Amazon today announced its first smartphone, the Fire Phone. The comment below may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research. Jan may be reached for further comment at (408) 744-6244 or firstname.lastname@example.org.
If you talk to people who use iPhones or Android phones about why they chose them, they frequently answer by saying, “I’m an Apple person” or “I’m a Google person”. The Fire Phone is the smartphone for the Amazon person – someone who buys lots of stuff through Amazon, has a Prime subscription, uses Prime Instant Video and has a Kindle, a Kindle Fire and a Fire TV. Amazon’s strategy here isn’t to take meaningful share in the smartphone market, or even to make lots of money selling smartphones. It’s to cement the relationship it has with its most loyal customers. The Fire Phone is intended to put Amazon’s content front and center, and the Firefly feature is intended to make it easier than ever for customers to buy things through Amazon.
However, for all the talk about disruptive business models such as taking advantage of AT&T’s Sponsored Data plan or heavily subsidizing the device, this really isn’t a very disruptive phone. It acts more or less like any other phone on the market when it comes to the things people use their phones for, and both the phone itself and the data plan that come with it are priced the way these devices usually are. The 3D features are gimmicks at best, which will be great marketing tools to get people to go into AT&T stores to take a look at the phone, but likely won’t drive many sales. Amazon has 244 million customer accounts, and about 10% of those are Prime customers. It’s likely that only a small fraction of those will be prospects for the Fire Phone, and as such the sales will be very limited. Because of the AT&T exclusive and the premium price, Amazon will sell even fewer units than if it had used broader distribution and a more disruptive pricing model. Instead of offering a free year of Prime, it should have just dropped the price by a hundred dollars. There were good strategic reasons for Amazon to launch a smartphone, but the Fire Phone isn’t the phone Amazon should have launched. Instead of something truly disruptive, Amazon has given the world (or technically just the US at this point) yet another shiny black rectangle.