Amazon gets BURNED, or iPad puts out Fire's fire

Discussion in 'iPad' started by PracticalMac, Oct 19, 2011.

  1. PracticalMac, Oct 19, 2011
    Last edited: Oct 20, 2011

    PracticalMac macrumors 68030


    Jan 22, 2009
    Houston, TX
    (I decided iPad forum is most appropriate for this)

    Bloomber news predicts huge sales for Kindle Fire, but the stunning part is Amazon will loose $10 for each Fire they sell. The report goes on saying Amazon will need to sell about $500 in media to make up the cost of a Fire. (WTH???)

    In my simpleton mind (correct me if I am wrong), the report suggests Amazon will lose millions of $$$ if Fire is a runaway hit.
    Of course with iPad, Apple makes a tidy $166 (give or take) for each base model iPad sold.
    Score: iPad

    Now, I think Amazon is using the Game console and Ink Jet printer model of sales: loose money on the player/maker, make money on the media/supplies which is great if one has total control of the media. As we all know, you can buy books on iPad and Android, as well as movies and other media.
    I cannot see how the heck Amazon will have a compelling product advantage with Fire.
    Score: iPad (and other Android devices) (unless Amazon stops selling to other devices).

    [​IMG] (the-eBook-and-eReader-Market-in-Pictures
    Amazon has a clear lead selling eBooks, but it just started selling music, and I am pretty sure no video (since Fire is first color Kindle).
    But I just think Amazons older readers will steal the show here since most books are still black and white (rapidly changing)

    Score eBooks: Old Kindle, especially the 3G versions (for a short time until more colorful books are plentiful)

    Video content is pretty much in iPad's favor becuase of iTunes, but that wont stop people from d/l movie files from net into Android.
    But how good is Fire at playing video? For sure, at 8GB of memory, cant store too many files in it.
    Score: slightly iPad.

    Fire out iPad the iPad?
    It is so bare bones (not even 3G or Bluetooth) and reportedly simple to use, one wonders that after the newness factor is old people start to look for more?

    Tell me if I am off base, but Fire looks like it will be a disaster for Amazon no matter what happens, both in that each Fire sold will cost Amazon plenty (per device sold), or by users who think Fire does not light their fire and don't get it, or worse, return it.
    I think after the initial buying spree reviews will be middling and sales fall. Oh, I am sure Fire will have strong sales and do well, but not threaten iPad.
  2. jsh1120 macrumors 65816

    Jun 1, 2011
    I agree completely. After all, those analysts who maintained selling electronic versions of books over the web were absolutely right. Amazon lost its shirt on that one.
  3. palpatine macrumors 68040

    May 3, 2011
    I am sure it will do well. It will make Amazon lots of money, probably mainly through ebooks, movie, music, and prime memberships.

    Apple will make lots of money on their iPads as well. It isn't a zero sum game. That explains why people (like me) buy Kindles and iPads.
  4. vitzr macrumors 68030


    Jul 28, 2011
    Epic fail, if one cannot understand basic business.

    Obviously there's a complete lack of understanding about the Kindle Series.

    Amazon will sell these in massive volume. Anyone who's used a current generation Kindle will understand.

    I have had three Kindles, as I upgrade each product cycle, the same way I do with iPads. These two are each unique and have their place in the market.

    I find an iPad AND Kindle are must have devices for my needs. They're each exemplary at what they were designed for.

    There's more than enough room in the marketplace for both. Why Apple worshipers are so obsessed with "the Win" is really quite childish.
  5. 4DThinker macrumors 68020

    Mar 15, 2008
    Bloomberg doesn't know the power of quantity buying. The higher quantity of parts you buy the cheaper they are. Sell 5 million and what everything thinks is a $210 device actually costs the manufacturer as little as half that. And even if it does cost $204 to make Amazon will make that $5 back plus far more in content/product sales within the first 30 days to see plenty of profit.
  6. jsh1120 macrumors 65816

    Jun 1, 2011
    In the first place the belief that it costs Amazon $209 to build the Fire is pure speculation. Googling that topic produces the usual blizzard of hits all based on the same analyst's estimates. Other estimates place the cost at $160.

