The Only Thing That Matters From Today’s Big Amazon Phone Event

The Fire Phone is basically a giant tether to Amazon’s services, including its giant store. But Amazon CEO Jeff Bezos still expects you to pay $199 for it.

AP Photo/Ted S. Warren

Amazon’s new Fire phone is so tightly connected to its store that users will be able to press one button and take a photo of something they are interested in buying. And Amazon thinks people will pay $200 — including a two-year contract — for that privilege.

Amazon CEO Jeff Bezos revealed Amazon’s take on a smartphone, the Fire phone, at an event in Seattle on Wednesday. The phone is basically a smaller Kindle and tightly bound to Amazon’s services like Amazon Prime, Mayday (its live customer service component), Amazon’s streaming services, and Amazon’s online storage. It’s available for $199 with a two-year AT&T contract, and an extra $100 will double the storage on the phone.

The Kindle Fire seems to be faring relatively well with consumers. Bezos said that Amazon has sold “tens of millions” of Kindles, though Amazon is traditionally shy about releasing statistics about the Kindle Fire. However, the Kindle Fire has a distinct cost advantage over competing tablets like the iPad, iPad Mini, and other Android tablets from companies like Google and Samsung.

The Fire Phone has no such advantage, and will instead have to rely on what it is bringing to the table: Amazon’s services and some interface tweaks, such as tracking the owner’s head using a series of cameras to create a sort of depth in the screen.

Samsung has often found itself in a similar position, and in 2013 when it released the Samsung Galaxy S4, the phone was loaded with lots of these tweaks, like head tracking and health monitoring. Inevitably, this proved too complicated for many consumers, prompting Samsung to add an “easy mode” to the device that limited the bells and whistles that had been added to the Galaxy S4.

As it happened, consumers were actually flocking to devices like the Galaxy S3 and Galaxy S4, and also the Galaxy Note, for simpler reasons such as a larger screen and slightly lower prices compared to the iPhone. Apple too has had to acknowledge that customers are willing to go after cheaper phones, especially in emerging places like China and South America where manufacturers like Xioami are quickly locking up much of the market.

In 2013, Amazon reportedly mulled building a phone that would be free and without a contract, according to a report by Amir Efrati and Jessica Lessin at The Information, which Amazon very quickly denied. Given the economics of smartphone manufacturing and upgrades, and the specifications of the Fire Phone unveiled Wednesday, a free Fire phone would quickly become complicated when owners sought an upgrade in a year or two.

For existing Amazon Prime customers, the value is a little more clear as Amazon is accompanying each phone purchase for the time being with a year of Amazon Prime. That makes sense, given that the phone is built around Amazon services, and Amazon customers (of which Bezos also says there are “tens of millions) might enjoy a phone centered around those services.

But for the time being, Amazon will be in essentially the same boat as other phones — competing with the design prowess of Apple and the marketing juggernaut of Samsung without a definitive price advantage. However, given Bezos’ marketing savvy, that the phone is priced competitively with the best phones manufactured by Samsung and Apple, the notion of finding a way to drive down the cost of the Fire phone is likely not lost on the CEO of one of the most formidable retail operations in the world.

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