5 ms·

Amazon Wants To Offer Its Smartphone for Free. Who Will Follow?

52 points by ssclafani 13y ago

xsighted 13y ago
True or not, phones are becoming a medium to bring value to a larger ecosystem. I can see android's value to Google. The only play Amazon might have here is to control media consumption by offering their phones. Somehow it seems unlikely of them to offer phones for free though.
- michaelbuckbee 13y ago
  Amazon already sells their Kindle devices at a loss [1], it doesn't seem like a stretch to think that with an even lower cost device such as a phone that they might try to offer it for free to up their marketshare and ecosystem. 1 - http://www.rawstory.com/rs/2011/11/18/amazon-sells-kindle-fire-below-cost-research-firm/ http://www.rawstory.com/rs/2011/11/18/amazon-sells-kindle-fi...
  - hga 13y ago
    It's not clear it'll be at a loss over the life of item from that link, it's based on a teardown at release, and it's very possible if not likely the cost will go down.
  - PaulHoule 13y ago
    As soon as I hooked my Nook HD+ to my AMZN account AMZN has been offering me crazy deals on Kindles...
    - hga 13y ago
      You're a special case, I think: 1. You've very possibly decided that e-readers are a win. 2. Amazon really really wants to convert you to their ecosystem before you invest "too much" into B&N's.
  - MichaelApproved 13y ago
    There's a difference between selling at a loss and giving something for free. If you sell something at a loss, the consumer still had to put up some money and has a clear interest in using the product. That makes taking the loss upfront less of a risk since the consumer is more likely to use the product and eventually make a profit for you. If you give it away for free, people will accept the product, whether they are interested in using it or not. That means a smaller percentage of people who take the product will actually be likely to use it. That makes recouping your loss much harder.
    - kbenson 13y ago
      I can see free with contract (we have that already), but free without? Maybe they could do it if they focused on what I've wanted in a phone recently, a small phonebook and alarm capable device that tethers extremely well with good battery life, so I can just pair it with a small tablet when I want the extra smartphone features. I don't imagine that costing too much, so it might fall within any acceptable loss they have built in to their products. Then again, it would have less capability to generate revenue for them, unless it changed data that passed through it (replacing adds, etc), which would be pretty horrendous.
Raphmedia 13y ago
... I already get pretty much any phone for free with a 2 or more year plan. How is this different?
- ireadzalot 13y ago
  Except it is not free. You pay for the phone in monthly installments when you pay your phone bill.
  - stephengillie 13y ago
    You pay at least $800-1000 for that $600 smartphone when you pay for it across 24 months instead of paying for it all at once.
  - f0under 13y ago
    I've never quite understood this statement. Aren't you still going to pay the monthly installments regardless of whether you were in a contract or not? On ATT, Verizon, etc, the non-contract prices aren't cheaper than the ones on contract. So, at the end of two years, you'll be paying the same amount for your phone bill and have a subsidized device.
    - untog 13y ago
      You're right. However, some telcos do offer cheaper monthly rates. T-Mobile is leading the charge on that in the US.
    - sliverstorm 13y ago
      non-contract prices aren't cheaper than the ones on contract. That's just because of how ubiquitous the subsidized phone model already is.
    - abruzzi 13y ago
      Yes if you stay with ATT/Verizon/Sprint. If you instead choose a MVNO like StraightTalk or Virgin Mobile, you'll pay less. I pay $45/mo on StraightTalk, and when I buy a new phone in the next year or so, I'll jump to $30/mo with Virgin Mobile since I don't need unlimited voice (or text...).
abruzzi 13y ago
in the claim that this is apple's worst nightmare, they jump very quickly to the implication that this will be a high end device. "It is also shows that Apple’s worst nightmare may be coming true: prices could fall not just for cheap phones in developing markets but higher-end ones too." But there is no discussion of wether this really is a high end phone. Looking at existing Kindle tablet, I'm going to guess that it will be mid-range or upper low end, depending on how you define those terms. Free low end could force prices down on the high end, but thats not really a slam dunk case.
