Why Amazon didn’t go cheap with the Fire Phone

Above: The Amazon Fire Phone.

Image Credit: Amazon

Amazon’s Fire Phone innovates with its four-camera configuration. It innovates with its object-identifying Firefly feature. And it innovates with its Mayday feature that provides face-to-tracked-face assistance on the go.

But one way in which it doesn’t innovate may be the way that most people were hoping it would: price. Available for $199 on a two-year AT&T contract or $649 unlocked, the Fire Phone is similar to other premium phones such as the iPhone 5S and Samsung Galaxy S5.

The Fire Phone’s failure to disrupt has led many to question whether it is keeping the Amazon flame. Indeed, the cellular options available to Fire Phone buyers are less creative than the limited free data option Amazon offered with AT&T at the release of the Kindle Fire HD.

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When Amazon entered the tablet market with the $199 Kindle Fire, it set off a price war. Jeff Bezos noted that the company produces “premium products at a non-premium price.” But while Amazon has shown some willingness to follow others down the ladder as tablet pricing has collapsed, offering the Kindle Fire HD for $139, still a far cry from the sub-$100 tablets littering the pages of

But, perhaps burned by that competitive tablet, things changed when the company introduced the Kindle Fire HDX, with its leading-edge processor and display technology. At a starting price of $229 for the 7-inch version, it is significantly less than the $299 iPad Mini, but so is nearly every other tablet below 8 inches.

A better comparison would be with the Google Nexus 7, also priced at $229. Amazon’s next category expansion — Fire TV, also loaded with powerful internals — came in at $99, the same price as Apple TV and the highest-end Roku player.

It’s not unusual for brands to climb the prestige ladder as their sales grow. HTC, for example, was once a company that developed phones and PDAs for other companies. In the 1980s, Samsung’s electronics were dismissed as cheap junk. Now, both are focused mostly on high-end gadgets.

But what Amazon is doing is more like a cross-country expedition than one up a mountain. As Jeff Bezos pointed out early in the Fire Phone presentation, its brand has strong recognition among consumers for customer satisfaction across several metrics.

And according to the YouGov brand index, which measures “brand health” across a variety of measures, Amazon was the #1 brand in 2013, with the Kindle sub-brand coming in 10th behind Cheerios. (Alas, the Fire Phone, like Fire TV, drops the “Kindle” delineation.) Amazon doesn’t need to raise the prestige of this brand, it just has to extend the influence of it.

There’s another factor at play. The Fire Phone has its share of features designed to keep you at a buying level Amazon finds palatable. However, much more of what consumers do on phones — tasks such as taking photos, sending e-mail and messages, mapping and, yes, even having voice conversations — are more difficult to monetize.  If, as Jeff Bezos said, Amazon monetizes when consumers use their devices (since they inevitably drive purchases on Amazon), there’s simply less of the usage pie that Amazon is getting, at least compared to AT&T.

The Fire Phone may not strike fear into the heart of Apple and Samsung for the time being, but it’s clearly not intended to. It’s about providing an option to Amazon’s loyal customers in a product category where its ecosystem advantages are too diluted to disrupt at this point.

Volume Up is a regular column on consumer technology and digital ecosystems. Ross Rubin is principal analyst at Reticle Research and founder and editor of the crowdfunding product site Backerjack. He also blogs about the tech industry at Techspressive.

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Jay Drew
Jay Drew

Great Read. Does anyone here use for organizing book notes? Just wondered how anyone else was managing their notes?

Michael Essen
Michael Essen

What a waste of money! Why do Americans these days always feel the need to get the latest iStuff and smart phones? There is barely any difference between any of these mobile devices. A touch screen phone with internet... WOW!

You shouldn't be able to complain about the economy or your own personal financial situation if you blow your money on trivial Amazon and Apple crap. 

Many American have a steak taste on a hamburger budget . That's part of the problem we now face from a long time ago. Barrow to the max and then whine about now having enough money . Nice house , car or truck and boat. Can you afford them or does it really matter at this period of time?

I'm just gonna make smart decisions with my money so I don't end up with an empty bank account:

1) Paying off my debts as they come to me. Never holding a credit card balance longer than a month. If this means living in a small studio apartment and eating ramen, rice, and beans, so be it.

2) I will always buy small, fuel efficient and durable cars. I drive a 2006 Honda Civic now. It costs me nothing to fill up and next to nothing to insure ($25/month from Insurance Panda… woohoo!). I will not drive when I don’t need to, and use public transportation whenever possible.

3) Developing multiple revenue streams. Doing side jobs. Building up small businesses. Doing contract work. Basically doing whatever I can to generate income from multiple sources.

4) Grow my revenue and assets no matter what. Make sure I am always expanding and develop them to the point that they consistently generate reliable cash flow.

5) The most important one - make as much as I can. Save as much as I can.

iPhones... ecigarettes... Starbucks... $12 Chipotle clothes.. organic lipgloss... expensive yoga classes. Why not try living in your means for once? No wonder we have a debt crisis.

matthew mcqueeny
matthew mcqueeny

Regardless, they needed to innovate on features, AND price.  However Amazon feels about their strategy, that was the only way to gain market share.  Tie it to prime in a more meaningful way, such as if you have prime, the price is $10 for the phone.  People might've jumped at it.  Furthermore, anybody in the market to purchase a phone now (coming up on two-year contracts) is using a phone that is at least two years old.  The Fire Phone against those phones is very much an improvement.  With a price that makes it an offer you can't refuse, they could've done something.  Check out my podcast for more analysis of the Fire Phone:

Lynn Kerska
Lynn Kerska

I think the points on not being able to monetize the phone to the degree they can their tablets and fire tv is spot on. That being said, I don't think the price is particularly outrageous. I would have to pay that much for an iPhone and I don't believe they have added much in the way of innovation to the line in a long time.  Amazon has solid hardware and compelling new features and if you're heavily invested in the amazon ecosystem it's a no brainer to put that money on their phone. 

Elizabeth Valentine
Elizabeth Valentine

Yeah I really don't understand why Amazon got so carried away with the 3D tech, all it has done as brought the price up to that of other flagships like Samsung Galaxy S5 and the Iphone. If you look at it side by side with the Samsung Galaxy (there is a good comparison here, you can see for around about the same price, you can get a better processor, better battery and no network exclusivity with the Samsung. Amazon have shot themselves in the foot!!

Zack Morad
Zack Morad

They will turn around and start throwing in membership to prime and music download credits.

Joshua Darlington
Joshua Darlington

Amazon has a mobile store. The existing phone manufactures may have used that leverage to reign in Amazon predation.