While Amazon is tight lipped about its business strategy, analysts generally concur that Amazon is not in the Kindle business to make money on devices, but rather is in the business to make money on content. In fact, according to most estimates, Amazon loses money or simply breaks even on device sales. Business Insider’s new tech industry research service BI Research, has analyzed the entire Kindle ecosystem and theorized about Amazon’s plan to make money from Kindle in the long term.
Here is more from Business Insider: “Right now, Amazon generates 45% of its revenue from the sales of physical media–books printed on dead trees, DVDs and the like. This form of media distribution is, slowly but surely, going the way of the dodo bird (or at least the tiger). No one knows when, no one knows how, but it’s happening.”
The piece argues that while Amazon likely doesn’t make much money on hardware, eBook sales, MP3 sales, video streaming, apps or ads, they probably will in the future and building out the ecosystem now is the way to do so. Here is more from BI: “But if Amazon gets millions or tens of millions of cheap media tablets in the market it will also be very well placed to make money from other kinds of media, as it will have the kind of distribution that will allow it to get better deals with content owners.”