Great article at ZDNET about Amazon's math for a subsidized tablet

For many companies, subsidizing the Kindle Tablet wouldn’t make much sense, but Amazon has unique assets. Here’s a look at the numbers behind the Kindle Fire.

• $250: Cost to manufacture the Kindle Fire, according to Piper Jaffray estimates.
• $199: Price of Kindle Fire.
• $50: Estimated Amazon loss, according to Piper Jaffray.
• $79: Cost of Amazon Prime subscription.
• $28: Net gain on a Kindle Fire assuming every tablet buyer becomes an Amazon Prime subscriber for one year. Conservative estimate since Prime subscribers spend more.
• 10 to 20 percent: Potential earnings downside if Kindle Fire is a huge hit, according to Piper Jaffray. Caveat: Prime subscriptions could drive physical good sales.
• 160 basis points: Estimated operating margin decline in the fourth quarter based on increased media and device expenses, according to Barclays Capital analyst Ben Reitzes.

You can read more here]]>