Re: Kindle first-year sales

I don't have any information about Amazon's costs, Kent, but I seem to remember hearing 
that Gemstar was spending $12 million a year on its ebook readers and online bookstore 
at the point at which it pulled the plug on that business venture.  That seemed like a lot to 
me at the time, considering that they never undertook a massive advertising campaign for 
their readers (one was rumored at one point but never materialized), but I'm not clear how 
efficiently they were operating.  

My dim recollection is that Amazon when bought Mobipocket 3 years ago the price was $2 
million.  From a publisher's standpoint Mobipocket is a pretty highly automated system, 
so it may not need a large staff to run it.  Gemstar had a technical staff that checked 
publishers' submissions individually for proper formatting and rendering, but Mobipocket 
has always assumed that it's in publishers' interests to have their ebooks provide a good 
customer reading experience and just allows them to upload titles directly to their website.

Creating the Kindle Store and linking it to Mobipocket's content was presumably done by a 
"two-pizza team," and creating the .AZW format perhaps by a second one, so there 
probably weren't huge costs there.  Hardware R&D and manufacturing could certainly be 
big-ticket items though, especially bankrolling substantially increased production capacity 
for E-Ink displays.  

However, Amazon may have held off on ramping up production capacity until it could 
assess market reaction to the Kindle.  That would be consistent with the Kindle selling out 
so rapidly but Amazon not releasing sales figures or the sales ranking, which are probably 
unimpressive so far.

WhisperNet could certainly be a major expense, but I've seen speculation that Sprint 
receives revenue based on downloads from the Kindle Store rather than a flat monthly fee 
per device from Amazon.

Print, radio, and television advertising shouldn't be much of an expense for the Kindle 
because giving it and the Kindle Store prominence on Amazon's website is probably about 
as effective as anything else would be, especially given Amazon's success in getting media 
coverage for its introduction.

Sony does indeed seem to be selling its readers through some online retailers as well as in 
in its Sony Style stores. but not so far at places where you might expect to find it like 
Staples or OfficeMax.  It can be purchased online from Borders, where its status is listed as 
"In Print."

John

--- In [email protected], "Kent S. Larsen II" <kent@...> wrote:
>
> At 1:41 AM +0000 12/14/07, John Landahl wrote:
> A thread on the MobileRead forums contains a link to a brief summary of a
> Forrester report
> saying that Amazon "...will be lucky to sell more than 50,000 units in its
> first year."
> 
> 
> Hmmm. While I've not followed everything about the Kindle, from what I've
> seen Amazon is the only place you can purchase one (except for aftermarket
> sales on ebay and the like), and they aren't really discounting them, right?
> 
> So 50,000 at $400 each is $20 million.
> 
> What was Amazon's development costs? Do we know? All I can find is that it
> took 3 years to develop.
> 
> If its less than $10 million, I think you would have to call the Kindle a
> success, at least financially. I'm sure that Amazon is at least doubling
> the manufacturing costs per unit, and its probably doing much more than
> that.
> 
> If the Sony machine is $300 and they are selling them through traditional
> retailers, I'd guess that their manufacturing costs couldn't be more than
> 30% or 40% of retail, and probably much less.
> 
> Does anyone have any insights on these costs?
> 
> I'm curious!
> 
> Kent
>





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