Amazon Tablet just $249? Let’s Hope

Amazon tabletAmazon Tablet for just $249? That’s the recent rumor from tech analyst, Tim Bajarin (and others), who also predicts the device might cost Amazon as much as $300 to produce and sell.

Why take a $51 loss on an electronic device? Easy, to make it back plus a lot more over the following months on Amazon products and services. Simultaneously it could knock many out of a crowded tablet market: Acer, Coby, Samsung, HP, Motorola, Asus, Toshiba, Blackberry, Dell and more. Amazon’s device will be much less than those of competitors, many of which don’t have the infrastructure for content distribution and sales of books, music, video, cloud storage and everything within its Android App store. Bajarin says, “…over a two-year period, a person with an Amazon tablet might buy or rent 15 movies, stream or download 50 songs, buy 18 books, and pay $5 a month for cloud storage from Amazon. Then let’s say they also purchase five items through the tablet’s Amazon store… let’s throw in some advertising in this mix as well… Amazon would make back that lost $51 within six months and reap a profit of anywhere from 10 to 30 percent on the tablet over the last 18 months of the device’s accounting period.”

Many figure Amazon to be the only major player poised to take on Apple’s iPad as king of the tablet market (not to mention Barnes & Noble’s Nook Color which also happens to sell for $249). Due to Apple brand loyalty and its own ecosystem of extra services/products, my guess is a pair of kings would be just fine with Amazon as would saving face with customers who are on the fence or even recently jumped ship to B & N. Other rumors include the tablets may come in familiar 7 inch (code named-Coyote) and 10 inch (Hollywood) sizes. While the rumors abound, CEO Jeff Bezos has refrained from any public announcement other than telling us in May to “stay tuned.” Common sense see this happening well before Christmas if it’s a 2011 release. September? October? Inquiring minds want to know.

This lowest price possible strategy reminds me of something many Indie authors are doing to sell ebooks. They give away the first book in a series for free, then sell the sequels for 99 cents or $2.99. By taking an initial loss on the freebie, they gamble that future sales will come in bunches. Sometimes it doesn’t pan out, others times they sell millions of ebooks. Smart business, if you have a great product.

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