Kindles Getting Cheaper, and Huge: 10 Percent of Amazon's Business Next Year
Amazon's Kindle e-reader, a gawky novelty just three years ago, is now a big business getting bigger. Really big. — Jeff Bezos and company continue not to release sales numbers for the devices, but everyone else keeps guessing.
Context & Ripple Effects
The Kindle's scale has been an open guessing game since launch: back in February 2009, Citi estimated Amazon had sold just 500,000 Kindles and projected a $1.2 billion business. By December 2010, Bloomberg was reporting that holiday-quarter sales had run about 60 percent past estimates. Today's report — the e-reader heading toward 10 percent of all Amazon revenue next year, alongside fresh price cuts — is the point where analysts stop treating the device as a novelty line item.
The price-cut confirmation fits a pattern Bezos himself defended at this week's Seattle shareholder meeting, saying Amazon is 'willing to be misunderstood for long periods' while it invests ahead of profitability. That same playbook showed up two weeks earlier when Amazon sold Lady Gaga's new album at 99 cents, with Billboard sources claiming the company lost millions on the promotion.
First-order effects
- Confirmed price cuts mean every incremental Kindle sells thinner hardware margin, while the installed base — and the book, magazine, and app purchases it feeds — grows faster than the revenue-per-device math would suggest.
- Amazon continues releasing no unit numbers, so Wall Street's Kindle models stay built on third-party estimates like Citi's and Bloomberg's, keeping forecast error — in both directions — baked into consensus.
Second-order effects
- If the device is priced as a gateway rather than a product, the economics resemble the recent Born This Way sale: absorb a visible loss on the entry purchase to win the recurring relationship, forcing any rival e-reader maker to match the subsidy or concede share.
- The 2009 question of whether Amazon would open the Kindle to outside developers becomes more urgent as the device approaches a tenth of revenue — a platform-sized audience raises both the payoff and the risk of keeping it closed.
Third-order effects
- The pattern points to consumer electronics where hardware is sold near cost and profit migrates to the attached media and services spend — an industry structure in which whoever owns the storefront captures most of the value.
- Persistent non-disclosure of unit sales, paired with Bezos's stated tolerance for long stretches of investor misunderstanding, signals a governance style in which Amazon expects markets to price its investments wrong for years before they pay off.
The trend: Dedicated reading devices are shifting from profit-bearing products to subsidized storefronts, with the seller recouping the difference through attached content purchases over time.