Forbes reports that the Kindle Fire may be “more profitable than expected” despite being (allegedly) sold at a loss. A market research company polled 216 Kindle Fire owners and determined that the average Kindle Fire owner will purchase $136 in digital goods over the lifetime of the device, giving it a cumulative operating margin of over 20%.
Of course, as Nate Hoffelder points out at eBookNewser, this is just an estimate. And for that matter, 216 Kindle Fire owners is a remarkably small sample size considering just how many of them Amazon is estimated to have sold.
I would also point out that the veracity of those claims that the Kindle Fire was sold at or near a loss has always been under question—as many conflicting estimates as there were, it’s unclear who to believe on the matter of how much the units really cost.
At any rate, it’s hard to be surprised over this. Amazon didn’t get to where it is today by throwing money away, and we all know how often analysts don’t really know what they’re talking about. If Amazon ever seems to be doing something that doesn’t make financial sense, the right answer is usually to keep watching rather than to point and laugh.
If you are going to use this kind of accounting, then apply it consistently to all similar devices. Apples to apples, oranges to oranges. Otherwise, it’s just not helpful.