Amazon sells the Kindle Fire for $199. But the cost of producing one tablet is $209.63.
Why does Amazon sell a product at a loss? Because, for Amazon, the Fire is a book store, and a movie theater and a record shop. And (of course) Amazon is the one selling books, movies and records. Once you’re inside Amazon’s ecosystem, there’s a whole bunch of ways they can make money off you. You buy Amazon’s books, movies, and music. You buy Amazon’s apps. You see Amazon’s ads. There’s no Apple store on an Amazon device. You’re locked in.
This is the model printer manufacturers often use. You can buy a decent printer for $40—less than it costs to produce. That’s because printer companies make all their money selling ink cartridges to go in the printers.
Unlike, say, Apple, Amazon didn’t start out as a computer company. For Amazon, the computer is simply, a means to an end.