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SEATTLE — IDC analyst Tom Mainelli asked the right question before the start of Amazon’s launch event for the Fire Phone this morning here in Seattle: “Will the Amazon phone offer enough to get people to give up their iPhones and Android phones?”

Following the event, I asked Mainelli how he’d answer that question after seeing the phone in action.
“I don’t think it’s enough — yet,” he said. “But they don’t have to get it exactly right the first time.” Future improvements by Amazon could eventually pose a threat to Sony’s and Samsung’s market shares, he indicated.
The head movement-tracking and 3D graphics Amazon CEO Jeff Bezos showed off in his lengthy demo this morning looked impressive. But when I actually tried the phone for myself this afternoon, I found the head movement tracking to be less a part of the real experience of using the phone than I thought. I found myself tapping and swiping on the screen more than I was moving my head around to navigate.
Here, too, Mainelli is hopeful. He points out that Amazon released an SDK for developers today, and it may be up to those developers to make apps that are more creative about exploiting the head tracking and 3D imagery capabilities of the new phone.

A good ‘vending machine’

The most important factor to the the new phone’s success, according to Gartner mobile analyst Tuong Nguyen, will be whether it provides a good place to buy and consume Amazon products. He give Amazon high scores here.
“Amazon has a very strong ecosystem, and they have brought that ecosystem to this phone,” Nguyen told VentureBeat. “In this sense they have set a bar and a standard that the rest of the device industry will need to meet to be successful.”
Some people I talked to here were pleased and a bit surprised that Amazon had sourced very good hardware and components for the phone.
So was Nguyen: “I was surprised on the hardware. No apologies necessary here. I think the hardware is robust and that technophiles should be happy.”

The cost problem

But that hardware is fancy and expensive. The cost of the sensors and cameras and 3D screens shows up clearly in the price of the product. Nobody’s saying that the announced prices on the Fire Phone are good deals.
A $200 price tag on a 32GB phone with a two-year contract certainly isn’t one of the phone’s selling points. That price is as much as any high-end phone from Apple or Samsung.
Amazon’s Bezos said in an interview that the phone is packed full of killer, cutting edge technology, but he declined to say whether his company would make a profit on the phones.
IDC’s Mainelli believes Amazon will make money on every phone sold. AT&T may be pitching in some subsidy money as well.
The high price point may end up dooming the Fire Phone.
Current Analysis analyst Avi Greengart was also a bit taken aback by the pricing, especially because the phone is meant as an enabling device that will spur users to buy Amazon products, digital and otherwise. One would think that Amazon could afford to discount the phone and make the money back on increased sales of books, games, apps, movies, and music.

“If you’re Amazon, you’re telling people ‘you’ve just bought a vending machine, now go buy stuff,’” Greengart told me immediately after the event.

Greengart isn’t completely sold on the 3D functionality, either. “They are mainly promoting the 3D technology with this phone, but other than the mapping functions, it’s not immediately clear if the technology is really useful, or just cool,” he said.

Lighting a ‘Fire’ under handset makers

In order to lure iPhone owners to the Fire Phone, Bezos needed to prove to the world today that his company had made a device that is leaps and bounds ahead of the competition in ease-of-use and functionality. If consumers don’t see it that way, the Fire Phone will just be an expensive 3D phone.

But taking a broader view of the whole thing, Bezos and company have definitely brought some new ideas to the party, and that might push other players in the industry to innovate better and faster.

“It is always great when a new company enters the market as provides a fresh look on a true and tried product,” Recon Analytics founder Roger Entner told VentureBeat via an email statement.

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