- jusben1369 13y ago
  If it's a modern Android OS on decent hardware it's going to look "high end" to 80% of the consumer market.
- gutnor 13y ago
  Well that would certainly be a nightmare for Apple if Amazon was coming with the equivalent of a Galaxy S4 for free. But I'm not quite sure that Apple would be the worse off compared to others. I does not really matter whether or not a brand has current plan for the low end: if people expectation are set to high-end phone == free, I'm not sure why they would want an low end phone unless what, you pay them ? What really matter is what brand has an alternative way of funding those phones. IMO that means killing "open" Android, anything open really. Apple can still rely on the App Store and its walled-garden. MS tiny markeshare will probably make them give up under the risk of bleeding to death. Samsung has enough marketshare to build its own walled garden. Google would have some thinking to do, I'm sure other brand will start to question how valuable their client really are for Goolge. As for the rest of the Android player, RIM, ... well good luck.
snorkel 13y ago
Interesting if it didn't require a cellular plan to make Telco calls. A WiFi only smartphone would be acceptable to consumers if it was free. If you're not online then incoming calls go to voicemail, which is not great for emergency calls but it's free so stop complaining.
- hershel 13y ago
  Republic wireless offers a $19 per month, all you can talk service by using wifi. Maybe amazon can offer this cheaper. Say at $10 a month with no profit. So it makes more sense to offer service. I have seen some phones in Chinese retail sites for $90. For amazon it's cheaper say $3 per month over 24 months. Now consider the revenues for content, apps, increased e-commerce sales, ads and better profiling and maybe some profit from the phone service - amazon have plenty of ways to earning this $3 per month. The only question - what about people getting the phone and not using it at all?
vondur 13y ago
Since Amazon doesn't seem to care about profits at this point, I suppose they can pull it off. Not sure how'd it work without telco involvement. Wifi only maybe?
- AsymetricCom 13y ago
  The Kindle Fire 4G offered a limited time data-plan that was like $50 one time fee for 6 months of 10gb@month. I imagine they would like to have some kind of data plan that hitches on you buying apps and content and having that subsidize the data plan somehow.
jjsz 13y ago
I hope Claro follows, for people that would like to break off their contract of a i9300 or any top-tier Android phone. They charge $600 even if you cancel on the last month with them.
Zigurd 13y ago
Amazon has a media-oriented ecosystem. The advantage is that Amazon customers spend directly on products that Amazon sells at retail. The disadvantage is that it doesn't cover the same suite of services as Apple, Microsoft, or Google. I have not been attracted to Amazon's Android-based devices because I would rather have the more-general suite of services provided by Google. But I can see people making the opposite choice.
SifJar 13y ago
Free, without a contract? Surely then everyone who hears about it will order one, and 99% won't even use them? Or am I misunderstanding and this is "free with a XX/month contract"? In which case, big deal - here in the UK you can get pretty much any brand new, top of the range phone for free if you get an expensive enough contract. It's certainly something I'll be keeping an eye on. EDIT: Also, they have to realise that it'll be rooted and have Google apps installed on it within days, thus loosing their "guaranteed" revenue stream...
Lost_BiomedE 13y ago
Telco termination fees have been, and are becoming much more so, a hindrance to innovation. The technical part of telcos should have been turned into dumb utilities by now, with the big providers as mere resellers. Thanks, Michael Powell.
- scholia 13y ago
  They might be a hindrance in the USA but not in most of the world, where pre-pay and rolling one-month contracts are common. It means there's a big market for good cheap phones among people who won't or can't pay $700 or $900 for an iPhone 5, and still want this year's model. The South Korean government banned contracts for being anti-competitive, which gave a big boost to Samsung and LG. Now Chinese firms like Lenovo, Huawei and ZTE are benefiting as well. This is why Apple has no real choice about doing a cheap iPhone. Contracts mean it can dominate the US market while making huge margins, but the rest of the world is going Android.

