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Yep, but that's just the build.  Completely skips marketing, them paying for our wireless, licensing, shipping costs for getting components, the actual cost of assembly (no way it costs $8.66 to assembly), or the cost of the warranty.  It's basically a list of the cost of buying the parts.  I bet their profit on the first run is less then 10%, and increases with subsequent runs as they are able to negotiate deeper discounts, the initial marketing push is ove, and bugs are worked out of the system (fewer bum units produced). 

L
 

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Does not include the cost of assembly, shipping of component parts,shipping of completed Kindle, advertising and many other items that would be involved in the total cost. Plus, as the auto manufacturers have proved, you can't continually operate in the red and expect to stay in the business.
 

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"Voracious readers fear not: there still exist justifications for purchasing the Kindle 2, despite its hefty teardown price -- but only if you consume many books per month"

I love when people who don't like the kindle point out that it is not cost effective because they only read one book a year or don't read alot.

Yes, the kindle would not be a good purchase for you  :)

If you only listen to one song a year...you probably don't need an Mp3 player either (unless you listen to books or podcasts more)

 

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I would expect that one of the largest cost components for the Kindle is Research & Development.  Even though the e-ink screen was developed by someone else, it still takes a lot to figure out the best way to put everything together into a marketable product.
 

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When you consider all the costs they didn't account for and add in a certain level of profit, I'm starting to think that $359 is a good deal!
 

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A BIG cost is the software development and updates.   And how could they know how much the enclosure costs? Really, come on, do I believe some one that "estimates" the cost of a custom component at 4.45? Don't think so! :p
 

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I love the line about  "When the conversion costs -- manufacturing expenses and the battery -- are stripped away, the price inflation weighs in at more than 50 percent" So, basically, it says, if you don't count half the cost of making this thing...
Or how about "For instance, the teardown company does not factor in software, intellectual property, licensing fees, shipping, logistics marketing, or any of the other components necessary to not only have a physical device, but a physical device that functions."
I though it was a wonder device before..now I think it's a wonder device at a great price!
 

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The parts-only cost of assembling a Kindle is about $185, according to an analysis done by iSuppli. Of those parts, the e-ink display is the most expensive, at about 42% of the parts costs.

Personally, I'm surprised how expensive those component parts are. And when you add in the advertising, shipping, customer service costs, WhisperNet costs, etc.... I'm sure Kindle is a great business for Amazon but it doesn't feel to me like the $359 price is out of line, given those (presumed) baseline costs.

More info here: http://www.ibtimes.com/articles/20090422/what-does-it-cost-build-amazon-039kindle-2.htm
 

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I feel that this article is totally slanted and is just meant to cause undue outrage about the Kindle's price while telling only part of the whole story (physical costs).  I agree with all the above posters about the other costs associated with the Kindle.  Amazon's R&D $$$ alone must be through the roof not to mention Sprint's bill for the wireless, marketing, software development, book conversions, and free shipping, etc.  Just another irresponsible article based on misinformation and half-truths.  I actually feel better about the price now and feel that at $359, it's a pretty good deal when you think about the all the REAL cost of bringing Kindle to market. 
 

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In other news did you see the shocking news that restaurants charge more for meals than the ingredients costs?

;D

 

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The reality is that the money is not in the Kindle.... it is in getting people to buy e-books. I have a father-in-law who had a printing business - sold industrial-size printer and the media that goes with them. The printers costs thousands, but the profit margin is slim. The company made its real money in supplying ink and printing media. The Kindle is the same way, I am sure. $9.99 for books that require no storage, no shipping, no manufacturing costs - just royalties?  They could make $20 off each Kindle - as long as we keep buying e-books, it still works out well for Amazon in the long run. Hopefully the prices will come down (on books and Kindles) as the sales volume increases. But no matter what, once they get a toehold, it's a moneymaker...
 

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mwb said:
In other news did you see the shocking news that restaurants charge more for meals than the ingredients costs?

;D
I know, the gall of some companies out there trying to make profit, as if that was what they went into business for in the first place!
 

