And, for the prescriptivists out there, don't fall victim to the recency illusion. The usage of "wrong" as an adverb, like the usage of "they" as a gender-neutral singular pronoun, is many centuries old.
"Still, $83 million of unsold phones is a lot, even for a tech giant like Amazon."
The article refers to this twice, and I can't figure out why. That's not a lot of unsold inventory compared to the disaster the Fire phone was. I would have expected a much higher number than $83 million. That's equal to not quite 1% of their cash. The real damage was to their reputation, that was a far greater hit than $83 million. Dud products taint all of your other products by association (especially those in the Fire lineup).
erm, they slashed it to 99c, as the article mentions, but it still has not gotten any significant traction - full blown write off.
it's just a shit device by a company that seems to try to emulate apple on some fronts, but without the taste or acumen for proper hardware and software.
AWS and Kindles are great. never seen a Fire tablet in wild.
Just for complete transparency, 99c is the contract price, so you are still paying for the phone, it's just built in to a higher monthly service cost.
The off-contract price for the fire phone is currently $449 on Amazon's website. Compare that to the Moto G which is off-contract at less than half the price and still a very usable and featured phone.
Amazon's Lab 126 is micromanaged from two states away by Jeff Bezos. It's a toxic environment where only yes-men can thrive. It doesn't help that Jeff Bezos runs Amazon like a miserly cornerstore Wallmart - looking everywhere he can to cut corners, to the detriment of his staff and his product.
I'm impressed that they have been able to iteratively improve on the Kindle. Given what I have seen, I would hazard that with upper management's obsessive spotlight focused on the Phone and Tablet, the Kindle developers have been able to get on with their work.
The same may be the case for AWS - no longer a sexy new market, and consequently able to get on with it's work.
I've heard terrible things about Lab 126 and I'm happy I've turned down several of their job offers already. I hear backstabbing is daily business over there, everybody can submit an anonymous reviews for your coworkers to your manager, and the whole environment is a zero-sum game. I'm a big fan of Jeff Bar, Werner Vogels, and, of course, Jeff Bezos, but, I guess, this is another instance of "far from the sight, far from the heart"!
You probably are right. I like him as the guy who shaped out Amazon the way it is today (AWS and the store), but I'm not sure I'd be willing to work for him. The whole Android forking and Appstore was a terrible idea although I understand the motives.
How is it possible that this article talks about Amazon slashing the price of the phone from $199 to 99 cents without ever mentioning that neither of these are actually 'prices', but arbitrary numbers used by advertisers to make the required $1000+ contract seem more appealing?
Lest anyone misunderstand, the 32GB phone actually costs $449 if you want to buy one, and the quoted prices require the purchaser to sign a two-year contract for service. I can see why the advertisers benefit from this approach, but I can't understand why the public is complicit. Is it that people don't want to think about how much they are actually paying?
I'm not sure why everyone seems to think carrier subsidies are a con. Amazon isn't getting that $1000+, they get whatever the non-contract price is of the phone. Carriers subsidize some of that cost in-exchange for some guaranteed cash flow for 2 years.
The full freight of the phone, plus the cost of off-contract service with somebody like Straight Talk ($50/month for unlimited everything for me, they throttle me to 128Kbps after 5GB of data), is much, much cheaper than the initial buy-in plus the delta of the monthly carrier bill.
The situations where carrier lock-in makes sense are few and far between (generally around large family plans), and outside of those situations you're paying hundreds of dollars extra over the life of the phone and the contract.
Pretty soon with all this throttling, people aren't going to be able to have meetings, do large code pushes, video chats etc at the end of the month when everyone's rigged data plans dry up.
The last few days of the month for me online is always spotty, slow, and pretty much unusable.
We are being held hostage by our telecoms, slowing business to a crawl because they want you to upgrade. I have upgraded to my broadband highest tier and still get throttled, the extra speeds cause faster depletion of that bandwidth limit on purpose. Speed and limits both need to increase.
