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Peter Osnos:

During a BBC interview the other day, Amazon CEO Jeff Bezos, in an uncharacteristic moment of revelation, disclosed that the company makes no profit on its various Kindle devices. “We sell the hardware at our cost, so it is break even on the hardware.” Why then is Amazon is so aggressive in its development of ever-more refined e-readers and tablets? “What we find,” Bezos explained, “is that when people buy a Kindle they read four times as much as they did before they bought the Kindle. But they don’t stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books.” The Bezos strategy is clearly aimed at driving profit margins through hard bargaining with publishers, whose dependence on Amazon as a principal retailer has been growing significantly each year.

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5 thoughts on “Amazon’s Kindle Strategy”

  1. Ryan says:

    I’ve said it before and I’ll say it again: The same principle applies to music as it does to books for me. I’ll pay more for a vinyl record over a cheaper CD if it has a coupon for a digital download inside. That way, I can enjoy it both ways. If publishers started doing this, I’d still read 4x times as much (because that part was true) AND I’d pay for a physical copy of the book.

    Everybody wins.

  2. Tom says:

    Both my wife and I have a Kindle. I have the e-reader, and she has the Fire. I have purchased several books for my Kindle, but there are still some books that I prefer to have in print or via Logos. That being said, I read an article the other day about the fact that I do not actually “own” the books I’ve purchased via Kindle, which seems a bit troubling to me. Kindle can revoke my “license” to the book content at anytime. So, in actuality, when you “buy” a Kindle book, you are paying for a license to view the content; you do not own the content.

    1. Dave says:

      Stories like this one looking Amazon in one instance deleting all a woman’s past purchases from her Kindle and banning her from Amazon without any (real) explanation deserve more attention.

  3. kpolo says:

    By selling at cost price, amazon is driving tons of publishers out of the market. once they get a monopoly, it will be hell for everyone.

    1. Amazon isn’t a publisher as far as I can tell. They are a distributor. They are competitive, yes, but smart. their competitors just need to be as creative in vying for market share. Ultimately, it seems, Amazon’s driving up demand results in more people reading. Although Amazon may pull ahead in sales, their competing distributors may see marginal improvements in sales as the culture as a whole improves its literacy.

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Justin Taylor, PhD

Justin Taylor is executive vice president of book publishing and book publisher for Crossway and blogs at Between Two Worlds. You can follow him on Twitter.

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