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October 12, 2012

Amazon Hopes Kindle Will Ignite Book Sales and Reading

By Tabitha Naylor, Contributing Writer

CEO at Amazon Jeff Bezos recently shared with the BBC the business model behind the Kindle Paperwhite, and it stands in stark contrast to that of it fiercest competitor, Apple (News - Alert)

Bezos stated that the Kindle – and its newest incarnation, the Paperwhite, which features a built-in light – is sold at approximately the same amount it costs to build. Unlike Apple, which builds a hefty profit margin into its devices, Amazon earns rewards from the content which is played on the Kindle.

The Kindle Paperwhite was recently released in the U.S. and will be released in coming weeks in Europe. Along with the new device, consumers in the U.S., U.K., Germany and France will be able to enroll in an associated book lending program called Lending Library. This program will permit consumers to borrow a book each month from a library of Amazon’s authors.

In the U.K., the Lending Library selection of ebooks will top 200,000, while in the United States, the selection is estimated at 180,000.

Bezos detailed the business model surrounding the Kindle by saying that Amazon makes money from the use of the device rather than the purchase. He attributes success of the Kindle to the increased reading habits of past purchasers. 

Consumers who purchase a Kindle read four times as much than they did prior to the purchase. This increased reading is not necessarily limited to ebooks on the Kindle. Many of the increased book purchases occur in paper formats as well.

 The Lending Library program is tied to Amazon’s Prime Service, which promises free two-day shipping on many items, as well as streaming from Amazon’s library of movies and TV shows.

Amazon hopes to leverage consumer presence on Prime into future revenue. Investors in Amazon are concerned that because Prime’s revenue is not published, Amazon’s Kindle business model cannot be accurately evaluated.

Edited by Braden Becker
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