I'm not sure why everyone seems to think carrier subsidies are a con.
I don't think it's a con, and I understand why the carriers price the phones this way: it works! But I'm baffled why consumers and reporters seem comfortable comparing the 'with contract' prices of phones as if the upfront difference between 99 cents, $99, $199, and $299 is the best way to decide with which company to sign a $2000 two-year contract.
Amazon isn't getting that $1000+, they get whatever the non-contract price is of the phone. Carriers subsidize some of that cost in-exchange for some guaranteed cash flow for 2 years.
Yes, Amazon collects whatever amount they convince the customer to pay for the phone, plus a much larger 'kickback' from the carrier in return for getting them to sign a two-year contract. My expectation was that an article in a financially oriented magazine about the losses Amazon was experiencing might make some mention of the several hundred dollars[1] Amazon collects from the carrier rather than concentrating only on the '99 cent' sticker price.
I had a confused conversation last week with someone who expressed delight that her new iPhone 6 cost about the same as my "no contract" Moto G. She was surprised to learn that if she broke or lost her phone it would cost more than the "discount" price to replace. And she's a very savvy consumer, has a science PhD, and her husband works for Apple! She probably would have 'bought' the same phone in either case, but if the details of the arrangement weren't clear to her, I doubt that most consumers have a very good understanding of how phone pricing works. My lament was that after reading this Fortune article neither she nor anyone else would have an improved understanding.
[1] What is the actual amount that Amazon collects from the carrier?
I would never buy a phone that requires me to repurchase thousands of dollars of apps, games, music, movies, books, etc. For the same reasons I stay away from Kindle Fire. Until there's a consumer law requiring companies to honor your digital purchases of the same intellectual property on difference marketplaces, I'll stick with the devices running the monopolistic Google Play.
It wasn't priced wrong, they made the wrong phone for the price.
It is possible to produce a $650 off-contract phone (the only useful comparison given the variance between carriers) that's desired. They just failed to do this. The Samsung Galaxy flagships sell like hotcakes at this price range.
They set out to make a premium phone and failed - they've cut the price and the phone still isn't moving off shelves. I sincerely hope that this is just PR-speak and that Amazon doesn't seriously believe pricing was the key point of failure.
The phone market, ironically, doesn't have network effects, because any phone can talk to any other phone. But it does have scale and timing effects, because developers decide which platform(s) to develop for, in part, by the number of buyers, and buyers decide which platform to buy based on how well developed, and both accumulate platform inertia over time that defeats any minor advantages of later, alternative platforms.
The lack of network effects means that you can get both developers and buyers to adopt a new platform--it's not hopeless--but the scale and timing make it difficult enough that any new phone platform now would need to offer a major advantage, or it shouldn't bother.
It would have to be something remarkable. Maybe Amazon, as a major retailer, could have done something along the lines of Apple Pay, but where the phone carrier got a cut of each purchase transaction in exchange for a special, reduced rate plan that made Amazon phone take off as the standard phone for schoolkids. Or Amazon stays close enough to standard Android to make development easy for Android developers but then leverages their AWS to make some sort of deal such as Amazon phone apps get free server-side infrastructure and services on AWS. Or anything ordered through the phone gets Amazon Prime delivery and you can stream Amazon Prime video and music through the phone for free.
Whatever, they need to come up with something that offers a remarkable advantage to some market segment or not bother.
Cell phone certainly have network effects, it's just that they're all software. You're right the carrier doesn't really matter at this point but there's no way I would switch from iOS to Amazon's phone because there just isn't any software available. Even if we ignore the stuff I've already purchased, there are tons of little games and utilities and other fun things that are never going to come out for a fourth tier platform.
Even with all the money they have Amazon can't really force people to make software for their phones. Microsoft has tried the "buying developers mindshare" thing for Windows mobile and it hasn't worked well for them. They're still in third place by a giant margin.