    "...But UBM TechInsights, another specialist in the field, on Wednesday produced a $150 cost estimate that indicates the hardware turns a profit on its own. That figure doesn’t include fees associated with manufacturing, which the firm estimates might take the total to slightly above $160..."

    Furthermore, Amazon has been spectacularly successful in the past in squeezing the cost of their inventory. There is no reason to suspect that they will suddenly begin to fail at that practice.

    Additionally, Amazon will likely be quite successful in driving new purchasers to their "Prime" membership, a $79 annual charge that costs Amazon virtually nothing in delivering electronic content.

    The nay saying comes from investors who would like to see a higher per unit profit margin out of Amazon. Not exactly a surprising point of view of investors who want their investments to pay off yesterday.

    All in all, Jeff Bezos and Howard Schultz have a lot in common. Each is a Seattle entrepreneur. Each started a business that most observers thought doomed to failure. ($3 for a cup of coffee????). Each has managed to survive rather well. I wouldn't bet against either of them.
  7. hcho3 macrumors 68030

    May 13, 2010
    What is the difference between Amazon kindle fire and saying like selling xbox 360?

    When Xbox 360 launched, they were selling the system at a loss. They made profits by selling games and accessories.

    Same thing applies here.

    10 dollars is not that much of a loss for company like amazon who has billion of dollars in cash reserved. They also have great distribution on selling games, acessories, apps, music and books.

    These analysts are just fools.
  8. zap2 macrumors 604


    Mar 8, 2005
    Washington D.C
    Amazon's being selling music for a while, and often I've found their prices to be better then iTunes, although I also have found a few songs that weren't on Amazon that were on iTunes, but that's just one person's experience

    I think Amazon's plan is the sale of media as you said, but also to work down the price of their hardware over time, so they don't have to lose money to have a fantastic price point)
  9. neutrino23 macrumors 68000

    Feb 14, 2003
    SF Bay area
    I'm skeptical that Amazon will sell very many Fire tablets. The pundits have a rather spotty success record on this sort of thing.

    Clearly the Fire has gotten a lot of attention. But what can you do with it? It is not a tool for students, sales people, executives, doctors, pilots, nurses, etc. It is a gadget that helps you shop at Amazon. That's worth $200? I can shop at Amazon just fine with the laptop I already own for no extra charge.

    My sense is that a lot of people are thinking that many other people will buy the Fire, but they won't get it themselves.

    We'll see. I may be wrong.
  10. JSalig macrumors 6502

    Oct 30, 2010
    I highly doubt the Kindle Fire is a threat to the iPad.

    Would I bet money on it? HELL NO! And I don't think very many people in this forum would either. This is Amazon we're talking about. Not Samsung.
  11. transam7816 macrumors regular

    Mar 7, 2008
    This is what I think. Amazon starts selling the Fire like crazy. They get a huge user base to believe in the product and when they release the next product (the better version of the Fire) they will make a profit off of that one.
  12. blackNBUK macrumors 6502a

    Feb 19, 2010
    A couple of differences come to mind. Firstly the cost of console games is closer to the cost of a console. It's going to take a very long time to make any significant profit selling dollar Apps.

    Secondly Amazon doesn't have complete control over the pricing of some of things is sells (music, books, Apps, downloadable videos) The pricing level is set by the market and/or the content owners. Most of these items are also available for purchase without a Kindle Fire and therefore Amazon can't raise the price for Kindle owners. Because of this there isn't an easy way to add in extra margin to cover the cost of the tablets.

    I'm sure that the guys at Amazon have done their sums and think it makes sense. My guess is that it's more complex than the console model and Amazon's aim is to make their platform 'stickier’. If you have a Kindle tablet then you are likely to spend more money, more regularly with Amazon.
  13. urkel macrumors 68030

    Nov 3, 2008
    oh boy, here we go. apple has a legitimate contender and the insecure superfans start gloating over misinformation from the same analysts that they regularly scoff at.
  14. Mac.World macrumors 68000


    Jan 9, 2011
    In front of uranus
    The Fire is an ereader+. It is designed to be an Amazon catalog and an ereader, with the one added feature of being able to surf the web. That's pretty much it. And with only 8gb of onboard storage it's not for those wanting to store lots of apps, games, music or videos, you know to take with you on the go. It's also not great for reading outdoors.

