Is Amazon’s Failed Phone A Cautionary Tale?

September 11, 2014

It’s been a big week in the world of gadgets. Apple announced its newest iPhones, the 6 and 6 Plus, and they’re bigger than any other before. And on the smaller side, there’s an Apple Watch — that does a lot of the same things. Meanwhile, Amazon took a nosedive with its foray into the smartphone marketplace. Here are some questions we had:

Amazon slashed the price of the Fire phone from $199 To 99 cents. Why?

First, that’s 99 cents with a two-year contract, so if you wanted to load up on smartphones without commitment, no such luck.

But the cut is very telling. Amazon, which is a master at selling things, wanted to try its hand at building the device we use to buy things. While Amazon hasn’t said how many Fire phones it has sold since the phone launched July 25, it clearly has a lot of inventory left over.

Amazon is also rolling out the Fire in the United Kingdom this week, and pricing it with no upfront cost, similar to the new price here, in an attempt to make a better first impression in Europe.

It doesn’t look like Amazon has given up hope, though — that 99 cents will only get you the low-end version of the phone with 32 gigabytes of memory. The 64-gig phones still will cost you $100.

And that’s not because the memory costs so much more — it could be Amazon hunting for that hardcore, dedicated customer who really loves downloading games and movies. That’s ultimately the customer who might make Fire take off.

The Fire was initially priced similarly to a new iPhone or Samsung Galaxy. Is it actually inferior?

Well, it gets mixed reviews. Some people say they like the 3-D effects on the screen, but that’s just bling at the end of the day. People get smartphones for awesome apps, and The Fire is very much inside Amazon’s walled garden. You can’t even get Google Maps.

What can we learn by comparing Amazon’s price cut to this week’s hyped Apple Watch announcement?

Amazon and Apple are actually trying to do similar things — that is, to take the smartphone and rejigger it, to create an even more intimate experience. But there’s a delicate line between feeling intimate and feeling trapped, and Amazon’s approach is a cautionary tale to others entering the smart-phone market.

Amazon CEO Jeff Bezos thought that because people love shopping at so much, they’d love a smartphone that’s really a shopping remote control. So far, it looks like he overshot.

Now over at Apple, CEO Tim Cook wants his customers to put Apple on their bodies — to use a smart watch to log how much we run and eat, and even take it along to the doctor to share our heart-rate charts. This vision is nothing new — it’s the kind of stuff that lots of so-called quantified self junkies have been trying to push for years — but Cook is hoping that because Apple’s doing it now, it’ll stick.

Is the Amazon price cut an attempt to compete with the new iPhones?

Yes, in part — but definitely not just with the iPhone 6 and iPhone 6 Plus. The true gorilla in the room is Android, which is by far the most popular smartphone operating system in the world, with 85 percent market share according to Strategy Analytics. Google has gone to great pains to build versions of Android that use less and less data.

In terms of the smartphones themselves, Samsung pulls in more revenue than Apple — and both of the giants are getting real competition from cheaper alternatives like Lenovo.

So while Apple hosts a glitzy event and talks abut tracking heart rates and as Amazon promises it can store all of Downton Abbey on your palm, the real future could be in phones that are lean — and, by the way, that also have decent battery life.

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