At this point you can't subsidize yourself into having a first-class software ecosystem. It would just cost way too much.
And since Amazon doesn't want to be just another Android vendor, they're not going to let standard Android software run on their phones. At that point they need an insanely compelling feature to get people and "easy Amazon shopping" isn't that.
Why should I get a phone for one dollar that has almost no software when I can get an iPhone 5c for free on contract with a ton of software and accessories? I know they're also good Android phones available free on contract.
The network effect I'm talking about is the N-squared growth in value of a network of N nodes where each of the N nodes derives most of its value from the number (N-1) of other nodes. The phone system overall has this property, so does Skype, so does Facebook, but no carrier, handset maker, or OS does, because their users aren't limited to interacting with the other users of the same carrier/handset/OS.
Instead, the existing players have a benefit resulting from their size that is more of a scale advantage, in that the N users tend to have access to more things if N is larger, but those "things" are not primarily the N-1 other users. There are more iPhone apps than Android, for example, yet Android sells more units and is growing faster. Scale matters, number of apps matters, but other factors are very significant, too.
Apple, therefore, does not have to be the #1 phone maker to make the most money, nor would a new entrant have to have huge scale to have a profitable business. Unlike a network effect business, a new entrant would not have to appeal primarily on the basis of how many other users it already had but, instead, on what value it offered.
And you mention that Amazon couldn't get you to switch from iOS because of the number of iOS apps as if the 2 billion phone users out there all care primarily about the number of apps they'll probably never use. Yet Android phones outsell iOS with fewer available apps, and the average Android user buys far fewer apps than the average iPhone user. A significant fraction seem to be satisfied with just the apps that come with the phone and never buy another.
It's not unreasonable to assume that there may be many market segments that would be fine with a few thousand apps covering 99%+ of usage PLUS something else they value more highly than the long-tail iPhone apps. Phones and phone plans that specialize in offering something more valuable than Yet More Apps might appeal to many people. Shoppers might care more about Amazon Prime than than the one game app they have to give up if they switch. Parents might care more about a managed kid phone with kid features and a kid rate plan than about Apple's app store.
Since the value of phones is not primarily the number of your maker's installed base squared but is based on so many possible things, I think there is room for new entrants as long as they offer something more significant to a market than the extra apps.
I was expecting them to meet the Nexus line at $299, since Amazon's M-O with tech devices is to make them cheap, affordable, and locked in to their ecosystem, a la the Kindle, Fire, TV, etc. I was going to buy one at that price for the novelty of Amazon's first phone.
Then they released it at the price for the most premium phones on the market.
I'm pretty sure 95% of the tech world saw this coming.
They don't even mention the real issue of the Play store, or lack thereof. The real reason nobody seems to want it is that the apps aren't there, and they tried to substitute some silly gimmicks in hope that nobody would notice. If they Play store and the rest of the Google apps were there, I bet it would sell fine at the original price. Without them, they're having trouble giving them away.
Of course, that would mean kowtowing to Google, and the real purpose of the Fire line of Android forks is get Amazon out from under Google's thumb. They're welcome to try, but I'm not about to sacrifice my experience to help them.
The deeper issue yet is the still open question of the third ecosystem. Apple and Google have theirs already. It remains to be seen if there is room for a third, but plenty of companies are opening their wallets to try. IMHO, Microsoft looks to have the best shot at it now. For Amazon, it's hard to see them pulling it off when the core of what they're working with is a fork of Android. How are we supposed to believe that they're ever going to be better than Google is at Android?
Amazon doesn't need Google to run a competitive app experience. The Android APIs are mostly open source and Amazon can copy them.
The problem is that Amazon is hard on developers, doesn't let them set prices, won't automatically approve new apps and upgrades, gives new apps harsh conditions, and doesn't promote developers' apps to a large user base.
Amazon could have a better user and developer experience but thinks it's Apple instead of Google. But only Apple is Apple.