52 points by ssclafani 13y ago

True or not, phones are becoming a medium to bring value to a larger ecosystem. I can see android's value to Google. The only play Amazon might have here is to control media consumption by offering their phones. Somehow it seems unlikely of them to offer phones for free though.

michaelbuckbee 13y ago
Amazon already sells their Kindle devices at a loss [1], it doesn't seem like a stretch to think that with an even lower cost device such as a phone that they might try to offer it for free to up their marketshare and ecosystem. 1 - http://www.rawstory.com/rs/2011/11/18/amazon-sells-kindle-fire-below-cost-research-firm/ http://www.rawstory.com/rs/2011/11/18/amazon-sells-kindle-fi...
- hga 13y ago
  It's not clear it'll be at a loss over the life of item from that link, it's based on a teardown at release, and it's very possible if not likely the cost will go down.
- PaulHoule 13y ago
  As soon as I hooked my Nook HD+ to my AMZN account AMZN has been offering me crazy deals on Kindles...
  - hga 13y ago
    You're a special case, I think: 1. You've very possibly decided that e-readers are a win. 2. Amazon really really wants to convert you to their ecosystem before you invest "too much" into B&N's.
- MichaelApproved 13y ago
  There's a difference between selling at a loss and giving something for free. If you sell something at a loss, the consumer still had to put up some money and has a clear interest in using the product. That makes taking the loss upfront less of a risk since the consumer is more likely to use the product and eventually make a profit for you. If you give it away for free, people will accept the product, whether they are interested in using it or not. That means a smaller percentage of people who take the product will actually be likely to use it. That makes recouping your loss much harder.
  - kbenson 13y ago
    I can see free with contract (we have that already), but free without? Maybe they could do it if they focused on what I've wanted in a phone recently, a small phonebook and alarm capable device that tethers extremely well with good battery life, so I can just pair it with a small tablet when I want the extra smartphone features. I don't imagine that costing too much, so it might fall within any acceptable loss they have built in to their products. Then again, it would have less capability to generate revenue for them, unless it changed data that passed through it (replacing adds, etc), which would be pretty horrendous.

Raphmedia 13y ago

... I already get pretty much any phone for free with a 2 or more year plan. How is this different?

ireadzalot 13y ago
Except it is not free. You pay for the phone in monthly installments when you pay your phone bill.
- stephengillie 13y ago
  You pay at least $800-1000 for that $600 smartphone when you pay for it across 24 months instead of paying for it all at once.
- f0under 13y ago
  I've never quite understood this statement. Aren't you still going to pay the monthly installments regardless of whether you were in a contract or not? On ATT, Verizon, etc, the non-contract prices aren't cheaper than the ones on contract. So, at the end of two years, you'll be paying the same amount for your phone bill and have a subsidized device.
  - untog 13y ago
    You're right. However, some telcos do offer cheaper monthly rates. T-Mobile is leading the charge on that in the US.
  - sliverstorm 13y ago
    non-contract prices aren't cheaper than the ones on contract. That's just because of how ubiquitous the subsidized phone model already is.
  - abruzzi 13y ago
    Yes if you stay with ATT/Verizon/Sprint. If you instead choose a MVNO like StraightTalk or Virgin Mobile, you'll pay less. I pay $45/mo on StraightTalk, and when I buy a new phone in the next year or so, I'll jump to $30/mo with Virgin Mobile since I don't need unlimited voice (or text...).

abruzzi 13y ago

in the claim that this is apple's worst nightmare, they jump very quickly to the implication that this will be a high end device. "It is also shows that Apple’s worst nightmare may be coming true: prices could fall not just for cheap phones in developing markets but higher-end ones too." But there is no discussion of wether this really is a high end phone. Looking at existing Kindle tablet, I'm going to guess that it will be mid-range or upper low end, depending on how you define those terms. Free low end could force prices down on the high end, but thats not really a slam dunk case.

