-Sales.aspx

It's not private or proprietary or anything. iSuppli served up their analysis both as a "virtual teardown" and as a business model.

$209.63 as "Hardware Cost to AMZ"

The rest of what they have to say is not that long and is very much worth reading. However, if you are looking for key sentences, here are two:

"When further costs outside of materials and manufacturing are added in—and the $199 price of the tablet is factored along with the expected sales of digital content per device—Amazon is likely to generate a marginal profit of $10 on each Kindle Fire sold."

iSuppli saying they'll make at least $10, even after you figure in more costs -- because there will be additional digital content sales. But that, actually is _not_ the point they are trying to make.

"However, the real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content. Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business."

And here is where the Prime-free-for-a-month bit becomes interesting. Let's say you were thinking about buying some sort of electronic device bigger than a phone, for playing games on, maybe watching video (TV episodes, trashy movies), maybe listening to music, probably to take with you when you are out and about. Maybe for a Significant Other, maybe for a child. The kFire will be on your shortlist once it exists. Let's say, further, you decide to pony up and get it right when it comes out. It arrives on your doorstep in the middle of November, right when you are about to start thinking about doing your holiday shopping for friends and family, some of whom are near and some of whom are not.

You just got _Prime_ when you were about to start your holiday shopping. I'm betting that you check Amazon for every damn present you buy, and free shipping could tilt you to making any given purchase at Amazon rather than ... anywhere else. (I know how this works. I _pay_ for Prime and I can see it in my behavior. And even if I couldn't, I have a little audio recording in my head of an elf-like man with an amazing laugh explaining how the goal is to increase the amount we get from each customer, because there are only so many customers out there.)

Here's what how CNN interpreted what iSuppli said:

http://www.cnn.com/2011/09/30/tech/gaming-gadgets/kindle-fire-price/

The author correctly understands that the foolish person at Piper Jaffray made an oopsie. And they get the diaper thing into the last sentence or two. But I don't think that author has figured out the implications of deliver-product-mid-November-with-one-month-free-Prime. I know _I_ didn't notice until quite recently.

Really quite diabolical. In a yummy sort of way.
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