One of the most surprising things about Amazon’s new 7-inch Kindle Fire tablet is its price tag. Though the device doesn’t boast a super-fast processor, cameras, or even Bluetooth, it’s still a very capable device, and at $199 it’s an absolute bargain. However, it’s not such a great deal for Amazon, which loses $10 with every tablet it sells.

Research firm IHS iSupply has estimated that each Amazon Kindle Fire costs around $209.63 to produce. That’s $10.63 more than the company sells it on for. Admittedly, that’s nowhere near as bad as the $50 loss that analysts had previously suggested, but it’s still pretty significant.

How, then, does Amazon make its money back? IHS iSupply explains:

“The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content. Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business.”

Although the company claims that Amazon won’t make up its money through digital content, I have to disagree.

What’s great about the Kindle Fire, is that, like the iPad, its creator has complete control over both the hardware and the software. Although the device does run Google’s Android operating system, Amazon has optimized it in such a way that you wouldn’t even recognize it, and it has been perfected just for the company’s first tablet.

That means that any content you want to access, be it music, movies, books or games, is seamlessly available from Amazon itself. It’s safe to assume, then, that a vast proportion of Kindle Fire users will be purchasing more content than ever before from Amazon.

So although the Kindle Fire will serve to promote the Amazon brand, and the goods that the company sells, it will also provide a gateway to Amazon’s digital services that many users may never have experienced before. And these are the reasons why Amazon’s Kindle Fire will be a huge success for the company — despite that $10 loss on each sale.