jusben1369 13y ago
If it's a modern Android OS on decent hardware it's going to look "high end" to 80% of the consumer market.
gutnor 13y ago
Well that would certainly be a nightmare for Apple if Amazon was coming with the equivalent of a Galaxy S4 for free. But I'm not quite sure that Apple would be the worse off compared to others. I does not really matter whether or not a brand has current plan for the low end: if people expectation are set to high-end phone == free, I'm not sure why they would want an low end phone unless what, you pay them ? What really matter is what brand has an alternative way of funding those phones. IMO that means killing "open" Android, anything open really. Apple can still rely on the App Store and its walled-garden. MS tiny markeshare will probably make them give up under the risk of bleeding to death. Samsung has enough marketshare to build its own walled garden. Google would have some thinking to do, I'm sure other brand will start to question how valuable their client really are for Goolge. As for the rest of the Android player, RIM, ... well good luck.

snorkel 13y ago

Interesting if it didn't require a cellular plan to make Telco calls. A WiFi only smartphone would be acceptable to consumers if it was free. If you're not online then incoming calls go to voicemail, which is not great for emergency calls but it's free so stop complaining.

hershel 13y ago
Republic wireless offers a $19 per month, all you can talk service by using wifi. Maybe amazon can offer this cheaper. Say at $10 a month with no profit. So it makes more sense to offer service. I have seen some phones in Chinese retail sites for $90. For amazon it's cheaper say $3 per month over 24 months. Now consider the revenues for content, apps, increased e-commerce sales, ads and better profiling and maybe some profit from the phone service - amazon have plenty of ways to earning this $3 per month. The only question - what about people getting the phone and not using it at all?

vondur 13y ago

Since Amazon doesn't seem to care about profits at this point, I suppose they can pull it off. Not sure how'd it work without telco involvement. Wifi only maybe?

AsymetricCom 13y ago
The Kindle Fire 4G offered a limited time data-plan that was like $50 one time fee for 6 months of 10gb@month. I imagine they would like to have some kind of data plan that hitches on you buying apps and content and having that subsidize the data plan somehow.

jjsz 13y ago

I hope Claro follows, for people that would like to break off their contract of a i9300 or any top-tier Android phone. They charge $600 even if you cancel on the last month with them.

Zigurd 13y ago

Amazon has a media-oriented ecosystem. The advantage is that Amazon customers spend directly on products that Amazon sells at retail. The disadvantage is that it doesn't cover the same suite of services as Apple, Microsoft, or Google. I have not been attracted to Amazon's Android-based devices because I would rather have the more-general suite of services provided by Google. But I can see people making the opposite choice.

SifJar 13y ago

Free, without a contract? Surely then everyone who hears about it will order one, and 99% won't even use them? Or am I misunderstanding and this is "free with a XX/month contract"? In which case, big deal - here in the UK you can get pretty much any brand new, top of the range phone for free if you get an expensive enough contract. It's certainly something I'll be keeping an eye on. EDIT: Also, they have to realise that it'll be rooted and have Google apps installed on it within days, thus loosing their "guaranteed" revenue stream...

Lost_BiomedE 13y ago

Telco termination fees have been, and are becoming much more so, a hindrance to innovation. The technical part of telcos should have been turned into dumb utilities by now, with the big providers as mere resellers. Thanks, Michael Powell.

scholia 13y ago
They might be a hindrance in the USA but not in most of the world, where pre-pay and rolling one-month contracts are common. It means there's a big market for good cheap phones among people who won't or can't pay $700 or $900 for an iPhone 5, and still want this year's model. The South Korean government banned contracts for being anti-competitive, which gave a big boost to Samsung and LG. Now Chinese firms like Lenovo, Huawei and ZTE are benefiting as well. This is why Apple has no real choice about doing a cheap iPhone. Contracts mean it can dominate the US market while making huge margins, but the rest of the world is going Android.