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But even if amazon is making a bit of money and turning a profit off of us kindle owners isnt that what most buisnesses try and hope to do every single day?

In these times Im sure there are ALOT of other people and other very large companies that only wish they had a certain product that they could market and generate as much Buzz to help turn a profit for their company. On top of that this article is very skewed and one sided.

Naturally all of us would love a less expensive kindle but at the same time I dont mind paying the money to get a great product that I love.
 

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Chad Winters (#102) said:
"Voracious readers fear not: there still exist justifications for purchasing the Kindle 2, despite its hefty teardown price -- but only if you consume many books per month"
I don't even agree with THIS statement! I had a huge stack of books on my nightstand when my Kindle arrived in late February, so I haven't bought many Kindle books yet --- but I can justify the purchase just for the subscriptions I've enjoyed. I *LOVE* reading the NY Times, Newsweek and The New Yorker on my Kindle. I'm sure I'll add more magazines as time goes by.

I love it that I can read newspapers in bed (I use white sheets, so imagine if they were the newsprint version!), and I love it that the papers and magazines don't stack up everywhere (I am slow to recycle the papers, and I have a very hard time parting with the magazines.) The Kindle is the perfect vehicle for me.

When my Kindle arrived, I had already purchased the entire year's list of books for my Book Club, plus I had stocked up at a Friends of the Library book sale. Eventually, I'll buy more books, but I'll still shop flea markets and FOTL sales. Even if I use my Kindle primarily for periodicals, classics and only occasional full-priced Kindle books, I can say this was money well spent.
 

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mwb said:
In other news did you see the shocking news that restaurants charge more for meals than the ingredients costs?

;D
MWB, very apt analogy!

I wrote this today on my blabspace and will just add it here because it so boggles my mind and I see others are saying similar things.

"COST OF THE KINDLE PARTS
I've been amused by the reaction to recent articles about the cost of Kindle components, this reaction actually equating the cost of components for the Kindle to the cost of "building" a Kindle and deciding that the amount over $185, from the $360 price, is all profit to Amazon.

For some reason, those writers don't factor in what happens after the builders buy the components. What about the hardware expertise to make all those components work together well toward some desired end and the software expertise and mucho labor to make that happen? After selecting the components that would function well together and readying the hardware and software conditions that make it happen without problems (involving a lot of paid people), then there's the mass assembling, transportation, warehousing, marketing, distribution, and management of inventory, plus (in Amazon's case) extensive customer support that's almost instantly reachable and normally more responsive than the usual (the one exception being Amazon's non-response about the lighter font issue of the Kindle 2 vs the Kindle 1). Can people be this naive about costs beyond buying the parts? I've been surprised though.

Then there's the prepaid Sprint wireless, always 'On,' global net access which normally costs $30/mo. to have (minimum limited services). That alone can cost $360, though I'm sure Amazon has a very good deal on it as long as we don't overdo the accessing (I might)."

So, the complaints after that article are based on never having spent any time running a business or even taking bus. admin 101 to make sure one's business doesn't fail, or even just not thinking.
 

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katsim said:
The reality is that the money is not in the Kindle.... it is in getting people to buy e-books. I have a father-in-law who had a printing business - sold industrial-size printer and the media that goes with them. The printers costs thousands, but the profit margin is slim. The company made its real money in supplying ink and printing media. The Kindle is the same way, I am sure. $9.99 for books that require no storage, no shipping, no manufacturing costs - just royalties? They could make $20 off each Kindle - as long as we keep buying e-books, it still works out well for Amazon in the long run. Hopefully the prices will come down (on books and Kindles) as the sales volume increases. But no matter what, once they get a toehold, it's a moneymaker...
As has been said by some authors and publishers, Amazon's contract calls for paying 35% of the LIST price. So if list is $25 and the books is discounted to $9.99, Amazon still pays 35% of $25, which is almost $9. I imagine that's why the non-current best sellers that are new are going for more. Amazon already priced the best sellers about $2 below Sony's pricing.

But they're reeling us in, and that's smart.
 
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