Amazon has denied the rumor of that it will be selling a $99 Kindle Fire HD tablet, claiming "we are already at the lowest price points possible for that hardware." But Sarah Perez at TechCrunch, who first reported the rumor, still suspects a the company is at work at a cheaper model, pointing to the phrase: "For that hardware." Perez suggests tablet manufacturers are playing a game of "how low can you go?" If that's the case, let's look a little closer at that question—just how low can Amazon go and it still make financial sense? Let's investigate.
Zero Dollars? Absolutely Too Low. Amazon has before said that it does not care to make money on its devices, instead making all its dollars selling content. So, why not just give the thing away for free, as Time's Tim Bajaran once suggested. Really, he doesn't suggest Amazon give the Kindle Fire away for free, but for $20 to $30: "What if Amazon increased the cost of Prime to $99 or $109 a year and threw in the Kindle Fire for free? I don’t know about you, but since I’m an avid Prime customer, I would do this in a heartbeat."
In theory, if Amazon didn't at all care about making money on its device it would do that. However, the problem with giving something away for free is that people who don't really want it will take one, as the wise Atlantic journalist James Fallows once taught me, when he refused to give away his wireless router to a poor intern for free because then someone who didn't really need it would come and snatch it. Instead, he reasoned, someone who would pay even $3.00 for that modem really needed it. Applying that logic to Amazon, if it handed out Kindle Fire tablets it would have huge demand from a group of people who might not make up the difference with their content purchases. It would pay to produce all these tablets that would sit unused, which would be a huge problem