Amazon Bets Right on Kindle Pricing

Some observers understandably have worried that Amazon faces financial risk by pricing Kindle Fire devices at cost, or slightly below cost. The contrast is provided by Apple, which makes healthy margins (30 percent or so) on its devices.


But Amazon has a different business model. It wants to populate the market with Kindles that drive content sales. Apple creates content capability only to sell devices. 


The early evidence suggests that Amazon made a good bet. Device sales are driving higher content purchases.