Why Amazon needs a continued Kindle win
Amazon (AMZN) is running a big special on its Kindle Fire HDX for some existing customers: Pay 25 percent down and the balance in quarterly automatic credit card payments over the next year. Is it a sign of desperation? No, it's more likely that CEO Jeff Bezos continues to seed the market, looking for the company to make its money in the long run, not off the devices so much as all the media Amazon thinks owners buy.
It's difficult from the outside to know how many Kindle tablets Amazon pushes out the door. Unlike Apple, the company doesn't release the actual numbers. Instead, there are statements like the recent ones declaring the biggest holiday weekend sales for the product and that the Kindle Fire HDX and Kindle Fire HD were the best-selling items during the Black Friday to Cyber Monday stretch. And Amazon's operations in China said that over the last six months, Kindle sales had "exceeded expectations" and "proven very encouraging."
Such highly specific statistics may seem suspicious. There's always the considerable possibility that a marketing group is sifting through all sorts of numbers to find something good to say. Clearly Amazon has its work cut out given competition from the iPad and Android-based tablets. (Amazon actually uses its own variation of Android for the Kindle.)
But the PR positioning and promotional push is far more than trying to outdo Apple, Samsung, and the like. Indirect indicators show how the Kindle family is increasingly important for Amazon. Look at its book business: Out of its top 20 best sellers, only one sold more in print than e-book form. The prices are lower, but there are no warehouse inventory costs and fulfilment is next to nothing.
Mobile gaming has become strong for Amazon. There are more people using Kindle Fire tablets to play mobile games than Nintendo 3DS and DS, formerly the standard-bearers. A different type of game, certainly, but an area where volume will become important.
Add music and videos and you're talking about a huge part of Amazon's business. The company cannot afford to allow competitors to become the dominant platforms for media and electronic entertainment, because then it runs the risk of being made obsolete. That is why selling the product for roughly the cost of manufacture, or offering no-interest installment terms over a year, aren't enough to upset Bezos. He knows how much losing the battle would run.