Computers

Paul Gilster: Amazon’s Prime service will determine future of company's new smartphone

CorrespondentJune 22, 2014 

The announcement of Amazon’s Fire Phone is no surprise after months of speculation, but can Jeff Bezos pull this off? I have tremendous respect for the man, but phones? Now we’re in dangerous territory, a mature market ruled by companies such as Apple and Samsung.

If the name Blackberry used to carry enormous cachet, its spiraling descent should be a reminder of what can happen when fortune turns and market whiplash snaps into play. Seventy percent of U.S. mobile phone users already have smartphones, meaning Amazon will have to siphon customers from the big players and their many market-tested designs.

So why does Amazon want to get into a market this treacherous, when its major strengths are clearly in merchandising? I think we can answer the question by looking at the Amazon corporate impulse, which is increasingly to speed up the delivery of goods to the point where the online purchase is as convenient as the local buy. At the same time, Amazon is a vast holder of content, which means the digital devices it builds, from Kindles to set-top boxes like the Fire TV, are being seeded into the market with the express purpose of becoming content conduits.

Pricing advantage

Amazon is turning the whole idea of the impulse purchase into a default for its roughly quarter of a billion customers, and when we compare its decisions in the hardware arena to those of an Apple or a Microsoft (which recently bought Nokia), we have to remember that this approach brings a powerful pricing advantage. Amazon is willing to take a hit on the price of the delivery technology if the result is a customer who reliably uses the service to buy a stream of content.

The Fire Phone boasts impressive features, a 4.7-inch screen and a 13-megapixel rear-facing camera, with 3-D technology and four front-facing cameras that make those effects possible. The result, particularly in mapping functions, is striking, a bid for the high end while keeping the price competitive because of the above factors. Even so, I don’t see it as enough to lure many existing iPhone or Android users into a new ecosystem. The latter are working with products in a state of continual innovation of their own, as well as app stores packed with software.

At $199 for 32 GB, $299 for 64 GB and exclusively available on AT&T, the Fire Phone offers a number of compelling features (I especially like gesture control of numerous phone functions including auto-scrolling of documents). To pull people off their current smartphones, Amazon must hope that the cost will also be weighed against the data service options. The Fire Phone has unlimited storage for photos via Amazon Prime, another bid to lock in customers through a membership plan that can be tweaked down the road as the market situation clarifies.

Purchase conduit

Prime, which was recently bumped up to $99 a year, is a play to make Amazon your default store for everything – buy a Fire Phone and you get one year of Prime for free. Those who do much shopping on Amazon find Prime compelling, especially the free two-day shipping, which makes pulling the trigger online for an impulse purchase that much more enticing. In Seattle, Bezos demonstrated Firefly, an app that can, among many other things, act as a scanner, recognizing books, DVDs, songs, videos and more, letting you know (ahem) where to buy them.

That purchase conduit, not hardware, is what this smartphone is all about. “When the Kindle launched, there was a lot of skepticism,” Bezos told his audience at the Seattle announcement. But phones aren’t ebook readers, and this time Amazon enters a market crammed with alternatives. We’ll see when it hits the market in late July, but the demo Bezos gave of the Fire Phone showed a device that will live or die based on the Prime service that supports it.

Paul A. Gilster is the author of several books on technology. Reach him at gilster@mindspring.com.

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