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[ 3.2 ms ] story [ 88.4 ms ] threadPhone's Amazon page was bombarded with fake reviews from activist groups that are trying to get Amazon to switch to renewable energy sources: http://www.amazon.com/forum/top%20reviewers?_encoding=UTF8&c...
The article refers to this twice, and I can't figure out why. That's not a lot of unsold inventory compared to the disaster the Fire phone was. I would have expected a much higher number than $83 million. That's equal to not quite 1% of their cash. The real damage was to their reputation, that was a far greater hit than $83 million. Dud products taint all of your other products by association (especially those in the Fire lineup).
it's just a shit device by a company that seems to try to emulate apple on some fronts, but without the taste or acumen for proper hardware and software.
AWS and Kindles are great. never seen a Fire tablet in wild.
The off-contract price for the fire phone is currently $449 on Amazon's website. Compare that to the Moto G which is off-contract at less than half the price and still a very usable and featured phone.
I'm impressed that they have been able to iteratively improve on the Kindle. Given what I have seen, I would hazard that with upper management's obsessive spotlight focused on the Phone and Tablet, the Kindle developers have been able to get on with their work.
The same may be the case for AWS - no longer a sexy new market, and consequently able to get on with it's work.
Lest anyone misunderstand, the 32GB phone actually costs $449 if you want to buy one, and the quoted prices require the purchaser to sign a two-year contract for service. I can see why the advertisers benefit from this approach, but I can't understand why the public is complicit. Is it that people don't want to think about how much they are actually paying?
> In September, the company slashed the Fire phone’s price from $199 to 99 cents, a steep discount Limp said yielded significantly better sales.
Well, of course its going to yield significantly better "sales" when you sell your item for something approximating zero.
The situations where carrier lock-in makes sense are few and far between (generally around large family plans), and outside of those situations you're paying hundreds of dollars extra over the life of the phone and the contract.
The last few days of the month for me online is always spotty, slow, and pretty much unusable.
We are being held hostage by our telecoms, slowing business to a crawl because they want you to upgrade. I have upgraded to my broadband highest tier and still get throttled, the extra speeds cause faster depletion of that bandwidth limit on purpose. Speed and limits both need to increase.
I don't think it's a con, and I understand why the carriers price the phones this way: it works! But I'm baffled why consumers and reporters seem comfortable comparing the 'with contract' prices of phones as if the upfront difference between 99 cents, $99, $199, and $299 is the best way to decide with which company to sign a $2000 two-year contract.
Amazon isn't getting that $1000+, they get whatever the non-contract price is of the phone. Carriers subsidize some of that cost in-exchange for some guaranteed cash flow for 2 years.
Yes, Amazon collects whatever amount they convince the customer to pay for the phone, plus a much larger 'kickback' from the carrier in return for getting them to sign a two-year contract. My expectation was that an article in a financially oriented magazine about the losses Amazon was experiencing might make some mention of the several hundred dollars[1] Amazon collects from the carrier rather than concentrating only on the '99 cent' sticker price.
I had a confused conversation last week with someone who expressed delight that her new iPhone 6 cost about the same as my "no contract" Moto G. She was surprised to learn that if she broke or lost her phone it would cost more than the "discount" price to replace. And she's a very savvy consumer, has a science PhD, and her husband works for Apple! She probably would have 'bought' the same phone in either case, but if the details of the arrangement weren't clear to her, I doubt that most consumers have a very good understanding of how phone pricing works. My lament was that after reading this Fortune article neither she nor anyone else would have an improved understanding.
[1] What is the actual amount that Amazon collects from the carrier?
It is possible to produce a $650 off-contract phone (the only useful comparison given the variance between carriers) that's desired. They just failed to do this. The Samsung Galaxy flagships sell like hotcakes at this price range.
They set out to make a premium phone and failed - they've cut the price and the phone still isn't moving off shelves. I sincerely hope that this is just PR-speak and that Amazon doesn't seriously believe pricing was the key point of failure.
