Amazon announced today that it was cutting the price on both versions of its largest Kindle device, the Kindle Fire HD 8.9. The WiFi only version of the tablet was priced at $299 in the U.S. and will see its price drop to $269. The price cut for the 4G enabled version is more dramatic, going from $499 down to $399. According to Amazon, they sell their Kindle devices at cost. With the impending release of the device to several new markets including the U.K., Germany, France, Italy, Spain and Japan, Amazon claims they have achieved some new economies of scale as they ramp up production to meet the expected demand from the new markets.
Amazon sells their devices at cost as part of a strategy to make their profit selling content for the devices, whether it is books, movies, magazines, games or other digital products. A small amount of profit is also made selling accessories for the devices. This strategy depends on Amazon selling a lot of units, something some analysts don’t think is happening. Chad Bartley with Pacific Crest Securities cites sources in the supply chain who have told him demand is weak. Others, like BGC Partners’ Colin Gillis, think the price drop is part of the normal sales cycle that slows down during the first part of the year.
If you have been eyeing a Kindle Fire HD 8.9, now may be the time to make your move.