    So who will buy this AND keep it? I'm guessing the Fire will have a 16% return rate, after people realize it's not like the iPad at all.
  15. palpatine macrumors 68040

    May 3, 2011
    ebooks, movies, unique browsing experience, emails, music, and cloud storage for less than half the price of an ipad, and less than an ipod. it is pretty impressive, and will have huge appeal, especially among kids. a parent who would balk at sending their kid to school with an ipad might see this as a much less risky prospect.

    my guess is that it pretty much covers everything most people do on the ipad, so it will be a keeper. i prefer my ipad, but taht's only because the fire doesn't fit my use case (work , reading pdfs, etc).
  16. Detrias macrumors member

    Jan 11, 2011
    Like another member mentioned there are a few reasons as to why this comparison isn't accurate. The most important being that a console mainly is used for consuming something that otherwise u cant get. Xbox 360 games only play on a 360 so if want it, u NEED an xbox to play one.

    Another key difference is the fact of the product cycle, u can sell at a loss for a while on a device that is gonna last for long (the xbox got 5 years with just mild modifications to it), the fire in the other hand will be outdated by the time it comes out (crippled hardware to lower price) so by the end of the first year an updated model will have to come giving it a really small window to make up for the loss and make a profit on top of that. Also the fire doesn't have anything "exclusive" to it and if its really being sold at a loss then all i can say is that it probably wont fare well with them.

    From a business perspective to me is really dumb to make a product which is targeted to "cheap" people looking for a tablet yet u expect to make a profit thru add-ons which on average most owners wont buy and with nothing "special" about the product besides the price .
  17. TrollToddington macrumors 6502

    Feb 27, 2011
    Exactly my thoughts. On the other hand, this might be a part of Amazon's advertisement program. Build a console which your customers use to purchase from your shop. Whenever someone sees Kindle they think of Amazon. It's an invaluable marketing tool. Seen from this perspective, the Fire is not a flop at all.

    Will I buy a Fire (when it becomes available in Europe)? No, the 7" screen is too small for me to show off the pictures I've taken with my DSLR. From my point of view the iPad is not expensive as it can hold all of my pictures and there will be absolutely no need to print them out and to buy photo albums. I can actually throw away my printed albums and free some space on the shelve. The IPS screen is so gorgeous.

    I also can't imagine me browsing on a 7" - it's too small.

    My conclusion about the Fire is - you get what you pay for.
  18. jsh1120, Oct 19, 2011
    Last edited: Oct 20, 2011

    jsh1120 macrumors 65816

    Jun 1, 2011
    Well, they've presold several million to "other people." As for what you can do with it...

    () Surf the web including...yup...flash websites.
    () Listen to music
    () Read books and magazines
    () Watch movies
    () Receive and respond to email
    () Maintain a calendar
    () etc. etc. etc.

    You're right. You might be wrong.
  19. gus6464 macrumors regular

    May 27, 2007
    I preordered one the day it was announced because I find a 7in screen a lot more comfy when reading a book than my iPad. And with it I will be able to read a book while listening to some music or a podcast. Both devices definitely have their uses and can easily coexist. Now if Apple would get off their butts and release an iPad mini that would be a whole different story.
  20. bearcatrp macrumors 68000

    Sep 24, 2008
    Boon Docks USA
    It's definitely the software where the money is at. When most schools switch to tablets, the education software is ripe for the picking. More and more schools are switching now. What better way than to give these kids a cheap tablet. Big money in education K-12.
  21. Mac.World macrumors 68000


    Jan 9, 2011
    In front of uranus
    This is really where I see Amazon selling. To your demographic of readers. And to the Amazon junky demographic. The ability to surf the net is just a bonus. But a lot of people are going to find out real quick how limiting 6gb (of actual storage) really is! You can make the claim that the cloud is great and wonderful, but what do you do when there is no wifi? What happens when your data gets "lost" aka deleted from the cloud? Yes, it happens folks. I prefer to keep my purchased and important data in physical memory that only I have access to.

