Giving away razors and blades

Farhad Manjoo:

But there’s something even more perplexing about Amazon selling The Hunger Games and other huge bestsellers for free. The Kindle lending program upends the conventional wisdom about Bezos’ business goals for e-readers. Most people think that Amazon is selling Kindle devices at cost in order to make a profit on the sales of books and movies. But if Amazon is also giving away a lot of media for free—4 of the Top 10 books in the Kindle Store can be had for free under the Kindle lending program—then what is its business model for Kindle?

Giving away the razor to make money on the blades is a well-known strategy. But giving away the razor and the blades in order to make money on a subscription loyalty program as a way to sell everything else? Is that Amazon’s real goal with the Kindle—is Amazon in the device business only to sell Prime subscriptions, which the company sees as a key accelerant for sales across the rest of its site? And if that’s the case, how well is that circuitous business model working out? Is the Kindle helping to sell Prime? And are those Kindle-fueled Prime subscriptions moving more sales across the rest of the company’s inventory?

It's a really interesting set of questions. Is it possible that subset of Amazon's catalog – books, movies, TV, music – could evolve into a subscription-oriented service akin to Netflix? Prime members would get access to free or heavily discounted content in the hope that membership encourages them to buy more physical goods through Amazon as well. Personally, I certainly buy more things though Amazon since I got my Prime membership. Even if the price is the same, I'll buy heavy or bulky items on Amazon to save me an inconvenient trip to the store.