The lack of network effects means that you can get both developers and buyers to adopt a new platform--it's not hopeless--but the scale and timing make it difficult enough that any new phone platform now would need to offer a major advantage, or it shouldn't bother.
It would have to be something remarkable. Maybe Amazon, as a major retailer, could have done something along the lines of Apple Pay, but where the phone carrier got a cut of each purchase transaction in exchange for a special, reduced rate plan that made Amazon phone take off as the standard phone for schoolkids. Or Amazon stays close enough to standard Android to make development easy for Android developers but then leverages their AWS to make some sort of deal such as Amazon phone apps get free server-side infrastructure and services on AWS. Or anything ordered through the phone gets Amazon Prime delivery and you can stream Amazon Prime video and music through the phone for free.
Whatever, they need to come up with something that offers a remarkable advantage to some market segment or not bother.
Even with all the money they have Amazon can't really force people to make software for their phones. Microsoft has tried the "buying developers mindshare" thing for Windows mobile and it hasn't worked well for them. They're still in third place by a giant margin.
At this point you can't subsidize yourself into having a first-class software ecosystem. It would just cost way too much.
And since Amazon doesn't want to be just another Android vendor, they're not going to let standard Android software run on their phones. At that point they need an insanely compelling feature to get people and "easy Amazon shopping" isn't that.
Why should I get a phone for one dollar that has almost no software when I can get an iPhone 5c for free on contract with a ton of software and accessories? I know they're also good Android phones available free on contract.
Instead, the existing players have a benefit resulting from their size that is more of a scale advantage, in that the N users tend to have access to more things if N is larger, but those "things" are not primarily the N-1 other users. There are more iPhone apps than Android, for example, yet Android sells more units and is growing faster. Scale matters, number of apps matters, but other factors are very significant, too.
Apple, therefore, does not have to be the #1 phone maker to make the most money, nor would a new entrant have to have huge scale to have a profitable business. Unlike a network effect business, a new entrant would not have to appeal primarily on the basis of how many other users it already had but, instead, on what value it offered.
And you mention that Amazon couldn't get you to switch from iOS because of the number of iOS apps as if the 2 billion phone users out there all care primarily about the number of apps they'll probably never use. Yet Android phones outsell iOS with fewer available apps, and the average Android user buys far fewer apps than the average iPhone user. A significant fraction seem to be satisfied with just the apps that come with the phone and never buy another.
It's not unreasonable to assume that there may be many market segments that would be fine with a few thousand apps covering 99%+ of usage PLUS something else they value more highly than the long-tail iPhone apps. Phones and phone plans that specialize in offering something more valuable than Yet More Apps might appeal to many people. Shoppers might care more about Amazon Prime than than the one game app they have to give up if they switch. Parents might care more about a managed kid phone with kid features and a kid rate plan than about Apple's app store.
Since the value of phones is not primarily the number of your maker's installed base squared but is based on so many possible things, I think there is room for new entrants as long as they offer something more significant to a market than the extra apps.
Then they released it at the price for the most premium phones on the market.
I'm pretty sure 95% of the tech world saw this coming.
Of course, that would mean kowtowing to Google, and the real purpose of the Fire line of Android forks is get Amazon out from under Google's thumb. They're welcome to try, but I'm not about to sacrifice my experience to help them.
The deeper issue yet is the still open question of the third ecosystem. Apple and Google have theirs already. It remains to be seen if there is room for a third, but plenty of companies are opening their wallets to try. IMHO, Microsoft looks to have the best shot at it now. For Amazon, it's hard to see them pulling it off when the core of what they're working with is a fork of Android. How are we supposed to believe that they're ever going to be better than Google is at Android?
The problem is that Amazon is hard on developers, doesn't let them set prices, won't automatically approve new apps and upgrades, gives new apps harsh conditions, and doesn't promote developers' apps to a large user base.
Amazon could have a better user and developer experience but thinks it's Apple instead of Google. But only Apple is Apple.