    Hell, now that Steve is gone, maybe Apple will follow suit and create a 7" cheapo tablet too? I don't know. I just can't imagine buying anything with less than 16gb of onoard storage though. That is a bare minimum in my book. Apps take up too much space. Just wait til those Fire buyers find this out. Should be entertaining.
  22. coldmack macrumors 6502

    Dec 26, 2008
    You do realize that Amazon has streaming media service and a cloud service that gives you up to 20gb of free storage to store and stream music and videos from your own stuff and I think unlimited storage for content you bought from Amazon(I read when it was launched that bought content doesn't go towards your storage space). So, the 8gb is a bit lacking, but I think their streaming service, seems to even out the playing field a bit if you ask me. Plus, it runs Android, which in its own rights is a solid OS, just like iOS is.

    If that chart is true, the most surprising thing for me is that Sony has 12% of the E-reader market. It would have been more believable if it was say the Nook, as I have seen people actually own one, vs the Sony, which I have only seen in store.
  23. Mac.World, Oct 20, 2011
    Last edited: Oct 20, 2011

    Mac.World macrumors 68000


    Jan 9, 2011
    In front of uranus
    Yeah, gives you 50gb, dropbox gives you 5gb free... But you know what? That means didly squat without a wifi connection. And there is no 3G or Bluetooth capabilities. And of course no access to Googles Marketplace. Should be awesome on that camping trip, road trip, plane ride, and so on. Get my drift. Battery life looks pretty subpar too.

    And I can tell you right now, there will be a lot of people that will assume the Fire is just like the iPad, only cheaper. They will assume there will be cameras to do video chat. They will assume they can download from Googles marketplace, because gee whiz, this thing says it's running Android. They will assume it has Bluetooth capability for an earpiece or keyboard. They will assume many things and there will be many people like this. These are the people that will return the cheapo wanna be iPad and give negative word of mouth. Just watch. Stupidity can ruin a product.
  24. jsh1120, Oct 20, 2011
    Last edited: Oct 20, 2011

    jsh1120 macrumors 65816

    Jun 1, 2011
    My wife has a wifi only Kindle. Manages to struggle on just fine with 2 GB of storage (enough to store 1400 books.) And when she's away from our wifi at home and no other is available, she uses a mobile hotspot to get content at 4G/LTE speed.

    No, she wouldn't be using a Kindle Fire to host 150 apps. More like 10-20. But that's quite sufficient for what she does with a tablet. She's not going to store 2200 songs on a tablet as I do on the iPad but again that's not what she does with a tablet.

    The argument that consumers will be disappointed with a device like the Fire is roughly equivalent to claiming that an iPad is insufficient to be a high end gaming rig and as soon as they recognize that they'll rush out to purchase a liquid cooled, quad core desktop system for two to three times the price.


    Damn, you're right. Is that why I can't access the internet with my wifi only iPad when I'm away from a wifi network? Oh, wait. I can. I just use my 4G/LTE mobile hotspot that gives me internet access at 7-10 times the speed of the 3G iPad.

    No bluetooth keyboard. Right. Of course, my wife has struggled along without a keyboard for her smartphone without complaint. No access to the Android Marketplace. When my wife learns how to spell "Android" she might care. No camera for video chat. Don't use it myself. Wife doesn't use it. If the camera disappeared from my iPad tomorrow I might notice its absence in a year or so.
  25. Mac.World, Oct 20, 2011
    Last edited: Oct 20, 2011

    Mac.World macrumors 68000


    Jan 9, 2011
    In front of uranus
    I'll say it again, your wife is the perfect demographic for the Fire. I do not dispute that there are likely millions of people out there that this device is perfect for. But there will be a lot of people that are going to assume this is just like an iPad or that they will have access to Gogles marketplace... These are the people that are going to be disappointed and likely return the device.

    And my guess is still 2 million sold (to people) not sitting on shelves, this quarter, of which there will probably be about a 16% return rate.

    Yeah, how's that working out for you in areas with no signal? Does you 4g phone work at 33,000 feet? You get good signal in places like hospitals? How about on a road trip or camping trip in areas with no signal? How about when you leave the U.S.?
    Or are you one of those people that never go anywhere, so it doesn't matter? I've done a lot of travelling overseas, and I can tell you right now, the little Fire wouldn't last a trip to Europe. Battery would die long before you got there, not to mention the lack of storage would limit you to maybe two movies and a couple of apps. But to eqch his own.

Share This Page