Amazon’s new line of Kindle Fire tablets cost considerably less than similar products from other manufacturers, including Apple, triggering speculation that Amazon is simply breaking even or even losing money on the sale of the devices.

The news came at an Amazon event yesterday, where according to a Wall Street Journal report, Amazon CEO Jeff Bezos said, “We want to make money when people use our devices, not when they buy our devices.”

Amazon launched three new HD Kindle Fires priced at $199, $299 and $499 and announced new pricing for a basic non-HD Kindle Fire of $159. All of the products have Wi-Fi capability and the $499 model also works with 4G LTE as well as HSDPA and slower-speed mobile data connections. The $299 and $499 models have 8.9” screens, while the $199 model is a 7” tablet.

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The lower-cost Kindle Fires are similar to Google’s Nexus 7,  which sells for $199 to $249 and is also a 7” device. The larger-screen Kindle Fire models are more closely aligned with Apple’s iPad, which starts at $399 and can run more than $600 when LTE is included.

Amazon is also undercutting Apple on the cost of its LTE connectivity plan. Users can purchase a plan directly from Amazon that includes 250 megabytes per month for $49.99 a year, the WSJ reported. In contrast, the WSJ noted that a similar plan for the iPad runs about $180 a year.

ZDNet reports that the underlying carrier for Amazon’s wireless offering is AT&T.

As for where Amazon hopes to make its money, ZDNet reports that every Kindle Fire HD will display ads on the lock screen when the device is not in use. In addition, Amazon is hoping to make money on apps and through memberships in programs such as Prime, which offers free fast-shipping on products ordered from Amazon and which also includes streaming video that could be viewed on the Kindle Fire screen.

The ZDNet report also noted that Amazon claims its Wi-Fi capability is 41% faster than iPad3 and 54% faster than Google’s tablet because of a dual antenna design, dual-band 2.4GHz and 5GHz Wi-Fi and MIMO.

According to Amazon, the Kindle Fire now has a 22% share of the U.S. tablet market. A Yankee Group report from June found that the percentage of people intending to purchase a Kindle had declined from a year earlier.

But that’s likely to change now that the company has such a competitive product lineup.

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8 thoughts on “Amazon May Be Subsidizing Price of New Kindle Fire

  1. The Kindle Fire succeeded because of it's Interoperability where you can buy once, and enjoy everywhere. The Kindle Fire allows you to access your content on other devices,including iPad, iPhone,Android phones & tablets,BlackBerry, Windows phones,Roku, TiVo, internet-ready TVs,and through your web browser. While Most Apple content can only be used on select Apple products. This is one of the biggest successes that Amazon Kindle Fire has had over Apple iPad series.

    Kindle Fire HD

    1. What I have found from my kindle fire review is that comparing the kindle fire and the iPad are like comparing a volkswagen and a ferrari. They are both cars but one cannot be expected to be as good as the other. Both are great within their price range.

  2. Says who Herman>? I think the Kindle is a fantastic device and I for one love mine. If they are subsidising the price I don't give a sno-cone in hell, just wish Apple would do the same…^O

  3. It's been a business model for Amazon since its inception. Subsidising heavily on popular products to gain turnover and potential future sales.

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