Amazon Makes More Than $100 Off Each Kindle Fire

The hardware and manufacturing costs of the Kindle Fire may exceed the device’s retail price, but Amazon is not losing any money on it.

Every Kindle sold is another annuity revenue stream for the company, strengthening its core retail business. And according to RBC, that revenue stream is larger than you might expect. A new survey by the investment banking firm concluded that each Kindle Fire generates well over $100 in additional income, which more than makes up for the $2 to $3 Amazon reportedly loses on each sale. “Kindle Fire unit economics are likely to be more favorable than consensus expectations, based primarily on frequency of digital goods purchases,” RBC Capital analyst Ross Sandler said in a research note to clients. “Our assumption is that Amazon could sell 3-4 million Kindle Fire units in Q4, and that those units are accretive to company-average operating margin within the first six months of ownership. Our analysis assigns a cumulative lifetime operating income per unit of $136, with a cumulative operating margin of over 20 percent.” So: an additional $136 over the lifetime of the device. How are Fire owners spending that money? Mostly on e-books.